A decentralized application, commonly abbreviated as dApp, is software built upon a decentralized network such as a blockchain, which combines a smart contract and a client-side UI. A single authority does not control these applications, and they run on multiple devices connected to the network. In this article, we will explore the process of creating a dApp on the blockchain and look at some of the top dApps today.
Let’s understand dApps with an example: Twitter is arguably one of the most popular and influential microblogging social networking sites. The whole of Twitter is run and operated by a single organization, giving it full authority over everything happening on the platform.
With more than 200 million active users daily, Twitter is full of people with different opinions and viewpoints, making it a good place for healthy debate online. But sometimes, things get out of hand and sentiments get hurt. This can result in users being banned, which is possible because the platform is a privately controlled web app and decisions are taken by the internal board of Twitter, Inc.
In the case of a decentralized application built on a platform like Ethereum, applications are open-source and lack this single authority figure, thus freeing it from such influence. For example, someone can launch a similar microblogging site like Twitter on the blockchain and anyone can post anything on it without regulation. Once something is on it, no one can delete it, not even the developers themselves.
A blockchain is a ledger or digital database, distributed among the devices connected to the network. Every individual block consists of a cryptographic hash of the preceding block, a timestamp, and transaction data. Time stamps ensure the validity of the data by preventing older data from being modified. They also make the technology useful for auditing.
The distributed blockchain database is managed by a peer-to-peer network adhering to a protocol to validate new blocks. Any type of asset can be tracked and traded through this platform. As the technology behind Bitcoin and other cryptocurrencies, blockchain is quickly becoming a powerful force in the business world.
Every website has a web server. This central server contains all the data and codes for the website to function properly. Every time we access a website, our browser interacts with this web server to retrieve information about the website. If we were to build a new website with the same paradigm, we might run into some problems:
A blockchain combines a database, central server, and network into a single unit. This architecture helps us get rid of all the drawbacks of the traditional web server system. The computers connected to the blockchain are called ‘nodes’, and every transaction data and record is stored in bundles called ‘blocks’.
With a smart contract, the Ethereum blockchain enables us to run our application’s code using the Ethereum Virtual Machine (EVM). All of our application's business logic is housed in smart contracts.
The conditions of the contract between the buyer and seller are directly encoded into lines of code, making it a self-executing contract every time a transaction takes place. The contracts and underlying codes are distributed throughout a decentralized blockchain network. These transactions are traceable and irreversible and the code regulates their execution.
Some benefits of a smart contract are:
1. Quick and efficient: Since it’s an automated process, the transaction is executed almost immediately after the prerequisites are met.
2. No middle man: As there is no third-party authority figure to validate the details of the transaction, there is no question of alteration of the records.
3. Secure: All the transactions are encrypted and are resistant to malicious hacking attempts. Since the record blocks are connected to their previous and following records, altering one block will involve the whole chain being changed, which is just not feasible.
4. Cost-effective: This is an extension to the no-middleman clause. No extra fees or charges are required as there are no intermediaries.
A decentralized application on the blockchain consists of a frontend and a backend. The frontend is the UI/UX of the website or software being designed that the users will directly interact with. The backend is the smart contract that helps the application run on the blockchain.
Frontends are a very crucial part of any application since this is what the end users directly interact with to use the application’s features. The UI should be intuitive and easy to use. It should also look appealing and transition smoothly for a satisfying experience.
Creating a business-worthy decentralized application is not a simple task. Dedicated specialized teams are required for every aspect of the software and it can end up being quite a technical feat. It can take four to six months to come up with a prototype and six to nine months to complete a working software.
We have condensed the whole development cycle into five easy steps to help you understand how to create a working dApp on the blockchain.
As mentioned, smart contracts are where the business logic resides. These are the automated actions the application will perform once it's live on the blockchain. Anything can be in a smart contract, from monetary transactions to running algorithms.
Ethereum is the most popular blockchain out there, but you can choose any other like the IBM blockchain, Cardano, Polkadot, Ripple, Solana, Tron DAO, etc. Some applications are equipped to work on multiple blockchains and are called cross-chain dApps.
The frontend of a dApp on the blockchain is the same as any standard software or website. Any action triggered on the standard software links back to the central server and database, whereas for a dApp, the actions lead to the smart contract making changes on the blockchain.
This difference in their internal functionalities should have minimal effects on the application’s user interface and thus, has the same features as traditional software:
You need a web solution, which is a type of program distributed over an internal network (eg., corporate intranet) on a private server, if you're developing Ethereum decentralized applications that demand a lot of data storage, want to run reports, or have any other functionality not covered by on-chain transactions.
Having such an administrative window will connect to smart contracts and frontend client apps to provide you, as a business owner, with more functionality to manage your dApp and users.
Although testing for bugs and flaws before the software is released is a common practice, QA testing for dApps is somewhat different from normal apps. Testnets are used to test dApps since smart contracts only work on blockchains. Further, this testing has to start early in the development process since there is no room for debugging once the software is live on the Ethereum blockchain.
As we previously learned, once a decentralized application is on the blockchain, not even developers can meddle with it. And although this is one of the advantages of dApp on the blockchain, the drawback is that if bugs or glitches make their way into the final product and onto the mainnet, there’s no changing the smart contract. This will render the dApp flawed forever.
Launching the application for desktop, IoS, mobile, and other platforms is the final step. The backend starts functioning and your smart contract is added to the blockchain. Your decentralized application is now live!
Though there can be no changes to the smart contract, maintenance is still required for the frontend of the application.
The following are some of the top examples of decentralized apps today.
Running on Ethereum and Polygon, OpenSea is one of the most sought-after NFT (non-fungible token) exchanges. Some of the more popular NFT projects featured on OpenSea are Bored Ape and Crypto Punk. Apart from NFTs, it offers other tradeable digital assets like in-game skins, weapons, Metaverse items, etc.
Released in 2018 and hosted on the Ethereum blockchain, Uniswap is a crypto exchange housing more than 150,000 monthly users with a monthly trading volume of $2.5 billion. The platform has its own cryptocurrency, UNI. The holders govern the platform and have ownership proportioned to the amount of UNI they hold. The UNI token is compatible with many popular crypto wallets like Coinbase, MetaMask, Trust, etc.
PancakeSwap is a decentralized exchange (DEX), a subset of DeFi applications. The BNB Chain, which replaced BSC (Binance Smart Chain) and Binance Chain as the platform's foundation, enables users to trade between two BEP20 tokens, a new token norm developed by Binance.
In the early days of dApps, the majority of them were created on the Ethereum blockchain. This excessive reliance on the Ethereum network led to problems like delayed transaction times and expensive gas costs.
PancakeSwap’s approach drastically lowers the waiting period in-between transactions. When someone wishes to exchange one token for another, they only have to add their existing token to the pool and take out the desired replacement token.
Compound is also based on the Ethereum network and has users deposit, borrow, and lend a select few cryptocurrencies to earn interest. They may deposit tokens like DAI, ETH, USDC, ZRX, WBTC, etc., into lending pools using Compound so that borrowers can access it. Once the assets are locked, lenders receive interest. Anyone with a crypto wallet may borrow using Compound since there is no credit check necessary. Based on the asset's quality locked by borrowers, Compound decides how much users can be lent.
Governance tokens called COMP are handed out for every transaction with a hard cap of 10 million. A total of 42 percent of all the tokens will be given to users via the protocol. Owners of these tokens may vote with them on significant protocol changes.
Residing on the Ethereum blockchain, MakerDAO (where DAO stands for Decentralised Autonomous Organisation) is one of the largest DeFi platforms. The dApp uses Ethereum smart contracts to automate the collateralization, lending, and other features of its stablecoin, DAI.
MakerDAO developed and controls the decentralized cryptocurrency known as DAI. It qualifies as a stablecoin since its value is pegged against the US dollar. DAI was the fourth-largest stablecoin by capitalization as of October 2022, with around 5.6 billion in circulation.
Anyone may borrow DAI using other cryptocurrencies as collateral. A point to note: users have to deposit more than they put in since these loans are overcollateralized.
Early in 2020, Curve, a DEX similar to Uniswap, was introduced that enabled users to trade several stablecoins in a single pool. It supports well-known cryptocurrencies like BTC and ETH as well as stablecoins like DAI and USDC.
The sole difference between the two platforms is that Curve concentrates on assets that are pegged against national currencies with a 1:1 ratio. Tokens can be traded like Uniswap as long as there is enough to liquefy. Curve distinguishes itself from other DEXes primarily by emphasizing stable assets and stablecoins such as DAI, USDT, USDC, etc.
Yearn Finance is a DeFi ‘profit switching’ lending system based on Ethereum. It was created to make common DeFi protocols easier for less tech-savvy customers to use and to provide their investors with the biggest returns. Since its creators were aware of how the crypto space was getting more complicated for the average person, Yearn Finance was established with a straightforward objective in mind: to make profitable investments easier for customers.
Within the system, Yearn provides two fundamental products named vaults and earn. Crypto pools known as vaults provide yield on an automated basis in response to changes in the market. Earn is a lending aggregator which automatically shifts funds between exchanges and other lending protocols for the highest returns.
Even games can be made on blockchain networks, and one such example is Axie Infinity. Built upon the Ethereum network, the game’s main objective is to hatch, raise, train, and fight digital creatures called Axies.
Axies with different skills and attributes can be traded as NFTs. Inspired by the popular Japanese animated series Pokemon, Axie Infinity takes a similar approach of play to win but the game requires a huge amount of investment to begin with when compared to other games of a similar genre.
Axies can be sold on the blockchain for real money. The tokens used in-game are SLP (Smooth Love Potion) and AXS (Axie Infinity Shard). Players can earn tokens by battling other players, completing objectives, and breeding Axies. They can also earn passive income by putting up their extra Axies for ‘scholarships’ where other players can play with them. The earnings are then split based on a predetermined split, i.e., 50/50, 60/40, 70/30, and so on.
Probably one of the most popular blockchain games out there, Alien Worlds sees the user going on a journey as a futuristic space explorer. The native token is Trillium (TLM), which can be obtained by mining alien planets in-game. Each player gets three mining tools and avatars at the beginning of the game that they can level up for better rewards.
Every player is required to have a WAX.io wallet to sign up for Alien Worlds. WAX.io is used to exclusively trade NFTs. After signing up, players begin by selecting a planet they wish to mine. They can own land in these digital planets and let others mine on theirs for passive income.
There are some things that players need to keep in mind before mining, such as commission rates, TLM yield multiplier, charge time multiplier, NFT luck multiplier, etc. All the avatars, weapons, and tools in the game are NFTs that can be exchanged on the blockchain for money. The stablecoin, TLM, can also be used to earn money outside the game.
Step App is a gamified fitness app where the user is rewarded for walking. This incentivizes users to have a healthier lifestyle and earn passive income while doing so. The native token is STEP. Deployed on the BNB chain, it is a governing token that gives the users a say in the company’s decisions. It can also be used to mint NFTs. Users can even hold the tokens for appreciating in value.
We’ve explored the concept of dApps built on blockchains, learned what goes behind building decentralized blockchain applications, and explored some of the top ones used today. Decentralized apps are the new frontier of application development. They allow for a more democratic and user-friendly experience as well as the ability to run applications without reliance on a single server or a central authority. dApps are built on blockchains like Ethereum to store data, ensuring the utmost security and privacy.
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