Like everything in life changes all the time, so does blockchain. Day after day innovative solutions are created, each time more decentralized and independent, aiming to make blockchain operations (whatever they may be) more private and more secure. The exact definition of DApp can be difficult to summarize in a few words, so this article aims to enlighten readers about what it is and how it will make a definitive difference in the Blockchain world.
How Does DApp Work?
This video explains DApps in a brief manner.
DApp can be loosely defined as applications built based on Ethereum smart contracts. So far so good. The problem is that when it comes to blockchain everything changes very quickly, which makes the exact definition of the term even more difficult.
Dig Into It
To explain it better, we need to find what most DApps have in common. Most DApps are open source, using smart contracts in Ethereum as the code behind the operations.
This is where real freedom for users starts. There is no need to sign up or even create a login, as these applications have no censorship or limits. The user interacts with the applications directly on the blockchain, and the interactions and data of the users are permanent in the system.
As previously stated, DApp presents a series of almost infinite possibilities, and that is why it is even difficult to define a concept that fits all its uses.
Sometimes, DApps interact with the world outside of the Ethereum blockchain, requiring information provided by an oracle to operate. Another possibility is DApps that have their P2P networks, built on top of Ethereum, enhancing or extending the functions of their underlying smart contracts.
DeFi Made DApps More Popular
Decentralized finance (better known as DeFi), which is the fastest-growing DApp category, most of the time involving money amid operations (which may not happen only a few times).
And of course, the more money involved, the more popular it gets, especially when it comes to the blockchain universe. Offering financial products and services based on Ethereum, there are several types of DApps in DeFi, including those that offer services such as insurance, DEXes, lending, payment solutions, etc.
Despite this, we must remember that not every DApp fits into the DeFi category. For example, DApps can be games like trading cards and collectibles with ownership stored on the blockchain, just to show how possibilities seem endless.
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DAO: Another Day, Another DApp
What are decentralized autonomous organizations?
Another possibility that cannot be let aside is DAO, which means decentralized autonomous organization. This means that they would be like independent companies or organizations, without a head chief behind the curtains. They can rule the way smart contracts or DeFi protocols operate. It is even possible that sometimes DAOs tokenize ownership and share profits like an average IPO company.
Complex and efficient, DApps offer a whole world of possibilities when it comes to blockchain. They are applications built on top of Ethereum blockchain smart contracts, but this common concept in no way manages to fit all the many forms that DApps can take. Coming in different shapes and sizes, DApps have as their common ground the fact that most of the time they have Ethereum smart contracts as the basis for the code, allowing unlimited anonymity and freedom between users.