What Is a dApp — Pros and Cons of Using One

Let’s start this guide by explaining what a dApp is — dApp is a digital application that runs on blockchain or peer-to-peer networks. It’s similar to traditional applications. However, since they have a decentralized nature, no single entity will have control over the network. dApps have numerous use cases, from gaming to finance.

There are more than 12,000 dApps across all blockchains, and their number is expected to increase when Web 3.0 launches.

With that in mind, in this guide, you’ll learn how dApps work and what are their use cases. In addition to that, we’ll talk about their main pros and cons.

What Is a dApp?

dApps meaning can be described as a software program that runs on a peer-to-peer network or a blockchain. dApps have a decentralized nature, which means a single entity does not control them.

These applications are often built on the Ethereum blockchain, but they can also be built on other networks, such as Polygon and Arbitrum.

That said, dApps must meet the following criteria:

• They must have an open-source code
• Their data must be public
• They must use cryptographic tokens
• They must use the PoW or the PoS consensus mechanism to generate tokens

The most popular examples of dApps include AAVE, Cryptokitties, and Zedd.

How Do dApps Work?

dApps operate via smart contracts, blockchain, and cryptographic tokens. In other words, all transactions are recorded and validated using smart contracts. This creates an immutable, transparent, and secure ledger.

dApps have the same front-end code as traditional applications, while their back-end code is different. Namely, since they run on P2P networks, they will not be controlled by a single entity. Moreover, since dApps have an open-source code, anyone will be able to build upon them.

Decentralized applications use cryptographic tokens to encourage their users to participate in the decentralization of the network. On that note, to use dApps, users will have to buy or earn their tokens through staking or mining.

dApps can also be divided into three categories:

• Type I — decentralized applications that have a native blockchain
• Type II — dApps that run on Layer 1 blockchain
• Type III — decentralized applications that depend on Type II dApps

What Are DApps Used For?

A decentralized application can have many use cases. On that note, it can be used within the financial, gaming, healthcare, and music industries. It can also be used for supply chain management and governance. Here’s how.

Finance

Unlike traditional financial institutions that rely on a centralized body, like banks, decentralized finance (DeFi) uses a blockchain to replace intermediaries. This means that all transactions will take place on P2P networks through smart contracts.

For example, Uniswap is a decentralized crypto exchange that allows its users to trade ERC-20 tokens. Another example of a DeFi platform is Aave. This DEX platform enables its users to lend and borrow crypto assets via smart contracts and earn rewards.

Gaming

dApps can also be used in the gaming industry. Namely, blockchain-based games enable players to buy, sell, and trade in-game items in the form of NFTs. Gaming dApps can come in the form of a play-to-earn model, or GameFi. These models reward players for participating in their games. The best examples of P2E games are Axie Infinity and CryptoKitties.

Healthcare

The use of dApps in the healthcare industry enables healthcare professionals to securely store and share patient data. All data on the blockchain is encrypted. This means that it will remain private and that no one will be able to tamper with it.

Notable healthcare dApps include MedRec, Solve.Care, and Health Wizz.

Music

The usage of dApps within the music industry allows artists to earn tokens each time they upload their music or share their songs. At the same time, users can use tokens to buy songs from their favorite artists. The most popular music dApps include Audius, Tune.FM, and Tamango.

Supply Chain Management

Decentralized applications allow users to track their goods through the supply chain in real time. This ensures the authenticity of the product. Supply chain dApps also allow buyers, distributors, and retailers to communicate with each other.

Governance

DAOs or Decentralized Autonomous Organizations are companies that allow their token holders to participate in the management of the company. To that, DAO users must stake their tokens. This will give them voting rights.

Pros and Cons of dApps

The main advantages of dApps include:

• User privacy
• Resistance to hacks
• Resistant to censorship
• No single point of failure
• No downtime
• Autonomy and transparency
• Global availability

At the same time, dApps come with the following disadvantages:

• Dependency on consensus mechanism
• High energy costs
• Hard to maintain
• Irreversible transactions
• Prone to network congestion
• Regulatory challenges

dApps Vs Apps

The main difference between a traditional and decentralized application lies in their nature. Namely, the former has a centralized nature, while the latter is decentralized. This means that traditional apps are under the control of a central entity, while dApps don’t have a central party. Other differences include the following:

Conclusion

What is a dApp, then? dApps are programs that run on blockchain and P2P networks. This enables them to be independent from third parties — users can interact directly with each other. Most dApps are built on the Ethereum network.

Unlike traditional apps, dApps use smart contracts to conduct transactions.

Moreover, they are resistant to censorship and they use open-source codes. However, they are also harder to maintain, they process transactions slower, and they are prone to network congestion.

dApps have many use cases, however, they are mostly used in the financial, gaming, and healthcare industries.

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