What are Decentralized Apps (Dapps) you might ask? Imagine the world where your computer is utilising its spare capacity to serve people and businesses across the globe, where your car working away, transporting passengers while you’re at work, and where you are paid for browsing the web and taking ownership of your, arguably invaluable, attention. Fortunately, that world isn’t far away and a paradigm shift in the way we view software models is approaching.
Bitcoin was the first cryptocurrency, and it made us reassess our definition of Store of Value (SoV). It also revealed a sneak peek of the future – a world running on Dapps. Dapps are a new breed of applications that are not owned by anyone, cannot have downtime, and can’t be shut down. They will prove themselves to the world by remapping the technological landscape.
Before we discuss Dapps, we need to be familiar with its underlying technology—the blockchain. Bitcoin introduced blockchain technology to the world. Blockchain is a globally distributed ledger which records transactions. The records are organized in ‘blocks’ that are linked together by cryptographic validation. It is a digital storage of consensus truth and it is secured cryptographically via a robust consensus mechanism. The key is to understand that this ledger is neither managed by any single entity, nor stored in a centralized location. The block validation system results in new transactions being added irreversibly and old transactions preserved forever for all to see. Open-source software that leverage on the blockchain technology are called Decentralized Apps or Dapps.
The Birth of Dapps
The concept is still in its infancy. That’s why there might not be one definition of what a Dapp is. However, there are notable common features of Dapps and if an app doesn’t meet all of these criteria, then it is not a Dapp:
- Open Source– Source code of app is available to all and it should be governed by autonomy and all changes must be decided by the consensus, or a majority of its users.
- Decentralized– Uses a blockchain-like cryptographic technology and all records of the application’s operation has to be stored on a public and decentralized blockchain to avoid pitfalls of centralization.
- Incentive– App has crypto-tokens/digital assets for fueling itself and validators of the blockchain should be incentivized by rewarding them accordingly with cryptographic tokens.
- Algorithm/Protocol– Generates tokens and has an inbuilt consensus mechanism, which means that the application community must agree on a cryptographic algorithm to show proof of value. For example, Bitcoin uses Proof of Work (PoW) (https://en.bitcoin.it/wiki/Proof_of_work). On the other hand, Ethereum is currently using PoW with plans for a hybrid PoW/Proof of Stake (PoS)5 (https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ) in the future.
The first Dapp was in fact Bitcoin itself. Bitcoin is a self-sustaining public ledger that allows efficient transactions without centralized authorities and intermediaries. One can say Bitcoin is an implemented blockchain solution that arose from issues revolving around censorship and centralization.
Dapps are classified into three categories based on which blockchain model they use:
- Type I – These types of Dapps have their own blockchain, and they are known as Bitcoin, Litecoin, and all other altcoins.
- Type II – Type II Dapps use the blockchain of a Type I Dapp. Type II decentralized applications are protocols. They have tokens that are necessary for their function. An example of Type II decentralized application is the Omni Protocol.
- Type III – Type III of Dapps use the protocol of a Type II Dapps, and they also have their own tokens to generate a use. For example, the SAFE network uses the Omni Protocol for issuing SafeCoins. These are then used to build distributed file storage.
As you can see, many of the crypto-projects that are out now fall under one of these classifications.
The Ethereum Network
As you probably know, Bitcoin and Ethereum are the world’s two biggest blockchain platforms at the moment. Both Ethereum and Bitcoin may be loosely defined as Dapps aimed at solving real-world issues. However, Ethereum has a much larger plan in mind.
It was stated in Ethereum’s white paper that the Ethereum has the plan to create an alternative protocol for building decentralized applications with emphasis on scaling, security, and development time. You may think of Ethereum as the Mother of Dapps. Ethereum is armed with its very own language called Solidity. Armed with Solidity, Ethereum enables developers to form smart contacts using the Turing-complete Ethereum Virtual Machine (EVM). Using these tools available, developers made Dapps that have real-life use cases, ranging from resource planning to asset management.
Examples of successful Ethereum-based Dapps include Melonport, Augur, and Golem. They have achieved millions of dollars in market cap and each of them aspires to rewire the economy using blockchain technology. They also move us a step closer to a decentralised world.
Successful Ethereum-based Dapps
Here are some prime examples of Dapps to further illustrate why Dapps should be built:
- Augur (https://augur.net/) – Augur is one of the most successful Ethereum projects to date, and it gathered $5.2 million during its crowdfunding period. Augur is a fully open-source and decentralized prediction market platform that aims to combine the power of decentralised network with the concept of prediction markets to create a forecasting tool, for potential trading gains. This is a great innovative tool that’s perfect for those who like to make predictions or forecast the future. It allows traders to make money from their predictions and create income for the community of Augur (REP) token holders. The platform is very straightforward and has a lot of amazing features like the ability to create one’s own prediction market without any form of centralization, safe automated transactions, and low fees. Augur is currently still under beta test, but it may be able to feed real world truths into other applications. Augur is currently one of the most popular Ethereum-based platforms and it may establish itself as the blockchain of facts.
- Golem (https://golem.network/) – The Golem project is one of the most exciting projects on the Ethereum blockchain, and it aims to create the first global market for idle computer power. Standing at a remarkable market cap of $220 million, Golem’s goal is to offer a competitive alternative to traditional centralized cloud-based platforms like Microsoft Azure and Google Cloud Platform. In May, Golem released the first version, Brass Golem, which will be tested on its ability to tackle CGI rendering, its first use case. If it turns out to be sustainably successful, CGI artists will be able to rent computing resources from other users to render an image faster, and an idle machine can also accept tasks from other users. This means that frictionless sharing and pooling of resources may become a reality sooner than most people think.
- Status (https://status.im/) – Status transforms your mobile device into a light client node on the Ethereum Network. This enables you to easily access Ethereum’s entire ecosystem from anywhere. Users may send smart contracts and payment to each other within their messenger system. The app runs on peer-to-peer protocol so server downtimes are now longer a problem.
- Melonport (https://melonport.com/) – The Melonport protocol is a blockchain protocol for digital asset management, and participants can set up or invest in digital asset management strategies in an open and competitive manner. The system itself is decentralised and you can imagine it as a toolbox for anyone who has access to digital assets that require management. The system also minimises the requirement for trust, and using blockchain technology, time and costs are also drastically reduced. Melonport enables a never-seen-before competitive environment in asset management by building an auditable and visible track record.
- Aragon (https://aragon.one/) (Upcoming ICO) – Aragon is another ambitious project that aims to disintermediate human trade. It also allows you to manage entire organizations using the blockchain. The Aragon Network aims to act as a digital jurisdiction by removing geographical borders and paperwork. This digital jurisdiction is extremely convenient for everyone to operate on.
- Brave (https://brave.com/) (Upcoming ICO) – Brave’s value proposition seems rather unique in a world where consumers struggle to be in control of their privacy and attention. The underlying ad technology causes a shocking 60% of web page load time. By shielding you from third party tracking, Brave browser makes web browsing fast and safe. On top of that, you may even be monetarily rewarded with tokens should you choose to support content creators by enabling ads, which gives end users an unprecedented level of control.
As you can see, each Dapp aims to apply blockchain technology to its niche and take over their respective industries. Blockchain technology will permeate markets, be it governance, technology, or investment. Its omnipresence will grace the world.
Being a Part of the Dapp Revolution
As Ethereum gets under the mainstream radar, the Ethereum ecosystem will continue to expand. A new wave of interest in blockchain application has been brought along with the recent rise in the price of Ether.
There is no better investment for you if you are a developer than acquainting yourself with Solidity. Solidity is Ethereum’s programming language for developing smart contracts and writing executable distributed code contracts (EDCC). Blockchain technology is growing a nascent industry in which opportunities abound, and today corporations all over the world are scrambling to add blockchain developers to their ranks.
How Does Dapp Function?
Dapps function by implementing all the four criterions that are discussed above, which means that Dapps are an open-source software platform implemented on decentralized blockchains and fueled using tokens that are generated using a protocol/algorithm.
Being an open-source application means that anyone can see and contribute to the code, and it also fastens the process for scalability of product development in terms of both quantity and quality.
The next step is to decentralize the app by using a blockchain. The blockchain serves as a permanent ledger of records/transactions. The ledger can be referred to at any time.
And finally, tokens are used to add records/transactions to such ledgers. The tokens are mined or pre-mined using different algorithms/protocols.
Popular protocols that are currently used are Proof-of-Stake (PoS) (that Dash uses), and Proof-of-Work (PoW) (that Bitcoin uses). Both these protocols are used to reach an agreement or consensus in between all the users of that particular Dapp.
- Proof-of-Stake (POS) – In order to become an eligible masternode, PoS requires holding and staking of tokens. This also helps in processing transactions and secures the blockchain.
- Proof-of-Work (POW)– This protocol entails miners to mine blocks and receive rewards. This also keeps the blockchain secure because mining blocks and adding them to the chain is an energy consumptive process.
How to Kickstart a Dapp Project
The process of building decentralized apps has its sequential steps and time frames and it is not straightforward as developing any centralized application or software.
- Step 1: Publish a whitepaper on the Dapp – Publishing a whitepaper is the very first step. It is very important to explain the concept, features, and technicalities of the Dapp. Your whitepaper should address an issue you want to solve and it should clearly state the goals and intentions of the Dapp. Be honest with any technical difficulties you foresee and describe the plans for your Dapp’s token distribution, and how you intend to go about doing it. State your technical requirements clearly, recruit your management and development team, and decide on a mechanism for establishing consensus.
Also, a positive selling point is adding the Dapp’s “road map”, or plan. Dapps with solid road maps are ahead of their peers, so it is essential that you must have a solid road map in place in front of the open market if you want your Dapp to succeed.
Also, in order to build trust and reliability among the community, highlight the history and capabilities of top developers and ideators in your project.
- Step 2: Gain a following – Discuss your plan, form a community, value feedback and revise your plans accordingly.
- Step 3: Start development – Once the Dapp has gained enough momentum, and after procuring the funds and fine-tuning the concept, it’s time to start development. And once you have started, it becomes very important to share weekly or monthly updates about the development progress. The Dapp’s crowd sale website should have all the information that an investor may need to build an inclusive environment for community members.
- Step 4: Launch the product – Launch the product with its maintenance plans and detailed release notes to keep the community involved. Welcome new developers and interest groups. Keep modifying and maintaining your product as needed to suit your community, your vision, and your road map.
ICOs (Initial Coin Offerings)
ICO is the birth of a new member or Dapp in the blockchain community. In a coin offering, you sell your crypto-coins which will fuel your Dapp, and also serve as a way to gather crowdfunding for your project.
Initially, you should announce and explain the aspects of how the ICO of your Dapp is going to be, and share with the interested community members whether the Dapp will be having pre-mined tokens or a mining mechanism in place. When the token gets listed on the exchange, the value is then corrected via price dynamics, and the eventual value will be settled on by the participants of the network.
And for building trust, it is extremely important to accentuate how much percentage will go to the marketing budget, the development budget, and other essential allocations. Also, most of the Dapps projects in the past have ruined their reputation by being not transparent enough. That’s why it is very important to be transparent with allocations of tokens.
ICO is a driving factor of interest and innovation in the blockchain scene, and it is the much-needed catalyst in extending the value that blockchain offers and opening a well of possibilities.
The Essentials of Dapps
You can give a Dapp a shot now that you know how to launch it.
But is there a way to participate if you’re not a creative genius with a brilliant Dapp idea?
Of course. You can participate in the ICOs of Dapps.
What are DApps’ ICOs and Tokens?
Again, ICO stands for “initial coin offering” and this is where you sell the Dapp’s tokens for the very first time in exchange for other currencies (BTC, ETH, LTC, fiat money, etc.).
Dapp tokens are crypto-coins made for the purpose of selling in an ICO to fund the product’s development. They also serve for fueling operations of the Dapp, for instance ETH is the “crypto fuel” for running smart contracts on the Ethereum platform.
These tokens are not pegged to any underlying asset. However, they are still valuable because of the unique concept and technology backing them.
How to Participate in ICOs
Follow the steps below to engage in an ICO:
- Stay Updated – Join Slack or Telegram channels of certain ICOs to follow popular Dapps and crypto news. You can also follow them on Twitter and other social media sites to keep up with their ICO plans and announcements.
- Prepare a Wallet – It is not recommended to use an exchange wallet because its address may change without you noticing it. It is also important to note that some hardware wallets are also not capability-wise ready for ICO tokens. This means that the best option is to make a wallet on com (http://myetherwallet.com/). Ensure that the wallet has the necessary amount to transfer. This includes the gas price. For example, make sure you have more than 10 ETH inside your wallet to pay the gas fee if you wish to transfer 10 ETH for the ICO tokens. Oversights like these are common. They will result in failure of purchase. It is also recommended to thoroughly read the ICO details and other technical requirements. You should also check out which currency to purchase your tokens in (USD, ETH, BTC etc.).
- Time Factor – Check your time zone and be on time because different ICOs list different timings according to different time zones. Prepare and make the transfers as early as possible to increase your chances of securing ICO tokens. You have to be really fast and punctual because in the past some ICOs have finished in less than a few minutes.
- Safekeep your tokens – It is very important to keep your wallet safe. You may transfer your tokens from the wallet to an exchange to begin trading once the token is listed and available on exchanges.
It is important to note that not all ICOs are worth it, and that some ICOs are just scams which only look good on paper.
How to Analyze ICOs
- Ask yourself the following questions when choosing the right ICO to invest in:
- Does the Dapp solve some real life issues?
- Are your investments safe?
- Do you leave your money with founders who were involved in frauds?
- Check the history and portfolio of the development team.
- Is there a long-term plan?
- Check what the technical experts think about the Dapp by joining forums.
- Do you have an exit plan?
- Check their development roadmap.
- Does it hold a unique advantage?
- Check if they have a working prototype demo of the Dapp.
These are only a couple of questions. It is important to note that the current ICO scene is massively hyped. Before getting into any ICO for a Dapp, it is recommended to do your research and due diligence. Pick your ICO with care.
A Decentralized Future Awaits Us
A decentralized world is about to come in full swing and big corporations hurrying to secure their place in the blockchain movement is only a testament to that. However, what we are experiencing now is like a sneak peak to it. This is just a short list of the Dapps already changing how we transact, live, and work. This decentralized environment proves that it can result in more solutions and innovations to long-standing consumer and business problems.
The unavoidable onslaught of blockchain adoption will make many practices obsolete. It may be a bold and distant conjecture. However, as the world learns to operate and finance itself by self-sustaining, trust-less and decentralized networks, services such as banking will be made redundant.
CEO of the Dapp Fund, Even David Johnston predicts this in his white paper (https://github.com/DavidJohnstonCEO/DecentralizedApplications):
“Due to their superior incentivization structure, transparency, flexibility, resiliency, and distributed nature, these decentralized applications will some day surpass the world’s largest software corporations in utility, user-base, and network valuation.”
CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com