Decentralized Applications (DApps)

A type of application that runs on a decentralized network, avoiding a single point of failure.

A type of application that runs on a decentralized network, avoiding a single point of failure.

What Are Decentralized Applications (DApps)?

DApps are any computer applications whose operation is maintained by a distributed network of computer nodes, as opposed to a single server.

DApps really took off with the creation of blockchain platforms that support smart contracts, like Ethereum. Ethereum doesn’t only feature a coin – it also facilitates something called the Ethereum Virtual Machine, or EVM. Think of the EVM as a distributed computer defined by consensus algorithms where everyone agrees on its state at all times.
This EVM is Turing complete, meaning it can perform any operation a normal computer can handle. Ethereum has its own programming language called Solidity that developers use to code DApps that run on the EVM in a decentralized way.
As a result of the way they are executed, DApps can provide the same quality of service that regular apps are capable of, while at the same time enjoying full advantages of decentralization, such as almost constant uptime and resistance to censorship and corruption.

How Do DApps Operate?

DApps are driven by code that runs across a distributed network using a consensus mechanism like proof-of-work. This allows many nodes to collaborate towards a common outcome, rather than relying on one central server. The data, records and activity logs for a DApp are stored in a decentralized manner on blockchains. The transparency of transactions on the blockchain combined with cryptography ensures trust and security. 

DApps provide user interfaces and experiences similar to traditional web and mobile apps. However, the backend operates in a decentralized manner, distributing control and authority instead of consolidating it.

Notable Examples of DApps

While still an emerging field, some notable DApp have gained significant user bases: 

  • Decentralized exchanges like Uniswap and PancakeSwap allow direct cryptocurrency trades between users without centralized intermediaries. 
  • NFT marketplaces, such as OpenSea and Rarible, provide a way to create and trade non-fungible tokens, enabling new digital economies. 
  • Prediction markets leverage the wisdom of the crowd for forecasting events while keeping user identities private. 
  • DeFi lending apps such as Aave enable crypto-backed loans and savings accounts with algorithmic determination of interest rates. 
  • Blockchain gaming apps blend NFT character ownership with gameplay and money-earning mechanics.

Benefits of the DApp Approach 

Building an application as a DApp brings some key advantages: 

  • Censorship resistance is improved, as no single entity can arbitrarily modify or take down the application. 
  • Transparency of operations is enabled through the open-source nature of DApps and public blockchain data. 

  • Data permanence and immutability result from blockchain storage. Records cannot be altered. 

  • Consistency of operations and reduction of fraud stems from the consensus mechanism. 

  • Interoperability between DApps that use the same underlying protocol and standards is another benefit. 

DApp Platforms and Programming Languages

There are a variety of blockchain protocols that support DApp development. Ethereum has the most DApp developers due to its maturity and programmability with Solidity smart contracts. Tron offers high throughput which suits certain DApp types, albeit with some centralization tradeoffs. Cardano takes a research-driven approach toward enabling secure DApps through its proof-of-stake protocol. 

Developers can choose from several programming languages. Solidity is commonly used to write Ethereum smart contracts and backend code. Vyper is a Python-inspired language for developing secure smart contracts. Rust, C++, Go and other languages can also be used for certain blockchains.

Challenges to Adoption

DApps also come with some inherent challenges. Scaling issues like slow transaction speeds, latency and gas costs on networks like Ethereum are a big obstacle. User experience complexity around crypto wallets, private keys and onboarding hinders adoption. Bugs can lead to exploitation. Lack of standards when building DApps results in fragility and interoperability issues. Moreover, unclear and evolving regulations create uncertainty for DApp developers and users.

Popular DApps Hacks and Scams

Decentralized apps, or DApps for short, have faced their fair share of scams and cyber attacks throughout their relatively short life in the crypto world. Let me walk through a few prime examples so we can learn from the past.

Back in 2016, an organization called The DAO made waves by creating a decentralized venture capital platform on Ethereum. They raised an impressive $150 million worth of ether through a token sale. However, some vulnerabilities in their code ended up haunting them. A devastating hack resulted in a whopping $60 million of ether being stolen right out from under them! This led to some massive drama, with the Ethereum community deciding to hard-fork the blockchain to get the funds back. This controversial move split the network into two separate blockchains: Ethereum and Ethereum Classic. 

The following year, 2017, a coding vulnerability in the Parity Wallet smart contract software was exploited by some hackers, leading to the loss of over $30 million worth of ether. The flaw enabled the attacker to take control of the smart contract and take off.

Then in 2018, the decentralized exchange Bancor suffered a $23.5 million hack, with the hacker exploiting a vulnerability in one of their smart contracts. This enabled access to both ether and other tokens the exchange held.

These events really drive home how crucial security is when building and using DApps. Developers need to double down on auditing and testing their code before launch to lock things down. Users should also stay vigilant for scams when engaging with DApps. 

How Secure Are DApps?

With all the hype around blockchain technology, a question on many crypto enthusiasts’ minds is: How secure are decentralized apps (DApps) really? Let’s unpack some of the key factors that give DApps an edge when it comes to security.

For starters, DApps are built on blockchain networks. Once data gets recorded there, it can’t be altered or deleted without agreement from the entire network. This immutable and transparent record makes tampering with data a virtual impossibility. It’s pretty neat for security, not to mention for reducing cybercrime.

Smart contracts serve as the backbone for many DApps. These self-executing contracts have the terms baked right into the code. While vulnerabilities can pop up, developers have ways to audit the code to squash bugs. Proper testing before launch is critical for DApps to ensure no holes remain for hackers to exploit.

Here’s another perk of DApps for security – users retain complete control over their own data and assets. With no centralized authority managing the info, users enjoy enhanced privacy. This reduced reliance on intermediaries for data management is a win for security. As long as they have an internet connection, users can access their details whenever and wherever.

While DApps mark an improvement in application security, it pays for users to take some basic precautions:

  • Make sure a dApp is legit before jumping in. Scammers sometimes create fake ones to steal private keys or passwords.

  • Keep software, wallets and dApp tools updated to keep the latest security features.