- There is an economically stable model used in most blockchains.
- Decentralization is expensive. Incentivization of parties and Economic balance costs a lot and it is reflected in every transaction.
- There is a possibility to use accounts and create new algorithms of interactions without asking anybody. Interactions can be algorithmized, coded and planned with the help of smart-contracts
- Tokens are the “footsoldiers” of smart-contracts. They’re programmable, traceable money that cannot exist outside of a blockchain. They play a decisive role in supporting and expanding the economic systems of these blockchains and act as units of trade.
Since we got ourselves some nice, transparent, permissionless systems allowing for a coherent and clear interaction through smart-contracts, we can start building businesses on them.
For example, we can make a simple betting system. First of all, we write a smart-contract just for that: if a set asset’s price reaches price of X, the bidder who made a bet on the asset reaching X gets a token from the pool of those who also made bets. And you, as an author of a smart-contract, get a fee for letting users bid and for sending them their prize.
The user is interested in making a bet.
The user wins and gets his prize. And you get your fee.
And there’s no need for users to blindly trust in the fairness of the house, as they can always check the smart-contract behind it and even check the addresses of where the prizes are being sent to. This way, the oversight is performed directly by the community as the smart-contract is transparent.
Slap on some GUI on top of this and you’ll end up with an app that works on a decentralized blockchain. Or a dApp for short.
dApps work using prearranged rules contracts, with no need for the middleman. They don’t require a single centralized access point to a blockchain as every user becomes such an access point by launching a smart-contract. And through the decentralized blockchain, interactions are possible with other users.
In a way, dApps are specialized blockchain “operators” with useful features, sort of a window for convenient interaction with blockchains and their assets.
The great and perhaps the most significant advantage of dApps is that there is no need for a user to get permission to plug into them. Who the hell needs it when the conditions and balance system is already spelled out in the smart-contract. The price of running a dApp is also paid solely by the user. So, when a user runs a decentralized application, the application interacts with the assets that he already owns, so its only the user who decides if he is willing to run a dApp or not.
The key aspects of dApps is that they’re:
- Open source
First of all, dApps, unlike our old and familiar Facebook, YouTube, Banking or gambling apps for that matter, are completely transparent about their algorithms.
It also means that once a developer has released a dApp’s codebase, other users can build on top of it. And all required changes are decided upon by a consensus of the majority of users through voting with governance tokens.
DApps being open source acts as an indisputable proof of their transparency.
- Censorship resistant.
This leads us to the next important aspect. As dApps are not controlled by a single authority, they cannot be censored and fully banned.
Banning a user is also practically impossible for a dApp. Accounts are just sets of numbers so a user can always create a new one and plug into the dApp with different credentials.
All that is required to make a dApp is to figure out a system that has demand and is compatible with the blockchain. This environment became a very fertile ground for businesses to flourish. And it is the selling point that drives the evolution of the crypto-world.
Since we’re here to stay, we would need something to pass the time. Something to play with. Games. Let’s make some decentralized games!
Almost every single game utilizes Non-Fungible Tokens to facilitate gaming experience.
Let’s take a specific example: The most prominent and famous example of a gaming dApp would be Axie Infinity. It’s an NFT game that allows players to trade, race, engage in battles and breed their NFT-creatures, called axies. It’s sort of like a card-game in its essence, but with a little less requirement for your imagination. By winning matches with other axies you also win tokens, called SLPs, which can be then sold for other cryptocurrencies. This incentives users to keep playing the game and even provides real-world interest to it.
In those classic non-dApp games, you can spend money to buy cards to build your team, and you collect them in your account, exchange them, battle with other players, but ultimately, all of those cards are stored on the server that is controlled and owned by the game producers.
But in dApp games, each one of the cards that you exchange is a token, which you store in your wallet instead of keeping them somewhere on a centralized server. So it will stay yours no matter the circumstances, even if the game is no longer supported by developers. You can even create your own game that utilizes those tokens if you want to!
Blockchain games are decentralized. Instead of living in a centrally controlled server, blockchain game assets and digital goods are distributed among players. Blockchain games either issue their own token or use an existing token.
With well designed token economics and gameplay, blockchain games are gradually starting a new era in the gaming industry.
Just as well as the games, if not easier, we can create a gambling dApp, which we’ve already proven at the beginning of our article.
In fact, these dApps account for a significant percentage (33% as of 2019) of all dApps on Ethereum, which remains the leader among platforms for dApp creation.
This includes coin flip games, dice, poker, roulette, baccarat — you name it. Yet, for all the usage they’re the less talked about sibling to games, DeFi, and exchange-related dApps.
The distinguishing feature of blockchain gambling is its transparency and (at least theoretical) fairness. All activity for gambling dApps is on chain. Meaning, you could look at all transactions for a given gambling contract on Etherscan.
If you win, the payouts are immediately sent to your wallet. There’s no “withdrawing” or cashing in of a physical ticket like in the real world.
There is a palpable demand for a remedy against confusion and fatigue inherent to today’s disconnected paradigm. Crypto marketplaces serve just that purpose, acting as a one-stop-shop for digital goods, usually NFTs or gift cards. These platforms in a form of application facilitate the process and allow the interaction with the blockchain.
Marketplaces usually have this core set of functionality:
1. Minting and listing NFTs
2. Buying and selling NFTs
3. Viewing listed NFTs, NFTs other users sell.
Location-based dApps implement a legitimate usage of Community Currencies (CC). In fact, these were the first dApps to take things to a new level by offering a ready-to-use source code that lets anyone create their own financial community.
CC is a currency that can be spent in a particular geographical locality at participating organizations. It aims to encourage spending within a local community, especially with locally owned businesses.
There are a number of projects already underway where blockchain is being leveraged for local currency development using dApps. One such example is known as “HullCoin” – a Local currency implemented in the English city of Hull to support communities affected by poverty. HullCoin can be secured by individuals undertaking activities that are sanctioned through organizations on the app. The coin they earn can then be redeemed via various retailers.
Another local currency that is being used for societal benefit is InvolveMINT. It operates in Pittsburgh. Similarly to HullCoin, InvolveMINT allows its users to find volunteer opportunities and projects they can work on, and give their time to. The cryptocurrency can then be redeemed with a range of different partners that InvolveMINT has signed up. This benefits the local community because again, projects might struggle to get sufficient volunteers in other ways.
DeFi is a whole can of worms, which we will get into at the later stage.
Essentially these are the applications which allow people to use decentralized finance. DeFi is a catch-all term for a group of financial tools built on a blockchain. But instead of financial intermediaries, such as brokers and banks, everything is automated into the protocol via smart contracts. The idea is to allow anyone with internet access to lend, borrow and bank without going through middlemen.
It is one of the fastest growing areas of the blockchain and decentralized web space.
The introduction of smart-contracts and tokens created an environment for businesses to flourish on the blockchain in the form of dApps.
If the tokens are units of exchange, dApps are the “operation centers” for the tokens. They allow users to interact with other users or with smart-contracts on blockchain to exchange, borrow, lend or utilize tokens, play games, gamble and so much more. There is no single inventor of DeFi, but DeFi applications first appeared on top of Ethereum, which is still utilized to build the majority of dApps.
Using a dApp doesn’t require a middleman and is completely permissionless, which is the core of business on the blockchain.