Understanding Dapps

by | Jul 13, 2021

Disclaimer: Posts on the HyperTrader blog and associated HyperLinq websites are for educational and informational purposes only. These posts should not be taken as financial advice, nor are they meant to be viewed as trading advice. HyperLinq Inc. or the authors take no responsibility for any damages or losses.

In our journey of understanding decentralized finance and crypto in general, today, well understand the concept of dapps. Decentralized applications or dapps are the critical steps to building a new web 3.0 experience following the ethos of decentralization at its core. So, let’s delve deeper into the concept of dapps, their benefits, and their significance.

What is a Dapp?

A dapp is basically is a decentralized application that runs on a blockchain network or follows a  peer-to-peer network model. From a fundamental point of view, a regular app on your smartphone or laptop has its backend code running on a centralized server and is owned by an entity or a company. Whereas when it comes to dapps, the backend code is running on a decentralized peer-to-peer network.

How do they Work?

As mentioned above, a dapp might look similar to that of a regular app from the looks and feel. However, true magic happens when you look at the backend. So, let’s have a look at the backend of dapps to understand their working.

As dapps work on the blockchain networks, they require smart contracts for their app logic and deployment. By definition, smart contracts are self-executing computer codes that are written on a distributed ledger. In simple language, smart contracts are similar to real-world contracts but stored digitally. The key point is – as they’re stored on a blockchain, smart contracts inherit two key properties  – immutable and distributed. Meaning smart contracts, once deployed on a blockchain network, cannot be changed and distributed across the network, allowing anyone to interact with them.

Therefore dapps are truly decentralized in nature as they’re governed by the logic of smart contracts, not by any governing entity. As smart contracts can hold funds, any dapp built on top of a smart contract can mediate agreements and transactions between two parties with a simple user interface and without any third party or escrow mechanism.

Benefits & Drawbacks of Dapps

The smart contracts on a blockchain network are open for everyone to access. Thus allowing anyone to incorporate an already existing smart contract into their dapp. By leveraging such key ethos of blockchain technology, dapps offer a range of benefits over regular apps. Some of these are:

  • Zero downtime
  • No owners
  • Free from censorship
  • Built-in payments
  • Plug & play
  • Anonymous login
  • Backed by cryptography

Even though dapps offer a range of benefits over traditional apps and mark a shift in how we’ll see and interact with apps in the coming future. Still, there are some drawbacks of dapps that need to be addressed. These drawbacks include:

  • Harder to maintain
  • Network congestion
  • Unpredictable transaction fees
  • Hard to scale
  • Clunky user-experience

In conclusion, it’s still a long way for dapps to become mainstream as the current apps are known among consumers around the world. Still, we’re hopeful that with the rise of web 3.0 and scalable blockchains, we’ll be able to witness the world adopting dapps in the coming years.

Head of Content Marketing @ HyperLinq. His love for Chai and mountains precedes everything. Often wonders about things like, "why $1 earned through leverage feels 100x better than $1 earned selling your time?"
Head of Content Marketing @ HyperLinq. His love for Chai and mountains precedes everything. Often wonders about things like, "why $1 earned through leverage feels 100x better than $1 earned selling your time?"

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