Decentralized Applications

Decentralized Applications


Decentralized Applications GLOSSARY OF TERMS

Decentralized applications (dApps) are applications or programs that are based on blockchain technology and run on a decentralized computer system or P2P network. Their main advantages are open source code and high resistance to possible attacks.

Decentralized applications never shut down due to the absence of a central server to shut down. The data in them is distributed between the nodes, while all the nodes act independently: if one of them stops, the others will continue to work in the network.

There are several decentralized databases that use this feature, such as the Interplanetary File System, BitTorrent, and independent DHT tables.

The classification of applications is based on which blockchain model they are using. There are three categories of dApps:

  • Type I. These applications run on their own blockchain. An example is the Ethereum platform.
  • Type II. DApps that function on the basis of an existing blockchain. These are protocols that have their own token issuance mechanism (Tron, EOS). An example of a Type II dApp is the MakerDAO protocol.
  • Type III. These applications are based on Type II dApp protocols. They need two components to work: a blockchain and an application running on this blockchain. An example is the Augur app.

In order to profit from a decentralized application, developers place scarce resources on the network and use a limited number of tokens (this is the internal currency of the application).

To work with the network, users need such tokens, so the owners of scarce resources charge a fee from them. For example, on the Bitcoin network, the owners (miners) of scarce resources (computing power) charge transaction fees directly from users so that they can use the services.

The network is constantly growing, the number of participants is increasing, but the number of tokens remains unchanged, which contributes to the increase in the value of the coins.

A special role in the work of dApps is played by smart contracts – computer algorithms designed to conclude and control self-executing contracts in the blockchain. So, when certain conditions are reached, the smart contract fulfills the corresponding clause of the contract. For example, in exchange for tokens, a user can get a place to store information.

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