Decentralized apps, also known as “dapps” and “dApps”, are cryptocurrency programs like games and financial products that run on a network of blockchains rather than a single company’s centralized server.
Dapps can be described as a wide category in the cryptocurrency world. This term can be used to describe any type of cryptocurrency exchange or social network that allows users to control the revenue generated from their posts.
Dapps are an integral part of “Web3,” a concept that seeks to reduce some of the power built up by internet companies over the past decade. Dapps also include projects that focus on decentralized finance (DeFi).
Dapps are smart contracts that run programs that automatically perform functions, such as distributing payments. Because Bitcoin doesn’t support complex smart contracts, Ethereum is the largest cryptocurrency network where dapps can be found.
Dapps have some advantages over centralized applications in that they give users more control and authority over their functions. They can be confusing and offer less consumer protections. You might also find it difficult to get help if there is a problem with a dapp because they are not controlled by one entity.
Dapps vs. Central Services
What does it mean to have an application centralized? And why should you care? Partly, it depends on who you trust.
Do you prefer doing business with well-respected, responsible companies, even if it means they make some money? Are you open to trying out new technology that can be potentially dangerous and allows you to transact directly with users without the need for intermediaries?
Remember that just because an app is decentralized doesn’t mean it is unrestricted. Transaction fees are a function of dapps or other cryptocurrency projects.
They pay users who take part in governance and other functions of the network.
They stop spam transactions from overloading the network.
Is it possible to decentralize dapps?
Dapps may, despite the name, have some degree of centralization. If a project is launched, its creators might have considerable control over it that they can surrender over time. However, if they give power to users (usually in cryptocurrency tokens span>), they may be able to relinquish some of their control.
Like most cryptocurrency projects, dapps might also have a central foundation that funds its development, promotes it, and offers ideas for improvement.
The “whitepaper” for any project that you are considering should be read if you value decentralization. This document outlines the plans of the developers for crypto projects’ operation.
Which dapps are the best?
There are many ways to evaluate dapps. Some of the most common metrics are:
The amount of cryptocurrency that was deposited into a smart contract in a dapp. DappRadar, an analytics site, reported that Ethereum’s ETH2 deposit contract was the most valuable dapp. This is one of the ways that users can earn staking rewards for holding ETH.
This is the number of users that a dapp has. It can be used to gauge the public’s interest in a project. It’s not unusual for one person to have multiple cryptocurrency wallets. DappRadar’s November 2022 analysis of monthly active wallets revealed that PancakeSwap was the most popular decentralized exchange, Hooked was a social app, and Trickshot Blitz was a game.
DappRadar measures the amount of capital that flows into a dapp during a particular period. In November 2022, decentralized finance apps or exchanges were the top players. Uniswap and PancakeSwap were some of the most prominent players.