What is a Decentralized Application (dApp)?

What is a Decentralized Application (dApp)?

in Cryptocurrency

If you have a notion on how blockchain and ICOs work you are now ready to understand the dApps' mechanism as well. In this guide, I will explain to you what is a dApp, how it works and how to create one by yourself.


  1. What is a dApp?
  2. DApps types
  3. dApps vs smart contracts: what's the difference?
  4. How does it work?
  5. How to create and develop a dApp
  6. Successful Dapps
  7. DApps future benefits
  8. Conclusion

What is a dApp?

dApp blockchain

Dapp stands for "decentralized application". It is a number of applications that run on the decentralized Ethereum blockchain.

The difference with the usual, centralized applications is vivid here: all the data of the decentralized ones are stored on a server of a company with single authority and require an ID information to log in. Meanwhile, the data of dApps is stored in the ethereum blockchain network and require only a private address.

So, dApps run on a P2P computer's network, that is not necessary a blockchain. For example, BitTorrent, Popcorn Time, ButMessage and Tor are not run on blockchain but on a P2P network.

The blockchain dApps should have the following features:

  • It should be an open-sourced autonomous application
  • The data and transactions records should be stored in a decentralized blockchain
  • The dApp should use a cryptographic token for the internal market operations
  • The tokens should be generated by the dApp with an inbuilt consensus mechanism

DApps types

There are three types of dApps, according to the Ethereum white paper:

  1. Blockchain financial applications — the decentralized and distributed applications where users control their money.
  2. Semi-financial applications where the money and information are mixed. For example, insurance apps like Fizzy that refund money for delayed planes. ICO also belongs to this type of dApps.
  3. The third type includes the protocol of the second type dApps and shouldn't be financial. The idea of them is you have a solar panel on the roof of your house but you have so much energy that you can sell the excess to your neighbor.

The analogy of the all the types are the following: 

  • Type 1 — an operating system like Windows
  • Type 2 — software program like Microsoft Word
  • Type 3 — specialized software like a mail-merge tool for the Microsoft Word

dApps vs smart contracts: what's the difference?

dapps blockchain smart contracts

Smart contracts are like a middleman between the parties and define the conditions to which both of them are agreed. When the conditions are met the actions are executed. In dApps the smart contracts allow them to connect to the blockchain. So, the dApps' analogy is a Web App.

A Web Application has a frontend (what users see with HTML, CSS, and JS), and a backend (the implemented mechanics like Java and Python) which are interconnected.

DApps also have the similar frontend but the backend is linked to a smart contract which connects it to the blockchain. To operate in the blockchain network dApps have their backend code. So, the smart contracts are only the backend of the dApps.

How does it work?

how dapp works

The functionality of dApps depends on all the four criteria I mentioned above.

  • As it is an open-sourced application it is decentralized and everyone can see the code.
  • Being blockchain-decentralized it serves as a transactions ledger which also can be seen by everyone.
  • Tokens are used to add transactions to the blockchain. They can be mined with the help of different protocols.

There are two of them at the time: proof-of-work and proof of stake.

  • Proof-of-work is the one where miners compete with each other to validate a block and add it to the blockchain.Proof-of-stake needs staked money to get the right to validate a block. 

how dapps work

How to create and develop a dApp

  1. Publish a whitepaper

A whitepaper with al the project's protocol, features descriptions and a roadmap is the first step. At least, you should cover the following items: 

  • dApp's goals and intentions
  • Token distribution plans
  • Consensus mechanism
  • Non-profit structure
  • Developer bounties management
  • DApp's technical description

Release a plan and gain the community engagement. Revise the plan depending on the feedback.

  1. Set the crowd sale date
  2. Start an ICO

ICO is a starting point. The crypto coins will be used in the internal market of the application and as a way to gather the project's crowdfunding.

how ico works
The tokens in dApps can be distributed as the following:

  • A wallet software should become available to the shareholders so they could exchange the dApps' tokens.
  • The tokens can be also premined especially if the founders provided a meaningful reason.
  • If there is a mining mechanism the referenced software program should be released and the way of incentivizing the network should be found so the users could start mining the token.
  • If there is a development mechanism the bounty mechanisms should be installed with a suggestion of tasks, tracking of the people who do the tasks and the awards.
  1. The spreading of the ownership stake

As the tokens are distributed the ownership becomes less and less centralized. The tokens of the dApp will be transferred to those who value it the most and then they can contribute to the development of the project.

  1. Launch the application

Launch the product of the project and keep maintaining it according to the roadmap, your and your community vision.

Successful Dapps

The aim of the project is to create a global market for idle computer power. The project has already had a $220 million market cap. Brass Golem, the first version of the project, will be released in May. If the project has a success Computer-generated imagery (CGI) artists will have a chance to rent other users' computer resources and render an image faster. Besides, the idle machine will be able to accept the other tasks thus putting in life sharing and pooling of resources.

The aim of the project is to create a prediction market which will get rewards to its users for forecasting events. The project has a market cap above $200 million.

The project aims to transform your mobile into a light Ethereum network node with the access to ethereum ecosystem from everywhere in the world with the help of the messenger which will be able to send payments and smart contracts.

It is an already existing project which is a platform for freelances who seek a job and employers who seek the employees to do the job. All the transactions between them are made in Ether without any fees.

The aim of the project is to provide users with a unique digital identity with citizenship information, credentials and a digital passport to share them with the other users.

The project is for those who are tired of the negative news. Here the news is created by people for people. The DNN tokens are given to the ones who provided the others with a high-quality reliable news on any existing topic.

You will find all the Ethereum-based dApps here.

DApps future benefits

  • Data ownership rights

Data is the most valuable asset in the digital world, although the users don't understand it. All the personal or any other sort of data you post in the social media belong to the platforms.

dApps will make a revolution in the data ownership in such a way that the average users will be able to make money from their internet usage.

  • Internet of Things (IoT) integration

Due to its decentralized nature and the veritable solution DApps will be the leaders of the IoT implementation and actualization.

  • Improved digital security

DApps cryptographic protocols provide reliable security features with the improved digital security for the blocks thus making the internet more secure.


All these blockchain dApps seem to be only the start of something really great and super developed.

The DApp Fund CEO, David Johnston predicts the following:

“These decentralized applications will someday surpass the world’s largest software corporations in utility, user-base, and network valuation due to their superior incentivization structure, flexibility, transparency, resiliency, and distributed nature.”




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