What Are Dapps and Why Are They Important
Imagine having your car zipping back and forth, transporting passengers or cargo while you’re at work.
Imagine having your computer utilizing its spare computing power to serve businesses and people across
the globe. How about being paid for browsing the web and taking ownership of your invaluable, attention.
Imagine a world like that. That world is not far away.
A paradigm shift in the way we view software models is approaching. When Bitcoin, the first
cryptocurrency, made us reassess our definition of Store of Value, it also revealed a sneak peek of the
future: a world running on decentralized applications (Dapps for short). These distributed, resilient,
transparent and incentivized applications will prove themselves to the world by remapping the
technological landscape.
Before we can understand what Dapps do, we need to be familiar with its underlying technology, in this
case the blockchain. In previous weeks we have discussed what a blackchain is, the blockchain is a ledger
of records organized in blocks that are linked together by cryptographic validation. It is a digital storage
of consensus truth. The key is to understand that this ledger is neither stored in a centralized location nor
managed by any single entity, hence it being decentralized. The open-source software that leverage using
the blockchain technology are called Dapps.
As the concept is still in its infancy, there might not be one definition of what a Dapp is. The common
featues of Dapps include;
– Open Source. Ideally, it should be governed by autonomy and all changes must be decided by the
consensus, or a majority, of its users. Its code base should be available for scrutiny.
– Decentralized. All records of the application’s operation must be stored on a public and decentralized
blockchain to avoid pitfalls of centralization.
-Incentivized. Validators of the blockchain should be incentivized by rewarding them accordingly with
cryptographic tokens.
-Protocol. The community must agree on a cryptographic algorithm to show proof of value. For example,
Bitcoin uses Proof of Work and Ethereum is currently using PoW with plans for a hybrid PoW/Proof of
Stake in the future.
If we adhere to the above definition, the first Dapp was in fact bitcoin itself. bitcoin is an implemented
blockchain solution that arose from problems revolving around centralization and censorship. One can say
Bitcoin is a self-sustaining public ledger that allows efficient transactions without intermediaries and
centralized authorities. While Bitcoin paved the way for cryptocurrencies and the blockchain technology,
Ethereum was the one that first showed everyone the true potential of blockchain technology. Ethereum
allowed developers from all over the world to run their Dapps on top of their platform. ethereum
developers can code smart contracts on Ethereum, which serves as the blueprint for the Dapp. Examples
of successful Ethereum-based Dapps that have achieved millions of dollars in market cap include Golem,
Augur and BAT.
So why are Dapps so important? Because the inevitable onslaught of blockchain adoption will render
numerous practices obsolete. It may be a bold and distant conjecture, but services such as banking will be
made redundant as the world learns to operate and finance itself by self-sustaining, trust-less and
decentralized networks. Currently, large corporations are rushing to secure their place in the blockchain
movement, which is a testament to that.
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