What Are DApps?

A DApp is any kind of platform or application that is decentralized and based on permissionless blockchain technology. The need for such applications stems from the push to convert traditional centralized platforms into decentralized ones in order to facilitate peer-to-peer (P2P) where users interact directly rather than relying on intermediaries.

Despite being decentralized, DApps offer the same experience as normal apps do. The only major difference is that they are decentralized and utilize cryptocurrencies for utility and security reasons. To summarize, all decentralized applications require the following features:

• Must operate on a permissionless blockchain network.
• Data must be located on a public ledger accessible by anyone.
• Must use a digital currency to provide utility and fend against typical blockchain attacks.
  

It is worth noting that not all Dapps on the crypto market have integrated these features, although most did. For example, certain applications might not require tokens in order to work and can use different mechanisms to protect their security.

Benefits of DApps

The one benefit which we have brushed by so far is decentralization. It is naturally the best advantage that DApps offer. However, there are other benefits to keep in mind as well.

For instance, a DApp cannot be managed or regulated by an institution or government. This also means that it cannot be censored, as there is no mechanism for actors, other than the community, to influence the platform.

As with other P2P systems, decentralization also ensures that the DApp always runs online and that it cannot be disturbed or offline - unless critical parts of the platform fail. Nevertheless, the main point is that these applications do not go down in the case that one part of the network or one client goes down, which is typically experienced in legacy systems.

Another benefit of DApps is the fact that they are customizable. Since most use blockchain scripting languages such as Solidity, it is incredibly easy to implement numerous rules, functions, features, and processes. By using smart contracts, they also remain open-source, which means that anyone can look into an application’s source code and analyze it.

Almost none of these benefits are present in modern-day centralized applications. This fact alone makes DApps incredibly attractive to not only developers but end-users as well. We can consider a large part of the market to be DApps since they primarily offer services rather than products. Take the following cases as clear examples:

• Aave facilitates loans
• Uniswap facilitates trades
• Yearn Finance facilitates yield
  

And the list goes on.

Disadvantages of DApps

While DApps do indeed provide a valuable proposition, we cannot claim that they are without their faults. Decentralized applications can fail due to:

• Security Vulnerabilities. Smart contracts represent a piece of code that executes everything that a developer tells it to do. If the developer does not spot a logical error, hackers can recognize the vulnerability and execute an exploit. DApps are not strangers to hacks, and some applications have lost millions of dollars due to poor code reviews.
• Poor user base. DApps are not front-loaded with liquidity most of the time, which means that a lack of customers leads to catastrophic consequences. For example, a lending protocol cannot be used if there are not enough lenders with whom borrowers can interact. Not to forget, a small network also means that the DApp is more vulnerable to security threats.
• Bad UX. Unsuitable and complicated user interfaces often deter users, resulting in a poor user base. Although decentralized applications remain complicated in nature, there is always room for improvement in the UX department, which was shown time and time again by popular DeFi projects.