Cryptocurrencies and decentralized applications (DApps)

Written by Davies on / Reading time: 5 minutes.

Cryptocurrencies and decentralized applications (DApps)

We live immersed in the digital age, surrounded by technological innovations and driven by the ambition to grow. And therefore, we have no choice but to constantly update and adapt to the trends of the moment… Or walk several steps behind. 20 years ago, no one could think of investing in cryptocurrencies simply because they didn't exist. The Bitcoin boom was back in 2009, but society still had serious doubts about its advantages, and they had great fears of its risks.

We are starting a new year and the use of cryptocurrencies has been growing gradually.  From the first digital asset to the more than 2500 cryptocurrencies that exist today.

They are the alternative that many creators (inspired by Satoshi Nakamoto) try to carry out to create a decentralized financial system, away from the traditional model, capable of transacting money anywhere in the world at a low cost and an instant way. Throughout this post we will share with you what decentralized applications (DApp) are, their advantages and the relationship they have with cryptocurrencies.

Let's go!


What are decentralized applications?

One question, remember what blockchain was? It is the technological tool on which the structure of cryptocurrencies is based and constitutes a kind of database validated by a broad community, rather than by a central authority. If we traditionally needed central authorities (banks), blockchain makes it possible for participants to secure transactions automatically and securely. Click on this link if you need to remember more features of this innovative technology.

That said, we can already tell you what decentralized applications or DApps are. They use blockchain technology so that users can relate directly to each other and close deals without the intermediation of a central entity that manages the service.


Do you know how a DApp works?

These applications work as follows: each user of the same DApp is a node in a decentralized network where all members work together. If we put this process into practice, everything works automatically, and it is the system itself that corroborates the validity of interactions with smart contracts (they self-execute when the conditions programmed in the code are met).

Each time a new operation is performed, the platform information is updated on the nodes. A copy of the entire history of the DApp is stored there. Next, let's tell you the advantages of the distributed character of your blockchain:

  • Increases information security against possible theft, computer attacks, etc., as data is not stored in a central database.
  • Avoid the use of information for commercial purposes, so that information published in RRSS from a DApp cannot be traced.
  • Facilitates the closing of agreements through smart contracts, as the agreed conditions can be met automatically.
  • The distributed character prevents possible system crashes, as these are nodes. If one of them fails, the rest still works.

Bitcoin has been the origin of everything because blockchain is the technology behind this cryptocurrency. Now that you know how it works, let's see the process that a traditional application follows to get the difference clear.

Think about the Facebook mobile app, from which you can access your friends' profile, view their photos, etc. None of this is stored in the app, because if it did it would take up a lot of space. It's easy, if we want to see a photo, first we have to log into our account and then search for X profile. Facebook goes to its back-end to be able to provide you with this information and then send it to the front-end.


The great advantages of decentralized applications

We start from the general idea that these applications are run by many users in a decentralized network with reliable protocols. They have been designed to avoid any failure, and the rest of the advantages are:

  • Unlike traditional applications, they have resources and functionalities distributed among blockchain peers.
  • Redistribute the power so that users of these applications can receive benefits in an equitable way.
  • Avoid any data manipulation.

The characteristics of any decentralized application are:

  1. An open source. The source code must be available to everyone and work autonomously, without the need to control all tokens.
  2. Decentralized character. It should rely on the blockchain technology to store data and record how the application works.
  3. Reward any value contribution through a token or digital asset with which the application can be accessed.
  4. Generate tokens based on a cryptographic standard algorithm that serves as proof of value of the nodes that work with the application.


Blockchain categories of DApps

Let's classify the DApps according to the model they use:

  • DApp with its own blockchain (Bitcoin, Litecoin and Ethereum).
  • DApp using one of the blockchain above.
  • DApp using the protocol of the second type that we just mentioned. In addition, they are also formed by protocols with their own tokens needed for their operation.

Examples of decentralized applications include: the Augur prediction market (open source platform that works to predict the future of markets, companies, events, etc.), the Digital Advertising Network Basic Attention Token (payment method to see ads or tip content creators) and Steepshot (platform for sharing photos and rewarding for sharing lifestyle and visual experience)

In short, DApps are an innovative model in the app market and can be both mobile apps and web apps that interact with a smart contract to perform their function.