A dApp is an application built on a decentralized network that consists of a smart contract backend and a user interface frontend. dApps are 'permissionless,' meaning anyone is free to use them. Indeed, many dApps include smart contracts others have written. They are also transparent and ‘trustless,’ meaning anyone can verify their authenticity and functionality.
Read more: What’s a smart contract?
Most dApps operate through the interaction of three components: smart contracts, blockchains, and tokens.
For a simple example of a dApp, imagine a dice game on Ethereum, though this dApp could exist on any decentralized network with robust smart contract functionality. To play, you send ether (ETH) to a smart contract that keeps your bet if you lose or pays out if you win. Since the contracts that define the game are open source, we can verify, for instance, that the house has (only) a 1% edge. We can also inspect the contract to ensure that the random number generator it references is indeed random. This transparency makes the game 'provably fair,' unlike games in traditional casinos which are inevitably plagued by opacity due to the inherent lack of transparency caused by reliance on a 'trusted' third party. Additionally, since identities aren't required to interact on Ethereum, anyone in the world can (in theory) play our decentralized dice game without restriction (although local regulations do still technically apply).
dApps have been a focal point of discussion and development within the blockchain community, primarily due to the myriad of advantages they present over traditional centralized applications.
While dApps offer numerous advantages, it’s essential to acknowledge the challenges and limitations that accompany this innovative technology.
As the landscape of decentralized applications continues to expand and evolve, several distinct categories of dApps have emerged, each serving unique purposes and offering different functionalities. These categories reflect the diverse ways in which blockchain technology can be leveraged to decentralize various sectors and aspects of our digital lives, from finance and exchanges to gaming and supply chain management. Below are some of the most popular and impactful categories of dApps.
Decentralized Finance (DeFi): DeFi represents the largest category of dApps. DeFi is recreating and enhancing traditional financial systems - such as banking, lending, and trading - through blockchain technology. DeFi dApps allow users to manage and optimize their assets in a more open, interoperable, and transparent manner, fostering financial inclusion and innovation.
Aave is a popular DeFi dApp that allows users to lend and borrow cryptocurrencies, earning interest on deposits, and paying interest on loans. Read more: How to lend in DeFi.
Non-Fungible Tokens (NFTs): NFTs have emerged as a groundbreaking category in the realm of digital ownership and collectibles. NFT dApps enable the creation, purchase, and trading of unique, indivisible digital assets, representing ownership of a specific item or piece of content, thus revolutionizing the art, music, and gaming industries.
Rarible is a well-known marketplace for NFTs, where users can buy, sell, and trade unique digital assets like art, music, and virtual real estate. Read more: How to buy an NFT.
Gaming and Entertainment: dApps in this category offer a novel approach to asset ownership, player rewards, and content creation, fostering a more immersive and equitable gaming and entertainment environment. The metaverse is strongly associated with crypto and dApps.
Axie Infinity is an example of a blockchain-based play-to-earn game where players collect, breed, and battle fantasy creatures.
Read more: What is the metaverse?
Discover the top platforms for buying, selling, and trading cryptocurrencies
Discover the top platforms for buying, selling, and trading cryptocurrencies
Looking to dive deeper into dApps, decentralized exchanges, DeFi tools, or beginner-friendly platforms? Explore these curated platform guides from Bitcoin.com:
Understand Ethereum's key characteristics.
Understand the function and utility of ETH.
Get the basics on the "software" that runs on decentralized networks.
Read this article →Get the basics on the "software" that runs on decentralized networks.
Learn the basics of the Ethereum token standard, what ERC-20 tokens are used for, and how they work.
Read this article →Learn the basics of the Ethereum token standard, what ERC-20 tokens are used for, and how they work.
Learn what makes decentralized finance (DeFi) apps work and how they compare to traditional financial products.
Read this article →Learn what makes decentralized finance (DeFi) apps work and how they compare to traditional financial products.
Learn about the unit for measuring transaction fees in Ethereum, get details on the Ethereum fee market, and discover how to customize the fees you pay.
Read this article →Learn about the unit for measuring transaction fees in Ethereum, get details on the Ethereum fee market, and discover how to customize the fees you pay.
Learn how to buy ETH and hold it securely in a digital wallet you control.
Read this article →Learn how to buy ETH and hold it securely in a digital wallet you control.
Creating an Ethereum wallet is as easy as installing software on your mobile device or laptop/desktop.
Read this article →Creating an Ethereum wallet is as easy as installing software on your mobile device or laptop/desktop.
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