Dapps: Blockchains Beyond Currencies
Learn what dapps have in store and some current examples.
The digital asset world is more than just Bitcoin. Here's why dapps are so exciting.
Uber, TicketMaster, and insurance brokers provide a service and take a cut. Why allow middlemen to take such a big cut for simply facilitating the transaction? Dapps offer a solution. Read about what they are, what they offer, and the challenges they face.
The FirstWatch Crypto, LLC team appeared on the Bad Ideas podcast with hosts from Rokfin, a company giving creators a way to earn more money through a subscription service. You can watch and listen here.
What are Decentralized Applications?
Dapp is short for decentralized application. They are similar to the apps we are used to and offer similar functions, but run on a peer-to-peer, fully decentralized network (like a blockchain).
Why is this so promising? Why have over 3,500 dapps been created?
Short answers: dapps promise to cut out the middleman. No individual, entity, or corporation has control. Instead of taking value from a transaction and being a gatekeeper, dapps provide an interface for anyone to use a blockchain to transact for certain services.
Characteristics of Dapps
Dapps are still in their infancy and the definition continues to evolve. However, there are three fundamental characteristics that all decentralized applications have.
Open-Source
Usage is determined by developer and user consensus, which means that the application is able to run entirely on its own and exists outside the domain of a single authority.
Decentralized
What does it mean for an app to be decentralized? All records of the operations and transactions are stored on a public blockchain for transparency and efficiency. Community members can control the future trajectory of the dapp.
Incentivized
The users who participate in using the dapp are rewarded, often through a cryptocurrency token that is native to the app. Users can then trade this for other Cryptos or USD.
What Do Dapps Offer?
Trustless Systems
The code is visible to everyone. You don't need to trust a company's marketing tactics because everything is open source and available. The open-sourced nature is that it encourages further development on the network.
Guaranteed Execution (Continuous Availability)
As long as the code exists on the network, the code will execute and function. After the recent Facebook outage that wiped out Facebook, Instagram, WhatsApp, and Oculus functionality, this is a powerful offering.
Censorship Resistant
It's impossible to take down an application without taking down every single node on the network. This is a different business model from centralized businesses. With dapps, no authority is needed to facilitate safe and secure transactions and dapps cannot be acquired or shut down.
The Downsides
As we mentioned above, dapps are still in their infancy and face challenges as they continue to grow and mature. Some of these challenges include:
Hacking has plagued dapps. This is a downside of open-sourced code. The code developers create products and publish the code, giving hackers the opportunity to inspect the code and take advantage of any weakness.
The user interface (UI) of many dapps is a far cry from the gorgeous UI's of Snapchat or the NYT Crossword app. We will have to be patient as dapps work to catch up to the digital experience that we're used to.
The proliferation of dapps has slowed down the benefits of network effects. Many dapps have struggled with slow user growth. Fixing bugs or updating the protocols across the network is often difficult.
Examples of Dapps
Games
The list of decentralized games include names like Cryptokitties, Splinterlands, Axie Infinity, Alien Worlds. Monetization of games is already a huge industry and blockchain is just taking it one step further. Players will be able to barter with each other, and exchange skins, weapons and power-ups to enhance the gaming experience.
Decentralized Exchanges
Decentralized exchanges include Uniswap, Sushiswap, Pancakeswap (yes you heard that right), Opensea. Defi is already a big topic we've covered. Decentralized exchanges and lending platform provide the same services that banks and brokers do, but allow for peer-to-peer exchange and less need for gatekeepers so that more people can access the financial world.
Gambling
Augur and Stake are two decentralized gambling platforms. Taking a "vig" is at the heart of the business model for casinos and sports betting apps. Dapps will take a small vig for developers and transaction costs, but nothing compared to what the industry takes now. This will make betting cheaper in the long run.
Social Media and Content Distribution
Examples include Steemit, Rokfin, Rally, and the Brave Attention Token. These days, Facebook is a controversial company. Almost everyone has an opinion about how they own and use your data. Social media and content dapps will flip the board on this model, where you could end up being paid in native blockchain tokens to share your data.
Dapp Stats:
The blockchain industry grew 509% year-over-year, according to the Q3 2021 Dapp Industry Report by DappRadar.
There are 3,600+ dapps in development or launched.
The 24-hour transaction volume exceeds $350 million.
Resources:
A fun 3-minute explainer of dapps.
A slightly more in-depth explanation of dapps published by the ethereum developer network.
Dappradar, a website that ranks dapps.
A thorough list of 2500+ dapps that can be sorted and filtered.
Vitalik Buterin from 2017 talking about Decentralizing Everything.
A more extensive dive into dapps from Hackernoon.
➡️ About FirstWatch Crypto ⬅️
FirstWatch Crypto was started by Dan McGlinn (@DigitalDanMcG)and John "Blaize" Hrabrick (@blaizebitcoin) who have been investing in the space for a combined 8 years. FirstWatch Crypto is on a mission to simplify the crypto investment landscape.