To better understand decentralised applications, also known as dApps, let’s first recap DeFi and NFTs:

  • DeFi is a financial system based on non-centralised, distributed, peer-to-peer (P2P)  money management. DeFi architectures are typically built on blockchains.
  • NFTs are unique digital assets. They are tokenised to represent and carry some kind of value, hence NFTs could qualify as products to transact on a DeFi system.

On the other hand, dApps offer service-based functionality like many applications you’d encounter on Google Play Store or the Apple Store. 

What sets dApps apart from conventional apps, however, is that they operate on a peer-to-peer basis – that is, dApps share the same architectural principles as DeFi systems.

dApps vs Apps: Basics

Before we dive in, let’s acknowledge that dApps are not fully decentralised. There must be selected figures with more authority than others for the network to operate. dApps are far from the keyholders to a democratic digital utopia – they are ultimately controlled by people and algorithms.

As a user, you’d notice several key differences between a ‘classic’ app and a dApp. Let’s use a taxi service app as an example.

If you’ve ever used an app like Uber or Lyft, you may know that the company behind the development and operation of the app takes a commission from drivers as a fee for connecting them to you, the customer. As a result, prices go up, you end up paying more, and the driver only sees a fraction of the total cash you’re putting up for your ride.

However, if you were using a dApp, you’d be connected with drivers directly, without a third-party or middle-man managing the process or taking a cut. The only fees you’d encounter are network operation and transaction fees. Such fees are far lower than commissions on a well-optimised blockchain.

User experience, downtime and censorship

The user experience of dApps is also somewhat different since the central authority is no longer a small group of people or company but rather a large group of people and a computer algorithm. This means that the entire infrastructure around consumer-company contact is different.

With dApps, you’re also less likely to experience downtime, since they run on blockchains. Blockchains operate in a manner where a chunk of the system can experience failure, yet the rest of it will run without trouble.

dApps are also central censorship-resistant. They’re not controlled by a central entity and the only censorship you may experience in what we consider a decentralised application are activated by group consent.

dApp Criteria 101

There are a handful of other basic requirements to be met for an app to be considered ‘decentralised’.

A dApp must have an open-source code – ie, the source code is not controlled by a private development hub. You can view examples of such projects on GitHub. These projects include well-known, open-source cryptocurrency projects like Bitcoin, Ethereum, Monero, Ripple, Zcash, and plenty of others.

An open-source project is defined by three main factors:

  • A copyright holder who/that grants users rights to access, use, and change the code for any legally-justifiable purpose;
  • Public collaboration and broad contribution from developers worldwide;
  • A free application or software available for download.

Current dApp pros & cons

So, to recap: 

  • A dApp’s code is open to public access with rights for anyone to use the code as they wish. 
  • It runs on a public ledger with little-to-no central control, mostly controlled by the users, contributing developers, and the algorithm on which the developers work.

Bearing these characteristics in mind, here are some advantages and disadvantages to consider about dApps. These pros and cons are both operational and consumer-facing, we’re considering both perspectives.

Advantages of dApps

Here are some reasons you might consider exploring dApps today:

  • Broad contribution allows an equally broad creative hub to operate. Many new ideas can break through without profit-driven limitations that were put in place by executives.
  • Little-to-no downtime due to the dApp running on a distributed system.
  • Easy to integrate multiple cryptocurrencies to set up a DeFi ecosystem.
  • Increased user privacy
  • A new paradigm to develop better app security with an open-source code (e.g. bug bounties)

Disadvantages of dApps

That said, the following reasons may make you consider taking a different approach to dabbling in the dApp space:

  • Prone to hacks due to open-source code. It’s easier for hackers to find vulnerabilities. While this can be battled with smart anti-hacker actions, it’s a significant threat at this point of dApp development.
  • Poor user experience due to focus on infrastructure and technical development. dApps are still young and require more work under the hood before they can compete with ‘classic’ applications and their shiny, UX-friendly interfaces.
  • Few users means limited options and availability to transact. dApps are peer-to-peer and need many users to work well. This works hand-in-hand with the appeal of the interface which attracts mainstream users. 

What does the future hold for dApps?

Without a doubt, dApps need further development behind the scenes before they become serious competition to mainstream apps on Apple and Android devices.

We may not even see dApps compete with conventional apps but create a market of their own entirely. Today, there are billions of US dollars flowing into dApp projects from both users and investors.

At present, we mostly see dApps function as decentralised exchanges that trade NFTs or cryptocurrencies. However, user numbers are racking up and as more people become familiar with the concept of decentralisation, traction for dApps and more use-cases could get a grip.

Some of the most popular dApps today, at the time of writing, include:

  • PancakeSwap is a crypto and NFT trading hub with 3+ million active users in the last 30 days.
  • Uniswap, a leading Ethereum DEX nearing the 2 million user mark.
  • AlienWorlds is an NFT metaverse with close to 200,000 active miners within the past 24 hours – that’s an average of almost 6 million in a 30-day month.

Given the rising interest in the utility of dApps, active user numbers are set to grow, and with it the projects. The quality of public education on decentralised finance, apps, NFTs, and generic blockchain knowledge will also determine how people perceive these services in the future.