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Decentralized applications (DApps) are applications that run on blockchain networks. There are many DApps with different use cases: they are used in games, finance, social networks and other areas.

Although DApps resemble regular mobile apps, their internal system is different: DApps rely on smart contracts on a distributed network instead of a centralized system. This ensures their transparency, decentralization and resistance to attacks. However, such a system is still not without certain disadvantages.


Introduction

Since the advent of Bitcoin (BTC) over a decade ago, blockchains have developed many new features and use cases. One of the new directions is the development of traditional sectors and services through the creation of decentralized applications (DApps) based on the blockchain.


What are decentralized applications (DApps)

Decentralized applications (DApps) are smart contract-based digital applications or programs that run on a blockchain rather than on centralized servers. They look and function like regular mobile apps and offer a wide range of services and features, from gaming to finance to social networking and more.

As the name suggests, DApps operate on decentralized peer-to-peer networks. One of the early reports determined that DApps should have the following characteristics:

  • Open Source: The source code of the DApp is publicly available and can be inspected, used, copied, and modified by anyone. Most coins or tokens cannot be controlled by one specific entity. Users can propose and vote on changes to the DApp.

  • Decentralized and Cryptographic Security: To ensure data security, all DApp information is protected by cryptography and stored on a public decentralized blockchain maintained by multiple users (or nodes).

  • Tokenized system: The DApp can be accessed using a cryptographic token. They support cryptocurrencies such as ETH and can 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 miners and stakers.

Thus, the Bitcoin blockchain can be called the first DApp. It is open source, stores data on a decentralized blockchain, and uses a cryptocurrency token and PoW consensus algorithm. The same applies to other blockchains with the above characteristics.

However, the term “DApp” now generally refers to all applications with smart contract functionality that run on blockchain networks. Since Bitcoin does not support smart contracts, most users do not consider it a DApp.

As of June 2022, the majority of DApps run on the Ethereum network, which offers a robust infrastructure for expanding use cases. But as DApps developed, developers began creating them on other blockchains, including BNB Smart Chain (BSC), Solana (SOL), Polygon (MATIC), Avalanche (AVAX), EOS and others.


How DApps work

DApps are applications that run on smart contracts. Their internal code runs on distributed peer-to-peer networks. A smart contract is a set of operations performed using computer code. When certain conditions are met, the network nodes perform the tasks specified in the contract.

Once smart contracts are deployed on the blockchain, it is very difficult to change or destroy their code. Therefore, even if the DApp development team is disbanded, users will still be able to access the application.


Benefits of DApps

Although the interfaces of DApps and centralized applications may look similar, DApps offer more benefits. Traditional web applications store data on centralized servers. Hacking one of them can temporarily or permanently disable the entire application network. Centralized systems can also suffer from data leakage or theft, putting companies and users at risk.

DApps are based on distributed networks without central management. Because of this, they have no single points of failure, making them less vulnerable to attack by malicious actors. A P2P network can also keep DApps running continuously with minimal downtime, even if individual computers or parts of the network go down.

The decentralized nature of DApps also means that users have more control over information. Since no companies control users' personal data, they do not need to reveal their identity to work with the DApp. They can connect to the DApp using a crypto wallet and have full control over the transfer of information.

Another advantage of DApps is that with the help of smart contracts, developers can easily integrate cryptocurrencies into the core functions of the application. For example, DApps on Ethereum can accept ETH as payment without integrating third-party services.


DApp Limitations

DApps can be an important component of the uncensored future, but they are not without their drawbacks. Decentralized applications are in the early stages of development and have yet to overcome the challenges of scalability, code modification, and a small user base.

DApps require significant computing power to operate, which can cause network congestion. For example, to ensure the security, integrity, transparency and reliability of Ethereum, validators must verify and store every transaction made on the network. This can reduce the number of transactions per second (TPS) processed, lead to network congestion and increase gas fees.

Making changes to a DApp is another challenging task. To improve user experience and security, DApps will need to fix bugs, update the interface, and add new features. The problem is that it is very difficult to change the internal code of a DApp after it is placed on the blockchain. Approval of any changes or improvements requires the consent of the majority of nodes on the network, which will take a lot of time.

The wide variety of DApps creates high competition among developers. For the project to work effectively, a network effect is necessary: ​​the more users a particular DApp has, the higher the quality of its services. A large user base also increases the security of the application and protects its open source code.


Common DApp Use Cases

DApps offer companies from all industries new ways to attract users. Some of the most popular DApp use cases include GameFi, decentralized finance (DeFi), entertainment, and governance.


GameFi

In recent years, the GameFi DApp space has been actively developing, as seen in the popular Ethereum blockchain game Axie Infinity. According to the website DappRadar, gaming activity on the blockchain in the first quarter of 2022 increased by 2000% compared to 2021. In March 2022, the blockchain was able to attract 1.22 million unique active wallets (UAW), with over 50% of the activity coming from gaming DApps.

Unlike traditional video games, most gaming DApps give players full control over in-game assets and allow them to monetize them in real life. For example, Axie Infinity players can purchase in-game characters, virtual land, and other items as NFTs. All game assets can be stored in a personal wallet, sent to other Ethereum addresses and exchanged on the NFT marketplace. Players can compete to accumulate ERC-20 tokens within the ecosystem and trade them on exchanges. Typically, the longer they play, the more in-game rewards they can earn.


DeFi and DEX

Traditional finance relies on intermediaries represented by various financial institutions. DApps allow the use of financial services without central authorities and provide users with complete control over assets. The DeFi space is also attractive to low-income people who would like to have access to various financial services at a lower cost.

Loans and credit are the most popular types of financial services in decentralized applications. DeFi DApps provide instant transaction settlement, minimal to no credit checks, and the ability to use digital assets as collateral. The DApp lending market offers increased flexibility: lenders have more control over their loans and can independently choose the appropriate token and platform. Users can also earn up to 100% of the amount borrowed as interest on the loan as they are not charged any fees.

Decentralized exchanges (DEX) are another example of financial applications. Such platforms offer peer-to-peer trading without the intermediaries found in centralized cryptocurrency exchanges. Users do not have to give up custodial ownership of their funds: they do not transfer their assets to the exchange, but trade them with other users directly through smart contracts. Orders are executed on the chain and directly between user wallets. Because decentralized exchanges are easier to maintain, they charge lower fees compared to their centralized counterparts. Some of the most popular DEXs include Uniswap, SushiSwap and PancakeSwap.


Entertainment

Entertainment is an integral part of our life. DApps allow you to digitalize your daily leisure time and even monetize it. For example, the decentralized, blockchain-based streaming platform Audius bypasses traditional music industry middlemen and connects artists directly with their fans. On this platform, artists can monetize content and create an immutable record of their work on the blockchain.

DApps also help solve problems faced by social media users. Centralized social networks such as Twitter and Facebook are often criticized for censoring messages and mishandling user data. And in decentralized social media DApps like Steemit, users can freely interact with each other and express opinions without so many restrictions and censorship, while controlling their personal information.


Management

DApp users actively participate in the governance of online organizations through a decision-making mechanism in which the community plays a key role. With the help of smart contracts, owners of the governance tokens of a blockchain project can put forward proposals and anonymously vote for the proposals of other users.

Another decentralized governance model is offered by decentralized autonomous organizations (DAOs). DAOs can be considered fully autonomous DApps that use smart contracts to make decisions without a central authority. There is no hierarchy on these platforms, and the interests of the DAO and its participants are aligned through economic mechanisms.


How to connect to DApp

To interact with a DApp, you need a compatible browser extension wallet, such as MetaMask, Trust Wallet, or Binance Chain Wallet. Registering a wallet takes only a few minutes. Some even offer mobile versions for quick access.

As an example, consider connecting the Trust Wallet to PancakeSwap on BNB Smart Chain (BSC). If you don't already have a Trust Wallet, check out this article on installing one on your smartphone.


Depositing BNB to Trust Wallet

To use a DApp on the Binance Smart Chain (BSC), BNB coins are required to pay transaction fees. For example, BNB can be withdrawn from the Binance spot wallet.

Open the BNB Smart Chain tab in Trust Wallet. Do not click BNB Beacon Chain - this option is for BEP-2 BNB on BNB Beacon Chain and cannot be used to pay transaction fees on BSC.


Click the "Receive" button to view your BNB deposit address. Copy this address to your withdrawal wallet or scan the QR code to complete the transaction.


Once the transaction is confirmed on the blockchain, the deposited BNB amount will appear on the main page of the Trust Wallet.


Adding CAKE tokens to the Trust Wallet list

By default, the Trust Wallet token list does not include DApp tokens such as PancakeSwap (CAKE). In order for CAKEs to appear in your wallet, they must be added to the Trust Wallet list manually.

Click “Add Tokens” and enter “PancakeSwap” in the search field. You will see CAKE tokens on various blockchains. Since we are using BSC, click the button next to BEP-20 CAKE.


The CAKE token should now appear in the list of Trust Wallet tokens.


Next, you need to connect Trust Wallet to PancakeSwap. This can be done through the Trust Wallet mobile browser or through a browser on a PC.


Connecting to PancakeSwap via Trust Wallet Browser

1. Click on “Browser” on the main page of Trust Wallet and go to the PancakeSwap website.


2. You will see a request to connect Trust Wallet. Click "Connect".


Connect to PancakeSwap via browser on PC

1. Go to the official PancakeSwap website and click on “Connect Wallet”.


2. Click on the Trust Wallet icon and a QR code will appear on the screen.


3. Open the Trust Wallet app, go to Settings, and then go to the WalletConnect tab.


4. Click New Connection and scan the QR code.


5. You will see a request to connect your wallet. Click "Connect".



Summary

DApps extend the functionality of the Internet by enhancing traditional applications using blockchain technology. In the future, decentralized applications will bring even more innovative use cases to the market. As reported by DappRadar, the DApp had nearly 2.4 million daily active users in the first quarter of 2022, and this number is expected to continue to grow. However, DApp developers and the blockchain networks they are built on still have some limitations to overcome before they are adopted en masse.