This article was written by Michael Kordvani, an aspiring tech blogger.
Blockchain technology is being adopted by an increasing number of businesses, prompting a new type of application to emerge that can’t be owned, shut down or plagued by downtime. Take a moment to imagine your idle computer being used to service people around the world, or receiving compensation for simply browsing the web.
This is the future that decentralized applications, better known as dApps, are aiming to bring about. Built upon blockchain technology, dApps are distributed, resilient and transparent applications that incentivize value and provide security to users. To understand what a dApp is, you first have to grasp the concept of blockchain development technology.
Blockchain technology produces a ledger of records that are organized in blocks and tied together through cryptographic validation. The blockchain network is completely decentralized and cannot be managed by any single entity. It offers a validation system that promotes full transparency and resilience, as all transactions made on the blockchain are unmodifiable and preserved until the end of time. DApps are open-source software programs that leverage the groundbreaking features of blockchain technology. Blockchain development is becoming an essential part of many new business solutions, and therefore, dApps are following suit.
WHAT ARE DECENTRALIZED APPLICATIONS AND HOW DO THEY FUNCTION?
To be considered a decentralized application, there are a number of standards that must be met. For starters, the application needs to be completely open-source and operate autonomously. Any improvements or changes that are made to the application must be decided upon by the consensus of its users.
Secondly, all data and records of operation in the dApp have to be cryptographically stored in a public and decentralized blockchain. A decentralized application also needs to utilize a cryptographic token, either through Bitcoin or a native token. Introducing tokens is integral to a dApp system, as it provides access to the application and rewards users for valuable contributions.
Finally, the dApp must use a standard cryptographic algorithm to generate tokens, which provides proof that nodes are contributing value to the application. For instance, both Bitcoin and Ethereum use Proof-of-Work (PoW)-based public blockchains to show this proof of value. The PoW system enables miners to mine blocks and receive rewards, while also keeping the blockchain secure because adding them to the blockchain is an energy-consumptive process.
The other popular option is Proof-of-Stake (PoS), which is used by the dApp Dash. This proof system requires miners to hold tokens to become an eligible masternode. PoS also lends a helping hand to transaction processing and secures the blockchain as well.
HOW TO DEVELOP A DAPP ON THE BLOCKCHAIN?
Unlike centralized applications, dApps need to be developed in sequential measures and time frames. The first step is to publish a white paper that details the concept, features, and technicalities of the dApp. By adding a “road map” for the dApp on top of this, a developer can add even more legitimacy to the application. All in all, this process generates feedback from the community, an essential part of becoming a true dApp.
The second step in the decentralized application development process is launching initial coin offerings (ICOs) to jumpstart crowdfunding for the dApp. Not only will this help bring the application to fruition, it also provides an opportunity for businesses to explain aspects of the ICOs to the community. Transparency plays a crucial role here, so developers should be sure to share what percentage of the tokens will go toward development and marketing, among other allocations.
Once the concept is fleshed out and funding is acquired, the next stage is to start the blockchain development process, keeping the community up-to-date on a weekly or monthly basis. If you’re a blockchain developer looking to create a decentralized application on the Ethereum network, it’s important to learn the programming language Solidity. This language is used to write executable distributed code contracts.
After that, the final step is to launch the product along with release notes and future maintenance plans to keep users involved. However, the development process doesn’t come to a halt once this last step is complete. In fact, the dApp should be continuously maintained and modified to meet changes in the roadmap or community demands.
EXAMPLES OF SUCCESSFUL DAPP PROJECTS
Although blockchain technology and dApps are relatively unexplored territories for businesses, there is a wide range of successful decentralized applications built on the Ethereum network. In fact, a handful of Ethereum-based dApps have already achieved millions of dollars in market cap. Here are a few of the most popular projects and what each has to offer.
One prime example of how dApps can be applied to business models is the Golem project, which aims to develop the world’s first global market for idle computer power. The goal of this dApp is to allow users to utilize idle machines to accomplish certain tasks, enabling frictionless sharing and pooling of resources. More specifically, Brass Golem has been released in Beta to allow CGI artists to rent computing resources to render images quicker.
Another Ethereum-based dApp is Augur, which combines blockchain technology and the idea of a prediction market to develop a forecasting tool for trading gains. As explained on the project’s website: “Users feed real world information into Augur’s contracts. Augur ensures the accuracy of this real world information by providing a financial incentive for REP token holders to correct markets they believe have been reported on incorrectly.” In other words, Augur is aiming to provide real-world truths to other applications, ultimately establishing itself as the blockchain for factual information.
Melonport is a successful dApp that is a blockchain protocol for digital asset management. This project enables participants to invest in digital asset management strategies in an open and competitive environment. In this instance, blockchain technology helps reduce time and cost by offering an auditable and publicly visible track record for asset management.
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Interesting article!
And this is why Buffett can't quite understand the new organisations that are coming through.
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