DApps - Introducing features and specific examples!
DApps is a general term for decentralized applications using blockchain technology.
Currently, DApps’s development is underway in various fields such as games and finance.
It is said to be a next-generation application, and has features that are different from conventional applications and Internet services.
we will discuss in detail the mechanism and characteristics of DApps, advantages and disadvantages, and future prospects.
Table of contents
- What is DApps?
- Mechanism and features of DApps
- Advantages of DApps
- Disadvantages of DApps
- Examples of DApps
- Future Prospects/Future Potential of DApps
- Precautions when using DApps
1.
What is DApps?
DApps is an abbreviation of "Decentralized Applications", which means "decentralized applications".
It is an application that applies a mechanism to run smart contracts on the blockchain, and has a decentralized feature without a central administrator.
DApps differ from apps on computers and smartphones in the following ways.
Differences between Dapps and traditional apps
- Digital information is stored securely on the blockchain
- Operations are executed in the absence of an administrator
- High transparency about transactions, data history, etc.
2. Mechanism and features of DApps
First, let's understand the mechanism and features of DApps.
Mechanism and features of DApps
- Blockchain technology is used
- decentralized system
- Used in a wide range of applications such as games and finance
1. Blockchain technology is used
DApps is a general term for applications developed by applying "smart contracts", which are mechanisms that run software on blockchains.
It is an abbreviation of "Decentralized Applications", which means "decentralized application”.
Currently, various services are being developed, centering on games and financial services.
DApps have the feature of being able to provide services independently without the intervention of an administrator, etc., due to the smart contract function.
Unique tokens are issued within DApps, and transactions and various services can be received using these tokens within each app.
Many of the original tokens can be exchanged for other virtual currencies and legal currencies, so there are many people who use DApps with the expectation of investment returns.
2. Decentralized system
In DApps, there is no organization, group, or person who acts as an application administrator.
For normal apps, the operating company develops and provides the service and also manages the server.
DApps use a blockchain smart contract mechanism to manage apps in a decentralized and independent manner without relying on a specific administrator.
This makes it possible to accurately record and store data without a central administrator, making it easy to take countermeasures against fraud.
Another feature of the DApps service is that the mechanism is open to the public through open source. Since the source code is open to the public, it has the advantage of being highly transparent and less likely to be fraudulent or tampered with.
3. Used in a wide range of applications such as games and finance
DApps is a general term for applications built on blockchain, but there are various types of DApps provided.
Typical DApps include the following types.
Types of representative DApps
- Games … “Play to Earn” type NFT games that allow you to earn virtual currency by playing games are popular
- DeFi (decentralized finance) … A financial service without a central administrator, which has the advantage of being able to expect high profits and low fees
- Virtual currency …Some decentralized virtual currencies are also a kind of DApps
- Insurance …The smart contract determines whether the insurance can be paid, and automatically and speedily executes the payment.
- Data analysis/market forecasting: Market forecasting is possible by automatically collecting accurate data without fraud
- Digital ID … Used as an identification card by managing personal information on a Blockchain.
The development of DApps is progressing rapidly, and it is expected that DApps will continue to be used in various fields in the future.
When DApps start gaining popularity, the value of related cryptocurrencies can also skyrocket.
3. Advantages of DApps
Let's check the benefits of DApps. The main advantages are the following three points.
Advantages of DApps
- Low risk of personal information leakage
- Hard to system down
- Fraud and data tampering are less likely
1. Low risk of personal information leakage
In the case of general systems and apps, developers and operators manage while holding a lot of authority and information.
In the event of damage such as hacking, data is likely to be leaked all at once, and there is a risk that it is easy to be attacked.
Leakage of personal information is often a problem. However, in DApps that use blockchain, data is distributed and managed by a large number of nodes in a P2P method, so transaction data does not remain in the hands of developers.
Therefore, there is no worry that the personal information that is collectively managed will be leaked by an attack.
There is a low risk of personal information being traded illegally or being collected as big data, so there is an advantage that you can use it with peace of mind.
2. Hard to system down
If it is a normal application, it is almost impossible to use all the functions of the application if the server of the network where the application is built goes down.
DApps have a feature that various data is distributed and managed on the blockchain, so it is a mechanism that makes it difficult for servers to go down.
Since data is not concentrated on a single server, it can be said that there are almost no cases where all functions stop with DApps.
Because there is no central administrator, there is an advantage that the risk of partial system failure is small.
3. Fraud and data tampering are less likely
Dapps are decentralized applications that use the blockchain mechanism, so all distributed data must be rewritten in order to tamper with the data.
For this reason, it has the characteristic of being less susceptible to damage such as hacking, compared to ordinary apps, in which data can be easily tampered with by hacking a single network.
In addition, there is no central administrator managing data, and data processing and transactions are constantly monitored by many participants, making it extremely difficult for fraud to occur.
The high level of security due to the use of blockchain will provide users with a sense of security.
4. Disadvantages of DApps
On the other hand, DApps also have disadvantages. Check the following three points.
Disadvantages of DApps
- Lack of administrative support
- Transactions can take a long time
- As the number of users increases, the cost tends to increase.
1. Lack of administrative support
DApps do not have a central administrator, so use them at your own risk. When using the normal service, if you have any questions or problems, it is common to contact the operating company and solve it.
However, since DApps does not have a management source to contact, you have to solve everything yourself.
Especially for those who do not have much knowledge about DApps, it will be a disadvantage that there is no one to help them when trouble occurs.
2. Transactions can take a long time
As the number of Dapps users increases, the time required for data processing increases, and transactions may not be smooth.
This is because if many payments occur at once, the capacity of the network will be exceeded.
Too much trading not only takes time, but it can even make it impossible to execute trades.
This is also known as the "scalability problem" and many engineers are working to solve this problem.
Commonly considered countermeasures include entrusting only the parts necessary for data processing to the blockchain, and managing the rest on a server or database.
3. As the number of users increases, the cost tends to increase.
The increase in the number of DApps users also leads to the problem of increased costs.
Increased usage will result in more transactions across the blockchain, which can also increase transaction fees.
Fees are seen as a big problem because they can affect not only the fees within DApps, but also the transactions of users who are not using DApps.
Indeed, Ethereum is facing the problem of increasing fees due to the increase in users due to the development of many DApps in recent years.
However, recently, blockchains have emerged that emphasize the advantages of being able to develop DApps more efficiently than Ethereum and reducing fees.
5. Examples of DApps
Here are some famous DApps.
- OpenSea
- Axie Infinity
- STEPN
- PancakeSwap
- Uniswap
- Compound
- The Sandbox
- Gods Unchained
1. Uniswap
Uniswap is one of the DEXs representing DeFi. DEX (Distributed Exchange) is a decentralized exchange built using smart contracts on the blockchain.
It is a mechanism that automates transactions and writes transaction records and contract details on the blockchain. Built on the Ethereum blockchain, it is possible to trade over 1,500 cryptocurrencies.
Uniswap introduces a mechanism called liquidity mining that allows you to get the governance token "UNI" by pooling the virtual currency you own.
Many people have the image of making a profit from the difference between selling and buying when making a profit with virtual currency, but in liquidity mining, you can earn income without letting go of the virtual currency you hold.
2. PancakeSwap
PancakeSwap is a DEX (Decentralized Exchange) built on BSC (Binance Smart Chain).
Soaring gas costs (fees) have been viewed as a problem on the Ethereum network, but Pancakeswap has the advantage of being available with relatively low fees.
It is a highly versatile DEX because it handles grass coins that are not handled by domestic exchanges. Like Uniswap, Pancakeswap can earn commission income through liquidity mining.
By depositing virtual currency pairs, you can earn CAKE, a unique token, as a reward.
3. Compound
Compound is a virtual currency lending service that operates on Ethereum. We have made it possible for users to lend and borrow virtual currencies using smart contracts.
If you use Compound to lend virtual currency, you can receive interest rates according to the currency, period, and quantity lent. On the other hand, it is also possible to borrow virtual currency by paying interest and turn it into investment and operation.
It offers a similar service to a bank, but with Compound you can earn higher interest rates than if you deposited your fiat currency in a bank.
Since you can receive an interest rate of 5 to 6% for high ones, it is also popular with those who want to aim for profits while reducing the investment risk of virtual currency.
At Compound, you can get the governance token “COMP” by using the lending service.
4. Axie Infinity
Axie Infinity is famous as a blockchain game where you can earn virtual currency.
One of the most popular DApps games, it has become a hot topic due to its high gameplay and rising prices of related tokens. Axie Infinity uses monsters called Axies to battle, train, and trade.
By winning battles and clearing quests in the game, you can get in-game tokens SLP and AXS. It's so profitable that it's even said that some people make a living out of Axie Infinity.
Dapps games built on Ronin, the Ethereum sidechain, can be played without worrying about fees.
5. STEPN
SREPN is an NFT game where you can earn virtual currency by walking. It is one of the blockchain games where you can earn virtual currency by exercising "Move to Earn".
In STEPN, tokens called GST are distributed according to the walking distance and speed. The game is built on the Solana chain and features cheaper gas than games on Ethereum.
Sneakers are required to play STEPN and can be purchased using SOL, the native token of the Solana chain. You can also enjoy leveling up and nurturing your own sneakers. This game is played by a wide range of people, who are very health conscious.
With the popularity of STEPN, other to Earn projects have gained a lot of attention.
6. The Sandbox
The Sandbox is a game that allows you to own a land (LAND) in the game and build a diorama on that land.
With gameplay similar to Minecraft, you can create characters in the Metaverse space and enjoy virtual communication.
You can also earn your own currency, SAND, by listing items created in The Sandbox on the marketplace, and by providing other players with created dioramas.
7. Gods Unchained
Gods Unchained is a card-playing blockchain game. A variety of battle formats are available for you to enjoy at your own pace.
In addition to simply enjoying the game, it is also possible to buy and sell cards and items obtained in the game to earn virtual currency. If you do well in the game, you can get new cards, which you can sell on the Marketplace.
Cards with a high degree of rarity are sometimes traded at high prices, and in the past there have been rare cards that were sold for about 70 million yen.
8. Open Sea
OpenSea is known as the world's largest NFT marketplace. NFT is digital data that is issued and traded on the blockchain, and has the characteristic of being able to prove that it has unique value.
It is possible to trade this NFT widely on OpenSea.In addition to purchasing your favorite NFT, you can also create and exhibit your own work.It supports not only the popular blockchain Ethereum, but also Tezon, Klaytn, Solana, etc.
6. Future Prospects/Future Potential of DApps
Let's check the future outlook and future potential of DApps.
Future Prospects/Future Potential of DApps
- The popularity of NFTs drives the spread of DApps
- Expansion of DeFi market size
- Growing trust in blockchain
1. The popularity of NFTs drives the spread of DApps
According to a report, the global NFT market size is expected to reach US$211.72 billion by 2030, growing at a CAGR of 33.9% from 2022 to 2030.
The growth of the market is being promoted against the backdrop of the growing global demand for digital art and the fact that it is easy for artists from various fields to enter.
Recently, NFT companies have also raised funds, and you can see that the marketplace has grown significantly. For example, in March 2022 NFT Marketplace Magic Eden successfully raised US$27 million.
With the further spread of digital content such as NFT art and NFT games, DApps themselves are expected to grow further in the future.
2. Expansion of DeFi market size
DeFi (decentralized finance), in which funds are sent and settled without going through financial institutions such as banks, is also attracting attention as a new form of finance handled by DApps.
Typical DeFi services include DEX (distributed exchange) and lending.
With these services, it is possible to lend and borrow funds, make payments, and remittances without verifying your identity, just like with conventional financial institutions.
DeFi also has the advantage that higher profitability can be expected compared to financial institutions such as banks.
Due to these advantages, the number of people who are paying attention to DeFi is gradually increasing, and efforts are being made to gradually raise awareness. However, DeFi is considered to be a hurdle for new entrants because of the high risk of investment, the risk of loss due to hacking, and the need for a certain level of knowledge about new technologies.
In the future, as DeFi becomes more widely accepted by people around the world, DeFi-related services will grow even more in DApps.
3. Growing trust in blockchain
In order for DApps to grow further in the future, it will be necessary to increase trust in blockchain technology itself.
Currently, various DApps using blockchain technology are being developed, but users are limited to those with knowledge.
Many people have the impression that blockchain and virtual currency are "unfamiliar" or "dangerous", and it is difficult to say that they are generally widespread.
To improve this situation, in February 2020, the "Blockchain Content Association" was established as an organization to develop the blockchain content industry and protect users.
The Blockchain Content Association is considering various self-regulations, arguing that the development of laws and systems that businesses must comply with for content that uses blockchain is delayed.
If these efforts accelerate and the industry develops soundly, users will be able to use DApps with peace of mind.
7. Precautions when using DApps
There are some things to keep in mind when using DApps. Please note the following points in advance.
Precautions when using DApps
- Use at your own risk as there is no central administrator
- Beware of Token Price Fluctuations
- Virtual currency is required to use DApps
1. Use at your own risk as there is no central administrator
Since DApps do not have a central administrator, they have the advantage of being able to conduct highly transparent transactions while keeping costs down.
On the other hand, it is a disadvantage that you cannot receive support when something goes wrong, so you need to be careful.
Also, because it is built on the blockchain, it has the characteristic of being resistant to attacks such as hacking, but it does not mean that 100% of the assets are guaranteed.
In the unlikely event that you lose your assets due to hacking, etc., the loss will not be compensated, so please use it at your own risk.
In addition, the management of the virtual currency used in DApps is also your own responsibility.
Although it is basically a highly secure mechanism, let's be aware that the risk is not zero.
2. Beware of Token Price Fluctuations
DApps require virtual currency (tokens) to use the service. It should be noted that the value of this virtual currency is not always constant and fluctuates depending on demand.
In other words, even if you start DApps with the expectation of profitability, you will not always get the expected profit, and if the value of the virtual currency you receive as a reward fluctuates, your profit return will also fluctuate.
It is important to understand that while there is the possibility of making a large profit depending on the price trend of virtual currency, there is also the possibility of suffering a loss depending on the timing of the transaction and the market situation.
3. Virtual currency is required to use DApps
Many DApps use their own virtual currency to use their services, and on the contrary, receive virtual currency as rewards.
Please note that basically legal currencies such as yen and dollars cannot be used.In order to use virtual currency, it is necessary to purchase virtual currency from legal tender on a virtual currency exchange.
When purchasing virtual currency, it is better to use a domestic virtual currency exchange that can be used safely and securely.
