We have explained the differences between the decentralized and centralized technology, and now we can take on the task of explaining a dapp. We'll be looking at how dapps work, their benefits as well as future applications that go well beyond a simple transaction.
As established in "What is Decentralized Technology?" users in a centralized application do not have control over the data that they share with an application. Data stored on the app's central server may also include everyone's app interactions as well as personal information. The owners of the server can decide to close the server down, losing all your data, or share the user interaction data with others for a profit, or be hacked by malicious individuals.
Developers used cryptocurrencies' distributed ledger within the blockchain network, as a way to confirm ownership and transaction. As blockchains evolved, Smart Contracts were embedded in the blockchain code, essentially allowing applications to run on the blockchain network or as we discussed before on a decentralized network. These apps are called decentralized applications (dapps). Dapps employ direct interaction between the users of the application and the blockchain network. When a user shares data in a dapp, it is fragmented in the blockchain's, network and locked behind the ownership of the user. Developers of the dapp wanting to share or remove data owned by other users cannot do so without the user's permission. Power, therefore, is removed from the developers of the application and given to the users. All assets' actions are recorded in the distributed ledger within the network, and such a system ensures that the content is trackable and that no unwanted activities occur. The fragmentation of data within the network guarantees that if any one node is compromised, there will only be fragments of the original data.
Using War Rider, a dapp MMO game, as a practical example, players will buy vehicles on the game market and once purchased the vehicles will become the players' property until they decide to give it to someone else. The developers of the game cannot remove or alter these vehicles once the transaction has occurred, regardless of the player's actions.
Dapps need their commands to be processed somewhere since there is no central server doing the computing. Smart Contracts solves this issue with embedded code within the blockchain which makes the blockchain network behave as a virtual machine in allowing dapps to run. The miner nodes that composed the blockchain network provide processing power in exchange for a small amount of crypto value. Miner nodes are everyday individuals or miners, as commonly known, that offer processing power while connected the same blockchain network. Because of them, the network can process the commands issued by both users and dapps, while being rewarded for completing the functions requested.
With many new functionalities, increased processing powers, and security, it's no surprise that many are considering dapps to be the future or see the potential for it being the foundation for an Internet 3.0. Smart Contracts allow developers almost infinite control over every aspect of their app. As blockchains become larger and more efficient, many developers expect many everyday applications to shift into a dapp, away from the centralized networks currently in use today.
The primary function that we see in a dapp is a simple transaction between users. Operations can be a range of types, from a simple exchange of cryptocurrencies to the transfer of data. Using the blockchain's distributed ledger every node in the network validates the transaction before the transaction goes through. You can use CryptoKitties as a perfect example, one uses ETH to buy the Kitties, and once the Ethereum blockchain validates the operation, the purchase is made.
An exciting take with using the blockchain network is one that uses real-world information to determine what actions to take. The information is collected by "oracles," machines that collect raw data which is sent to the blockchain network. Once the data is in the network, the blockchain can execute transactions, change prices, or divert users.
For example Power Ledger's xGrid is a Peer-to-Peer electricity trading system using the blockchain. It collects information from households that produce low-carbon energy and sells the excess power to those within the neighborhood via the blockchain network. This method allows customers to reduce their power bills as well as allowing those who share the excess power to receive higher profits.
Using "oracles" to relay raw information to help the applications run smoothly sounds impressive but there are concerns. Data on the blockchain can never be changed without the original user's permission or once the information has been confirmed and included in the distributed ledger. Oracles collecting raw information from outside the blockchain network could provide information that is harmful to the network infecting the blockchain and corrupting the entire application.
There is considerable talk about using dapps as a way to organize and regulate groups of individuals working together. Due to the security and incorruptibility of a blockchain network, it would be possible to program rules determining all aspects from working hours to salary distribution. As a safeguard, members of the dapp can be given voting rights. Thus if a rule does not work, it can be changed with a unanimous vote. It would create a leaderless organization where the community decides the rules instead of an individual.
Dapps at this very moment have much to do to emulate perfectly what a central network or operating system can do, and blockchain networks have to decide on the right balance of power between the users and the developers within the network. Blockchain developers are testing various ways to increase control of their dapps, to seamlessly update a dapp without a unanimous decision, and to be able to remove toxic or unwanted individuals who can abuse the immutable nature of a dapp and its assets. Over time we can expect dapps to find their perfect balance, and become even more efficient, and possibly someday improve our lives significantly. For now, there are hundreds of entertaining and useful dapps on Dapp.com that you can discover and enjoy in just a few clicks.
By Alessio Casablanca