What is an Ethereum dApp?
DApps, or decentralized applications, are one of the cornerstone ideas of the Ethereum blockchain. Ethereum was revolutionary because for the first time, developers could build their own blockchain enabled apps on the Ethereum blockchain without having to launch their own chain. This dramatically lowered the entry barriers for programmers and projects looking to use the blockchain and spawned a new wave of innovation in the space.
Technically, any application that utilizes the blockchain or Ethereum’s smart contract technologies can be considered a dApp. Some uses of dApps includes decentralized fundraising (initial coin offerings or ICOs), automating exchanges of item (marketplace), and even games. Many of the largest ICOs on the Ethereum blockchain all use dApps to conduct the fundraising.
CryptoKitties is a game that allows users to collect, trade, and breed virtual cats. These cats are all Ethereum tokens and the hope is that this game is the launching point for tokenizing real world assets such as gold, oil, or real estate. CryptoKitties was developed at ETHWaterloo, one of the world’s largest Ethereum hackathons, and exploded in popularity right after gaining mass media attention. It even managed to congest the Ethereum blockchain. In March of 2018, they raised $12 million from Andreessen Horowitz and Union Square Ventures.
LocalEthereum provides an alternative to centralized exchanges. It is a peer-to-peer marketplace where buyers and sellers connect with each other directly to exchange ETH. This way, each party has more control over what price they offer. All transactions are handled by a dApp. LocalEthereum uses a type of smart contract known as an escrow contract which allows users to exchange items without trusting on a central authority. The entire process is automated, decentralized, and secure.
Idex is a decentralized exchange that allows users to trade ether and ERC-20 tokens. The entire exchange is operated through a publicly verifiable smart contract. This does its job of removing control from a central party. Currently only portions of the platform are decentralized with plans for a fully decentralized exchange already drawn out.
The Future of dApps
Currently one of the main challenges for dApps is the fact that they are restricted mostly to the Ethereum blockchain. All three examples above related to the trading of Ethereum tokens. Until there’s a day to tokenize real world items and move them onto the blockchain, most dApps will be in the realm of exchanges, token marketplaces, and games.
Another goal for dApps to reach is full decentralization. For example, even though CryptoKitties is a dApp, they still use a centralized database. Most of its traffic comes from its website and not through its smart contract. In the ideal decentralized world, a dApp would be able to operate independently without the need for any centralized services.
Regardless of these obstacles, dApps have a promising wrong in the era of blockchain and decentralization. It’s one of those things that make the Ethereum blockchain so unique as well as opening the doors for more blockchain projects.