It’s time to cut out the middleman. Why pay for a company to provide a ride-sharing service when you could use an app that connects you to the riders and doesn’t take a cut? That's the promise being offered by Dapps, or decentralized apps. Below we'll give you an overview of what they are, how they work, and some of the challenges these new types of applications face.

What is a Dapp?

Dapps, are decentralized apps. They are like normal apps, and offer similar functions, but the key difference is, they are run on a peer-to-peer network, such as a blockchain. What that means is no one person or entity has control of the network. There are other key features, such as:

  • It must be open-source and operate on its own without anyone entity controlling it.
  • Its data and records must be public.
  • It must use a cryptographic token to help keep the network secure.

Now, while these are beliefs many in the community think should be upheld, as the industry has matured, there are dapps that use some, a combination of, or none of the above features. More on that below.

What are the benefits of Dapps?

Dapps have several exciting aspects:

  • Censorship-resistant--With no single point of failure, it’s very difficult for governments or powerful individuals to control the network.
  • No downtime--Relying on a peer-to-peer system ensures the Dapps continue to work even if individual computers or parts of the network go down.
  • Blockchain-based--As they are made of smart contracts, they can easily integrate cryptocurrencies into the basic functionalities of the Dapp.
  • Open-source--This encourages the widespread development of the Dapp ecosystem enabling developers to build better Dapps with more useful or interesting functions.

What are the weaknesses of Dapps?

While Dapps promise to remedy a lot of the key issues faced by regular apps, they do have their downside.

  • Hacks--As many are run on open-source smart contracts, it allows hackers the rare opportunity to probe the networks looking for weaknesses. This has lead to a spate of hacks on popular Dapps.
  • Usability--A lot of Dapps have poor user-interfaces, which have put a lot of users off--you can read all our reviews on these services on our reviews page. But, we believe, this something improving as time goes on.
  • Users--Like many apps in Web 2.0, the more users a Dapp has, the more effective the network is at delivering those services. This often called the Network Effect. Dapps struggle from low user-numbers which can make them less interactive, and also make them less secure, as a Dapp's security can often rely on how many users it has.

What Dapps are out there?

A great place to start is State Of The Dapps, a website that lists more than 2,000 Dapps built on the Ethereum network. The most popular Dapps at present are decentralized crypto exchanges. These enable people to swap one cryptocurrency for another without the need for a centralized gatekeeper like you'd find on exchanges like Binance, and Coinbase.

Dapps, are decentralized apps. They are like normal apps, and offer similar functions, but the key difference is, they are run on a peer-to-peer network, such as a blockchain.

What about CryptoKitties?

CryptoKitties is one of the most notorious and used Dapps on Ethereum. It hit the news when high levels of transactions started to slow down the Ethereum network.

In the Dapp, users buy, breed and collect digital cats. These cats represent unique digital tokens built using the Ethereum ERC-721 standard. This means nobody is able to duplicate or steal them.

Read more about CryptoKitties in our handy guide.

Did you know?

The most expensive CryptoKitty was sold for $170,000 and the one-millionth CryptoKitty, called Vulcat, was born on September 13.

A new way to build a business

Because Dapps are decentralized, it has lead to a whole new way to build a business. One of the most fascinating examples is Augur, the decentralized betting marketplace. The creators built the marketplace, released it and now work on completely separate projects, while the network is maintained by its users. You can read our deep dive with the founders, over here or get a speedy overview of the project, right here.

Dapp Scams

Sadly, Dapps can be vulnerable to hacks. Fomo3D was one such scam. Fomo3D was an Ethereum-based Dapp where users put in a small amount of Ether into a pot--and the last person to do so wins the pot. Sounds simple right?

Not so. Bots were programmed to automatically bid on the game, theoretically ensuring that it will continue forever. However, someone managed to win it. By making countless transactions with high transaction fees, the hacker clogged up the Ethereum network so the bots couldn’t make their transactions. This meant nobody bid on the game and the rewards were distributed.

The anonymous hacker who pulled off the exit scam received 10,469 ETH, worth $3 million at the time, and has become a cautionary tale for people thinking about using Dapps where crypto is exchanged.

The future

Dapps are still in their early stages. However, there are already thousands of Dapps offering up a myriad array of services: Be it playing games, exchanging money, or growing your own digital felines. Before Dapps take off, developers and the networks they build Dapps on still have a lot of challenges to work out: scalability, security, and UX are among those.

Once they do, the dawn of the decentralized app will be upon us.