Résumé

Decentralized applications (DApps) are applications that run on blockchain networks. There are a wide variety of DApps with different use cases, such as gaming, finance, social media, etc.

Although DApps may look like regular mobile apps on your phone, their backend system is different. DApps rely on smart contracts on a distributed network instead of a centralized system to operate. It makes them more transparent, decentralized and resistant to attacks, but also introduces new challenges.


Introduction

Since the birth of Bitcoin (BTC) over a decade ago, blockchains have evolved to offer a multitude of new features and use cases beyond a simple unit of account. One of these new possibilities is creating decentralized applications (DApps) to use blockchain technology to bring new functionality to many traditional industries and services.


What are decentralized applications (DApps)?

Decentralized applications (DApps) are applications or programs powered by smart contracts that run on blockchains rather than centralized servers. They look like regular mobile apps on your smartphone and offer a wide variety of services and functions ranging from games to finance, social networks and much more.

As their name suggests, DApps run on decentralized peer-to-peer networks. An initial report suggested that DApps would have the following characteristics:

  • Open-source: The source code of DApps is publicly available, which means that anyone can check, use, copy and modify them. There is no single entity controlling the majority of its coins or tokens. Users can also make suggestions and vote for changes to the DApp.

  • Decentralized and Cryptographically Secure: To ensure data security, all information in the DApp is cryptographically secured and stored on a public, decentralized blockchain, maintained by multiple users (or nodes).

  • A tokenized system: DApps are accessible with a cryptographic token. They can adopt cryptocurrencies like ETH, or generate a native token using a consensus algorithm, such as proof of work (PoW) or proof of stake (PoS). The token can also be used to reward contributors like miners and stakers.

In this general definition, the Bitcoin blockchain can be defined as a DApp, and arguably the very first DApp ever created. It is open source, with all data stored on its decentralized blockchain, is based on a crypto token and uses the PoW consensus algorithm. The same goes for other blockchains that have the above characteristics.

However, today the term “DApps” generally refers to all applications that have smart contract functionality and run on blockchain networks. The Bitcoin blockchain does not support smart contracts, so most people consider it not a DApp.

As of June 2022, the majority of DApps are on the Ethereum network. It provides DApp developers with a robust infrastructure to develop their use cases. But as DApps evolve, developers have started creating them on other blockchains, including BNB Smart Chain (BSC), Solana (SOL), Polygon (MATIC), Avalanche (AVAX), EOS, and more.


How do DApps work?

DApps are applications powered by smart contracts. Its backend code runs on peer-to-peer distributed networks. A smart contract functions as a set of predefined rules applied by computer code. When and if certain conditions are met, all nodes in the network perform the tasks specified by the contract.

Once a smart contract is deployed on the blockchain, it is difficult to modify the code or delete it. Therefore, even though the team behind the DApp has been disbanded, users can still access the DApp.


Advantages of DApps

While the interfaces of DApps and traditional applications may look similar, DApps offer multiple advantages over their centralized counterparts. Web applications store data on centralized servers. A single compromised server can bring down the entire application network, rendering it temporarily or permanently unusable. Centralized systems can also suffer from data loss or theft, putting users, whether businesses or individuals, at risk.

DApps, on the other hand, are built on distributed networks without a central authority. With no single point of failure, DApps are less vulnerable to attacks, making it very difficult for malicious actors to compromise the network. The P2P network can also ensure that the DApp continues to work with minimal downtime, even if individual computers or parts of the network are down.

The decentralized nature of DApps also allows users to have more control over the information they share. Without a company controlling users' personal data, they do not need to provide a real identity to interact with a DApp. Instead, they can use a crypto wallet to connect to DApps and completely control the information they share.

Another advantage of DApps is that developers can easily integrate cryptocurrencies into their core functionality using smart contracts. For example, DApps on Ethereum can adopt ETH as a payment method without having to integrate a third-party payment service provider.


Limitations of DApps

DApps have the potential to become an important part of a censorship-free future, but every coin has two sides. Decentralized applications are still in the development phase, and the industry has not yet found solutions to the limitations of scalability, source code modifications, and a small user base.

DApps require significant computing power to operate, which can overload the networks they run on. For example, achieving the security, integrity, transparency, and reliability that Ethereum aspires to requires that every validator execute and store every transaction executed on the network. This could harm the system's transaction rate per second (TPS) and lead to network congestion and high gas fees.

It is also difficult to modify a DApp. To improve user experience and security, a DApp will likely need ongoing modifications to fix bugs, update the user interface, and add new features. However, once a DApp is deployed on the blockchain, it is difficult to modify its backend code. It would require a majority consensus of network nodes to approve any changes or improvements, which could take a long time.

The abundance of DApps in the market dilutes their respective user bases and hinders the mass adoption of a particular DApp. For a DApp to work effectively, it must achieve a network effect. The more users a DApp has, the more efficient it is in providing services. More users can also make the DApp more secure and protect it from hackers who manipulate open source code.


DApps offer a new approach for businesses across many industries to reach more users. Some popular DApp use cases include GameFi, decentralized finance (DeFi), entertainment, and governance.


GameFi

GameFi DApps have grown in popularity, exemplified by the rise of Axie Infinity, a play-to-earn game on the Ethereum blockchain. According to DappRadar, blockchain gaming activity in Q1 2022 saw a 2,000% increase compared to 2021. It also attracted 1.22 million unique active wallets (UAWs) in March 2022, with over 50% activity coming from gaming DApps.

Unlike traditional video games, most gaming DApps give players full control over their game assets. They also offer players the ability to monetize these items outside of the game. Axie Infinity, for example, develops its characters from game, its virtual fields and game elements in the form of NFTs. Players can store them in crypto wallets, transfer them to other Ethereum addresses, or trade them with other players on NFT marketplaces. Within the ecosystem, players can compete with each other to collect ERC-20 tokens that can be traded on exchanges. Generally, the longer they play, the more in-game rewards they can earn.


DeFi and DEX

Traditional finance relies on financial institutions to act as intermediaries. Thanks to DApps, anyone can use financial services without any central authority and maintain full control of their assets. DeFi can also benefit low-income individuals, providing them with access to a wide range of financial services at significantly reduced costs.

Borrowing and lending are the most popular types of financial services provided by decentralized applications. DeFi DApps enable instant settlement of transactions, minimal or no credit checks, and the ability to use digital assets as collateral. Users can have more flexibility on DApp lending marketplaces. For example, lenders have more control over their loans by choosing which token to lend and on which platform. Users can also recover up to 100% of the interest generated by the loan since they do not have to pay intermediary fees.

Decentralized exchanges (DEXs) are another important example of finance DApps. These platforms facilitate peer-to-peer trading by eliminating intermediaries such as centralized crypto exchanges. Users do not need to relinquish custody of their funds. Instead of transferring their assets to an exchange, they trade directly with another user using smart contracts. Orders are executed on the blockchain and directly between user wallets. As DEXs require less maintenance, they generally have lower trading fees compared to centralized exchanges. Some of the most popular DEXs include Uniswap, SushiSwap, and PancakeSwap.


Entertainment

Entertainment is an integral part of our lives. With DApps, everyday activities that people enjoy are transformed into digital experiences that can also generate economic incentives. For example, Audius, a decentralized, blockchain-based music streaming platform, cuts out the middlemen that exist in the traditional music industry to directly connect artists and fans. It allows music curators to better monetize their content and produce immutable records of their work on the blockchain.

DApps also tackle problems that users of social media platforms face. Centralized social media giants like Twitter and Facebook are often criticized for censoring posts and mishandling user data. Through decentralized social applications like Steemit, the community can interact freely and express their opinions with fewer restrictions and censorship, while maintaining control of their personal information.


Governance

DApps can enable users to play a greater role in the governance of online organizations by introducing a more community-centered decision-making mechanism. With the help of smart contracts, users who hold governance tokens of a particular blockchain project can create proposals for the community to vote on, and vote anonymously on other people's proposals.

One of the decentralized governance models are decentralized autonomous organizations (DAOs). DAOs can be thought of as fully autonomous DApps that use smart contracts to make decisions without a central authority. They have no hierarchy. Instead, it is the economic mechanisms that align the interests of the organization with those of individual DAO members.


How to connect to DApps?

To interact with a DApp, you will first need a compatible browser extension wallet like MetaMask, Trust Wallet, or Binance Chain Wallet. Setup only takes a few minutes. Some even offer mobile versions for even easier access.

Let's use Trust Wallet as an example and see how to connect it to PancakeSwap on the BNB Smart Chain (BSC). If you don't already have a Trust Wallet, check out this Academy article to learn how to install it on your smartphone.


Deposit BNB to Trust Wallet

To use DApps on BSC, you will need BNB to pay transaction fees. For example, you can withdraw BNB from your Binance Spot wallet.

Go to your Trust Wallet and tap [BNB Smart Chain]. Do not click on [BNB Beacon Chain]. This option is for the BEP-2 version of BNB on the BNB Beacon Chain and cannot be used to pay transaction fees on BSC.


Tap [Receive] to view your BNB deposit address. You can then copy and paste this address into your withdrawal wallet or scan the QR code to complete the transfer.


Once the transaction is confirmed on the blockchain, you will see the BNB amount on the home page of your Trust Wallet.


Add CAKE to your Trust Wallet list

Trust Wallet's default token list does not include DApp tokens like PancakeSwap (CAKE). To make CAKE visible in your wallet, you must first add it to the list.

Tap [Add Tokens] and search for “PancakeSwap”. You will see CAKE on different blockchains. As we are using BSC, press to toggle the button next to [BEP-20 CAKE].


You should now see “CAKE” in the Trust Wallet token list.


The next step is to connect your Trust Wallet to PancakeSwap. You can log in through Trust Wallet's built-in mobile browser or on a desktop computer.


Connecting to PancakeSwap via Trust Wallet Browser

1. Tap [Browser] from the Trust Wallet home page and navigate to the PancakeSwap website.


2. You will be prompted to connect your Trust Wallet. Tap [Connect].


Connecting to PancakeSwap via Desktop Browser

1. Go to the PancakeSwap website and click [Connect Wallet].


2. Click the [Trust Wallet] icon to display a QR code on the screen.


3. Open your Trust Wallet app and go to [Settings] - [WalletConnect].


4. Tap [New Connection] and scan the QR code.


5. You will be asked to authorize the connection on the application. Tap [Connect].



To conclude

DApps expand the functionality of the web by providing improvements over conventional applications using blockchain technology. In the future, decentralized applications could bring even more innovative use cases to the market. As reported by DappRadar, DApps recorded nearly 2.4 million daily active users in the first quarter of 2022, and the trend is expected to continue growing. However, DApp developers and the blockchain networks they rely on do not yet have solutions to the current limitations that are holding back mass adoption.