Decentralized apps – dApps – are applications that run on a peer-to-peer network and not on a centralized server. They have been in the market for quite a while; actually, the most well-known one might be Napster, a peer-to-peer file sharing platform that was very popular at the end of the 90s. Even though dApps are not new, the recent possibility to integrate them with blockchain makes them even more decentralized and appealing.
As we highlighted in our whitepaper, “Blockchain in action: key disruptive use cases for 2019” societies have been witnessing a transformative move from centralization to decentralization. The move towards dApps takes this a step further, because they change the nature of “trust”. What do we mean by this? Previously we trusted platforms to act as intermediaries – for example, companies such as Booking.com act as an intermediary when we want to book a hotel. With services based on Blockchain, people no longer need to interact via these intermediaries, but rather they can do so in a peer-to-peer way.
A decentralized app generally meets the following requirements:
The actual centralized app environment has several loopholes that have been covered with blockchain technology. For starters, it is much more secure since there is no single node that controls the information of the transactions nor the data records. Added to this, Ethereum backed up blockchains offer the possibility to integrate smart contracts in order to automatically facilitate and enforce negotiations.
Click here to learn how to fully take advantage of Smart Contracts in blockchain.
Another advantage is that it avoids censorship due to the lack of a central entity behind it. If any authority tries to block it, it wouldn’t be possible because it does not belong to any particular IP address. Also, it ends up being cheaper to run because all the data transfer is distributed among users and not on a centralized server. Finally, the nature of blockchain makes data to be stored in a decentralized and cryptographic way, therefore it is theoretically impossible to have data theft scenarios.
At the moment there are several projects running on specialized blockchains such as Ethereum (ETH), EOS, NEO, and TRON (TRX). For the sake of this article, we will highlight those industries in which dApps technology has already started to disrupt the traditional way of doing things.
The crypto hype (or bubble, depending on your perspective) from Q4 2017 – Q1 2018, sprouted a great number of enthusiasts from all around the world. People placed their investments on popular crypto exchanges such as Binance and Coinbase. However, security issues kicked in and affected others such as BitGrail, an Italian cryptocurrency exchange that was hacked, leaving millions of dollars in losses and the company bankrupt. Similar to this, infamous Tokyo based exchange, Mt.Gox, responsible for over 70% of all Bitcoin trading back in 2014, was hacked and lost over 740,000 BTC, worth around US $3 billion by the end of 2017.
Click here to read more about the Mt.Gox hack
Due to the importance of security in digital assets, different layers and features have been implemented, however, none of them can offer what blockchain can do; its distributed nature that makes it theoretically impossible to hack.
Bearing this in mind, decentralized blockchain powered exchanges are an appealing solution where assets can be traded with the confidence they won’t be stolen or lost. Despite its security, other kinds of hacks have risen, such as the DNS server hijack of EtherDelta where users were redirected to a false website that stole their information. In this case, the company’s blockchain was not hacked, it was a traditional-style phishing attack to their website.
While decentralized applications hold promise in theory, many organizations have struggled to find practical uses for them.
We live in a world where popular mainstream social networks are failing to protect users’ privacy and security. Just a couple of months ago, Facebook faced a massive security breach in which almost 50 million user accounts were exposed to attacks. Bear in mind this is just one of the multiple breaches this social media platform has had so far; the list includes the Cambridge Analytica scandal and more recently when a security review found that the passwords of millions of users had been stored on servers without encryption.
Amidst this landscape, Steemit has emerged as an alternate blockchain social media application that has gained a lot of popularity. The most interesting part of it is that it offers rewards to users that publish good content; once a blog post is published users can vote for it based on the quality of the content. It’s a truly blockchain-based business and stands in stark contrast to Facebook. Users are rewarded for their contributions with the platform’s native cryptocurrency, STEEM. Steemit is a great example of a decentralized application, and one that has garnered significant traction – according to the company’s analytics, by the end of 2018, they had around 1,200,000 registered users.
100% percent transparency when voting may be considered a utopia, however, thanks to the nature of blockchain, this can be achieved. Due to its immutable property, votes cannot be changed or reassigned. Quite a meaningful achievement. This is what Voatz, a mobile app that uses blockchain to ensure security saving records and during identity verification. Since its launch, it has been tested in over 30 pilots with no errors or bugs. Actually, it has been announced that it will be used in the upcoming West Virginia’s Senate primary election:
“…the West Virginia Secretary of State, Mac Warner, said the pilot is being offered to deployed military personnel and their dependents from the counties of Harrison and Monongalia for the May 8 election for West Virginia’s Senate primary election.”
Something very similar came up from a collaboration between ICON (ICX) and the Seoul Government: a project that involved 3 blockchain apps aimed to provide services that will streamline their population through the use of this technology:
The hospitality industry has reinvented itself into more participative and collaborative schemes where platforms such as Airbnb connect people through their app in a cheaper and simpler way. However, recently a platform called CryptoCribs came up with the idea of connecting people directly, using a blockchain-based service.
As stated on their whitepaper, the idea is to “provide a peer-to-peer solution to the trust problem inherent with renting out apartments to strangers around the world”. In a nutshell, what they offer is a worldwide platform where people can directly rent a place to stay from others with one special feature: it is paid only with cryptocurrencies such as Bitcoin and Ethereum. “The platform transaction data will seed a CryptoCribs blockchain and smart contract solution where guest and host reviews are stored and nodes can transact without a middle man.”
CryptoCribs is an interesting bet towards cryptocurrency adoption, and also, thanks to its smart contract capability, it enforces security and compliance. Finally, it’s a platform that provides greater transparency to users, without the need for intermediaries.
As with any new technology, challenges arise and it’s important to acknowledge them in order to fully understand how the can be appropriately implemented. One common issue with dApps is that any change, such as a bug fix or update must be approved by every peer of the network. Another issue dApps are facing is scalability since it’s not possible to come up with an MVP that can later be scaled upon request. Finally one aspect to bear in mind is API integration: due to dApps nascent stage, there are not many 3rd party APIs available in the market that may integrate with them, however, this is something that will naturally change as adoption increases.
Blockchain’s transparency nature is a feature that can be used by a wide range of industries. However, despite its growth in adoption and maturity, it is important to acknowledge it’s still in its first steps. The best thing to do for the moment is to understand its impact and follow what blockchain is doing in your industry, in order to keep up with the industry dynamics and ensure you are ready for the changes it will bring.
April 23 / 2020
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