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Decentralized Apps Explained

Basics Blockchain

The promise of the Bitcoin blockchain, was that transactional information could be stored indelibly on an open and accessible network of computers without any central figure, organization, body or government controlling it. The one constant in technology is change, and it was only a matter of time until blockchain technology was taken up a notch in utility.

The Ethereum bravely took up the challenge, innovating further by figuring out that if transactions can be stored in a block, so could code. This thought is what enabled the creation of something resembling a “decentralized app store” on the Ethereum blockchain, where Google or Apple can’t say yay or nay to approval, function or data handling.

Decentralised apps (dapps) enable their creators to reach consumers without a middle man, and because they’re open source no one place can be targeted to attack them.

The 3 Types of Decentralised App

Decentralizing everything is a dream of many people within the crypto community. Whether this decentralized state of nirvana will ever be reached, however, remains to be seen – it’s still early days, after all.

One thing that should be pointed out, is that the Ethereum white paper does somewhat confine the types of apps users can create on the platform, to 3 fairly narrow categories:

1.    Money Apps

Money apps enable users to exchange ether to settle a contract with another user. It uses the networks computing power to share the data.

Pretty simple.

2.    Money + “Another Piece”

The second kind of app outlined in the white paper is an app that mixes money (ether) transfer, with off-blockchain info.

To illustrate, let’s imagine an app designed to provide insurance for tulip growers.

In order to generate accurate quotes, it’d be important for the app to connect with the API of a weather forecast service that lives off-chain. Combining weather data with the data collected from each individual tulip grower would then enable each grower to purchase a futures contract which automatically makes them a payout if, say, a storm wiped out some of their harvest.

For a smart contract like this to work, it’d need to rely on “oracles”, which push current information from the outside world to the app. It’s worth mentioning that not all developers are sold on this type of use case being possible to execute in a decentralized fashion.

3.    “Other”

As touched on in our DAO article, smart contracts enable – theoretically – rules for an organisation’s governance to be encoded at its founding.

If figured out, eventually this will enable the formation of leaderless companies, where code enforces the decision-making process of the firm.