- Blockchain - Home
- Blockchain - Introduction
- History of Blockchain
- Blockchain - Technology
- Blockchain and Cryptography
- Blockchain Beyond Crypto
- Blockchain - Advanced Concepts
- Blockchain - Decentralization
- Blockchain - D-Apps
- Blockchain - DeFi
- Blockchain - Future Scope
- Smart Contracts in Blockchain
- Blockchain - Ricardian Contracts
- Blockchain - Oracles
- Blockchain - DAO
- Bitcoin
- Bitcoin - Invisible Gold
- How Bitcoin Works?
- Bitcoin - Network
- Bitcoin - Wallets
- Bitcoin - Innovations
- Ethereum
- Ethereum Alternate Cryptocurrency
- Ethereum Ecosystem
- Ethereum Virtual Machine
- Advanced Ethereum
- Ethereum Wallets
- Ethereum Miner Nodes
- Miscellaneous
- Blockchain - Double Spending
- Public Key Cryptography
- Blockchain - Hashing
- Bitcoin - Mining
- Blockchain - Chaining Blocks
- Blockchain - Proof of Work
- Blockchain - Network & Mining
- Blockchain - Incentives to Miners
- Blockchain - Merkle Tree
- Blockchain - Payment Verification
- Blockchain - Resolving Conflicts
- Blockchain - Privacy
- Bitcoin - Mitigating Attacks
- Blockchain - Conclusion
Blockchain - Decentralized Applications (D-Apps)
Decentralized applications, commonly referred to as dApps, are software solutions that operate on a blockchain or a peer-to-peer (P2P) network of computers, rather than being hosted on a single machine. Unlike traditional applications that are governed by a central authority, dApps are distributed across the network, allowing users to collectively manage and control them.
DAOs, DACs, and DOs are decentralized applications (DApps) that operate on a blockchain within a peer-to-peer network. They signify the forefront of advancements in decentralization technology.
On the other hand, Decentralized Finance, also referred to by its acronym DeFi, uses bockchain technology to eliminate intermediaries and centralized entities from financial transactions. It encompasses cryptocurrencies, blockchain technology, and software that enable peer-to-peer financial transactions. However, DeFi is currently vulnerable to security breaches due to inadequate programming and insufficient security testing during application development.
Let us first discuss a bit about the DApps and their types. The concepts of DeFi are explained in further parts of this chapter.
Types of Decentralized Applications (D-Apps)
At their core, DApps are software applications that function through one of several methods. They are classified into three categories −
- Type 1
- Type 2
- Type 3
These types of DApps are explained in detail in the following sections −
Type 1
Operate on their own dedicated blockchain, such as standard smart contract-based decentralized applications (DApps) that function on the Ethereum network. When necessary, they utilize a native token, such as ETH on the Ethereum blockchain.
An example of this is Ethlance, a DApp that leverages ETH to facilitate a job marketplace.
Type 2
Rely on an established blockchain, meaning they utilize the infrastructure of Type 1 blockchains while incorporating custom protocols and tokens. An example of this is smart contract-based tokenization DApps that operate on the Ethereum blockchain.
A notable instance of Type 2 DApps is the OMNI network, which serves as a software layer built on top of the Bitcoin to enable the trading of custom digital assets and currencies.
Type 3
Employ the protocols associated with Type 2 DApps.
For instance, the SAFE Network utilizes the OMNI network protocol.
Requirements of a Decentralized Applications (D-Apps)
To qualify as a decentralized application or DApp, certain regulations must be fulfilled. This definition was articulated in an article by Johnston et al. in 2015, titled The General Theory of Decentralized Applications, or DApps −
- The DApp must be entirely open source and operate autonomously, ensuring that no single entity possesses control over a majority of its tokens. Modifications to the application should be driven by consensus, reflecting the input from the community.
- The data and operational records of the application must be secured through cryptographic means and stored on a public, decentralized blockchain to eliminate any central points of failure.
- The application must utilize a cryptographic token to facilitate access and incentivize contributions from users, such as miners in the Bitcoin network.
- If tokens are utilized, they must be generated by the decentralized application through a consensus mechanism and a relevant cryptographic algorithm. This token generation serves as evidence of the value provided by contributors, such as miners.
In general, DApps now offer a wide array of services, encompassing financial applications, gaming, social media, and healthcare, among others.
Functions of Decentralized Applications (D-Apps)
The establishment of consensus within a decentralized application (DApp) can be accomplished through the implementation of consensus algorithms, including Proof of Work (PoW) and Proof of Stake (PoS).
To date, PoW has demonstrated remarkable resilience against attacks, as evidenced by the widespread success and trust associated with the Bitcoin network. Additionally, a DApp has the capability to distribute tokens (coins) through various means such as mining, fundraising, and development initiatives.
How are Decentralized Applications (D-Apps) Developed?
Traditional applications typically comprise a user interface, along with a web server or an application server, and a backend database, representing a standard client/server architecture.
In contrast, a decentralized application (DApp) utilizes a blockchain as its backend, which works on most of the logic behind the actual computations of DApps. A crucial component in the development of a DApp is the smart contract, which operates on the blockchain and incorporates the necessary business logic.
It is important to note that the frontend in both DApp and traditional application architectures can take the form of a thick client, a mobile application, or a web frontend (a web user interface, UI). However, it is most often a web frontend, typically developed using a JavaScript framework such as React or Angular.
Example of Decentralized Applications (D-Apps)
Some of the most popular example of DApps are given as follows −
- KYC-Chain
- OpenBazaar
- Lazooz
Let us look at a brief explanation of each of these −
1. KYC-Chain
This application provides the facility to manage Know Your Customer (KYC) data securely and conveniently based on smart contracts.
2. OpenBazaar
It is a decentralized platform that facilitates direct transactions between sellers and buyers without the need for intermediaries like eBay or Amazon.
Unlike traditional e-commerce platforms, OpenBazaar does not rely on a blockchain but utilizes distributed hash tables in a peer-to-peer network for communication and data sharing. Payments on OpenBazaar can be made using Bitcoin or other cryptocurrencies.
3. Lazooz
This is the decentralized equivalent of Uber. It allows peer-to-peer ride sharing and users to be incentivized by proof of movement, and they can earn Zooz coins.
Decentralized Web
The concept of a decentralized web refers to a vision where no central authority or group of authorities holds control. Initially, the Internet was designed to be decentralized, with open protocols like HTTP, SMTP, and DNS enabling anyone to freely utilize them and join the Internet.
However, the introduction of the Web layer above these protocols shifted towards a more service-oriented structure, leading to the dominance of profit-driven corporations like Facebook, Google, Twitter, and Amazon. While these companies offer valuable services, they have created a more controlled, centralized, and closed system.
The rise of these commercial giants has raised significant concerns regarding privacy and data protection, as they have monopolized the Internet. Despite their efficiency and popularity, these business models pose a threat to privacy and decentralization due to the limited number of entities controlling the online landscape.
Web 3.0
Web 1.0 or Web 1 is the original World Wide Web, which was developed in 1989. This was the era when static web pages were hosted on servers and usually only allowed read actions from a user's point of view.
On the other hand, Web 2.0 is the era when more service-oriented and web-hosted applications started to emerge. E-commerce websites, social networking, and applications were the main features of this period.
Web 3.0 or Web 3 represents the concept of a decentralized internet or web that will transform the way we interact with the internet today. This marks a new era that prioritizes users and operates in a decentralized manner, free from the control of any single authority, large organization, or internet company.
Example of Web 3
Examples of Web 3 include −
Steemit
A social media platform built on the Steem blockchain and STEEM cryptocurrency. Users are rewarded with cryptocurrency for their contributions, with more tokens earned based on the number of votes received.
Status
A decentralized communication platform offering secure and private messaging services.
IPFS
A peer-to-peer hypermedia/storage protocol enabling decentralized storage and sharing of data across a peer-to-peer network.
Decentralized Identity
Decentralized identity has recently become a popular trend. The issue of identity is a sensitive and complex one to address. Currently, the identity of a user is often not under the control of the identity holder due to the dominance of large Internet companies and similar organizations, leading to privacy concerns. Decentralized identity aims to give control of identity credentials back to the identity holders, allowing them to determine when and how they share their credentials and with whom.
A notable example of this is Microsoft's development of a decentralized identity network called Identity Overlay Network (ION) on the Bitcoin blockchain. This infrastructure is built on the work done for decentralized identity at W3C and the Decentralized Identity Foundation.
IBM and other organizations worldwide have also undertaken similar initiatives.