By: Jason Whang
“Everything that can be decentralized, will be decentralized.”
– David A. Johnston
In the midst of the surge in popularity of cryptocurrency and blockchain technology, decentralization has become a popular theme in our society. By eliminating the presence of a central authority and distributing control to the users, blockchain has allowed for fewer fees and greater efficiency from the reduction of middlemen services. Juxtaposed with this and the introduction of Bitcoin, DApps (decentralized applications pronounced D-Apps similar to Email) have emerged and introduced a new world of possibilities.
DApps are characterized by four criteria: open source, decentralization, incentive and algorithm/protocol. DApps are open source, meaning all of the application’s code is available to the public so that its contents can be determined by the consensus of the user majority. Since DApps are on a blockchain system, they are decentralized and not controlled by a central authority. DApps are also flexible and can incentivize the validation of each transaction in three ways using its own blockchain currency or a preexisting one: Type I DApps like Bitcoin utilize their own private blockchain, Type II DApps like Augur use Type I DApp blockchains, and Type III DApps like The SAFE Network use Type II DApp blockchains. Finally, algorithm/protocol refers to the way in which miners compete to be the first to validate and verify a transaction in exchange for tokens. This can be done in multiple ways including Proof of Work (PoW) and Proof of Stake (PoS). The difference between PoW and PoS is the way miners can increase their hash rate, the rate at which they can guess the correct hash or transaction code. The higher the hash rate the more likely the miner would be able to verify the transaction first. In PoW (used by Bitcoin), the hash rate can only be increased by using more powerful machines, but in PoS, the hash rate depends on how many tokens the miner owns. Thus, the more tokens the faster the hash rate. These protocols keep the blockchain secure and act as a way to process transactions. By implementing each of these criteria, Bitcoin was labeled the first DApp and has since led to the development of countless others.¹
DApp tokens are first sold through Initial Coin Offerings (ICOs) that give people the opportunity to invest. These tokens begin to increase in value as investments rise and could potentially yield enormous rewards for investors if it is successful.² DApps provide significant value for both users and developers as they incorporate these tokens in transactions that will propel the cryptocurrency ecosystem and appreciate their value. They are self-sustaining, immutable, secure and conceivably could be utilized for more than simple transactions. DApps may affect myriad sectors including “data storage, bandwidth and cloud computing,”³ however, the possibilities are virtually limitless.
Many believe that DApps are the future because of its “superior incentivization structure, flexibility, transparency, resiliency, and distributed nature.”¹ As shown by its massive yet growing present market value, DApps have the opportunity to surpass the valuation of today’s behemoth international companies and mark a start to a new era as revolutionary as the Internet.
- Khatwani, Sudhir, et al. “What Are DApps (Decentralized Applications)? – The Beginner’s
Guide.”CoinSutra – Bitcoin Community, 2 Feb. 2018, coinsutra.com/dapps-decentralized-applications/.
- Razumov, Renat, et al. “What Are Dapps? The New Decentralized Future.” Blockgeeks, 28 Dec.
- Vollstadt, Erik. “What Are DApps?” BITNATION Blog What Are DApps Comments, 16 Mar. 2015,