“Everything that can be decentralized, will be decentralized.” — David Johnston, CEO of the dApp Fund
Much of what’s happening in blockchain is so disruptive, so different, that it’s hard to explain using real-world examples. But that’s not the case for decentralized apps (dApps). They are, after all, apps. Even your most non-technical colleague or board member can relate to that.
A dApp is an application that runs on a decentralized blockchain network. And, at least for now, that network, or platform, is Ethereum. Built on blockchain technology, Ethereum makes it possible for developers to build and publish dApps. Ethereum took the blockchain concept and ran with it, dramatically expanding the potential applications.
Tiana Laurence, the author of Blockchain for Dummies, calls dApps “the most revolutionary and controversial manifestation of Ethereum.”
Before deciding if dApps need to be on your roadmap, it may help to get a lay of the land.
What is a dApp, really?
For now, the Ethereum ecosystem is currently the best place to build decentralized applications. That makes sense, given that Ethereum was specifically built for that purpose. In fact, the Ethereum Foundation’s mission is to empower developers to produce the next generation of dApps, and it regularly hosts hackathons to promote dApp development.
The key concept of dApps is decentralization. As Preethi Kasireddy explains in his helpful primer at Hacker Noon, “This is the main idea behind dApps: a decentralized set of rules that define a specific application. This set of rules sits on a public and decentralized blockchain (instead of a central server owned by some large entity, such as Facebook or Amazon). This enables it to be governed by autonomy and be resilient to censorship.”
Still wondering how to explain dApps to other team members? BlockGeeks offers a useful analogy. “Think of Ethereum like the internet and all the dApps as websites that run in it.”
David Johnston, CEO of the dApp Fund, authored a white paper outlining the basic concepts of dApps. The white paper states that for an application to be considered truly decentralized, it must be:
- Open source and operate autonomously
- Consensus driven
- Token-fueled (more on this later)
Coinsutra’s beginner’s guide to dApps puts it this way: “DApps function by implementing all the four criterion which we discussed in the first section. This means that a DApp is an open-source software platform implemented on decentralized blockchains and are fueled using tokens which are generated using a protocol/algorithm.”
Currently, most, if not all definitions of dApps include these characteristics, but we’re still in the earliest stages of development. Everything is subject to change — except one thing: dApps are poised to dramatically change the way we conduct business.
Transforming the ways we do business
“DApps have the potential to become self-sustaining because they empower their stakeholders to invest in the development of the dApp,” Johnston says. “Because of that, it is conceivable that dApps for payments, data storage, bandwidth and cloud computing may one day surpass the valuation of multinational corporations like Visa, Dropbox, Comcast, and Amazon that are currently active in the space.”
We’re not there yet, of course. Although still novel, dApp development is expanding. Ethereum — and the use of smart contracts (more on this later) make it possible to decentralize almost any service in almost every sector — retail, microfinance, virtual worlds, currency exchange, identity-theft protection, financial derivatives, voting systems, title registries, and thousands of others.
For many businesses, areas like supply chain management, loyalty programs, online sales, payment processing, and digital identity are ripe for dApp development.
Here are a few examples of how dApps are changing basic business functions:
- Insurance. French insurance giant AXA is testing flight-delay insurance. Here’s how the company describes it: “When you buy flight delay insurance on the fizzy platform, we record the purchase in a tamperproof network, the Ethereum blockchain, making the insurance contract equally tamperproof. This smart contract is connected to global air traffic databases, so as soon as a delay of more than two hours is observed, compensation is triggered automatically.”
- Supply chain management. Provenance is one of many startups focusing on supply chain management. “Provenance is a platform that empowers brands to take steps toward greater transparency by tracing the origins and histories of products. With our technology, you can easily gather and verify [product origin] stories, keep them connected to physical things and embed them anywhere online,” according to its website.
- Real estate. Tech startup Ubitquity offers an SaaS blockchain platform for financial, title, and mortgage companies. It aims to help address challenges like red tape and paperwork, a lack of transparency during and after transactions, fraud, and unintentional errors.
- Media/intellectual property rights. JAAK is developing a platform that allows media owners to convert their repository of media, metadata, and rights into “smart content” that can self-execute licensing transactions. “We believe a simpler framework for licensing media on the web will unlock a world of new content experiences and untapped value opportunities for the entire media industry,” its website says.
- Renting computing power. The Golem Project is a decentralized sharing economy of computing power, where anyone can make money “renting” out their computing power — or buying more from others. It describes itself as an “Airbnb for computers.”
Like any contract, a smart contract defines the terms and penalties around an agreement. Unlike a traditional contract, it can enforce those obligations with software code that runs on the blockchain.
To get a sense of what’s not only possible but actually in development, visit State of the dApps, a curated collection of decentralized apps for Ethereum.
Tokens: the fuel (for now)
As the name suggests, dApps aren’t individually held; they are decentralized. With Ethereum, dApps are owned by those holding the tokens. Those tokens aren’t necessarily Ether — the currency of Ethereum. (You can purchase the tokens with Ether, though.) They are usually unique to the dApp, a native currency. BlockGeeks explains the concept using examples you’re probably familiar with:
- Water park. You pay to enter, then you get a wristband to gain access to all the rides and to buy food. “In this example the water park is the dApp, your money is Ether and the band is the token.”
- Movie theater. You buy a ticket that includes popcorn and soda, as well as entry to the movie. You use the ticket to get into the theater and to get the popcorn and soda. “In this case, the cinema theater is the dApp, your money is Ether and the ticket is the token.”
In each of these cases, you are using “tokens” to access different goods or services.
It's important to note that dApps built with other platforms, including Hyperledger Fabric, wouldn't require tokens. However, few dApps are being developed with Fabric because of its relative lack of maturity compared to Ethereum. Learn more about the differences between the top blockchain platforms and frameworks in this white paper.
The big question: Why bother?
So, should dApp development be on your roadmap? Only you and your team can answer that. Like other tech stack choices, your decision will impact your programming language choice, the testing and debugging process, and many other things. Unlike other technical choices, the decision to develop a dApp also has widespread implications for your company’s business model.
If it’s a “maybe,” consider moving off the fence. First movers will have the advantage, and laggards risk being left behind. That may sound like a cliché, but it’s true. Blockchain technology is poised to change the world in ways we are only beginning to imagine, and that change is happening more quickly than that we’ve ever seen before.
By 2025, futurist Garry Golden predicts that Ethereum will achieve mainstream success “as dApps emerge from individuals, businesses, civic institutions, and governments eager to develop products and services based on a radical mix of trust, transparency, and automation.” He expects dApps to emerge in areas not currently considered ripe for decentralization, including social services, insurance, workplace learning credentials, and transportation.
So don’t be dismayed — or dissuaded — that there’s a lot of dApp activity centered around gaming. It won’t stay there.
Even if you’re not excited about all this right now, look at your pain points — what problems do you need to solve? Then look at the various use cases we discussed, from supply chain solutions to loyalty programs. If there’s a match, it’s probably time to move. Then look at the industries being disrupted. If that’s your ecosystem, you can’t afford a “maybe.”
So, you want to build a dApp?
If you’re ready to move, finding qualified developers might be a challenge.
“There [are] severe shortages in Ethereum resources, specifically Solidity developers, especially those with smart contracts experience,” Griff Green, a crypto pioneer, said to a packed house during the Blockchain Expo London this year.
Headhunter Philip Butler told a Cointelegraph reporter that businesses face an even bigger challenge is finding product managers and business architects that understand the complexities of these new technologies—not just blockchain but also IoT, AI, and machine learning.
“Companies will need to be fully educated on Blockchain and understand the potential of the technology that can create a massive strategic advantage but can also be destructive if ignored,” he says.
I’ll be honest, we’re still learning. Everyone else is too (and if they say they have years of dApp development experience, they’re probably lying). We’re heavily investing in training our senior product engineers on dApp development. Do you have a dApp project on your roadmap? Let’s talk.