Chapter 4: Decentralized application

A decentralized application, also known as a DApp, dApp, Dapp, or dapp, is an application that is capable of functioning independently, often through the utilization of smart contracts, and that operates on a distributed ledger system with decentralized computing, blockchain, or another similar system. Traditional programs, like decentralized applications (DApps), offer their customers some kind of purpose or benefit. DApps, on the other hand, run independently of human interference and are not owned by any single business. Instead, DApps distribute tokens that indicate ownership, which is a significant difference from regular applications. These tokens are allocated to the users of the system in accordance with a predetermined formula, which results in a reduction in ownership and control of the decentralized application (DApp). As a result of the absence of a single body that controls the system, the application is decentralized.

Among the many public blockchains, distributed ledger technologies (DLT) have been essential in the growth of decentralized apps. Examples of DLT include the Ethereum or Cardano blockchain, which serve as the foundation upon which DApps are constructed. When it comes to social media, Bluesky is the most decentralized platform available.

There are many different categories that decentralized applications (DApps) fall into, including but not limited to: exchanges, businesses, gambling, gaming, money, development, storage, wallet, governance, property, identity, media, social, security, energy, insurance, health, and everything else.

In order for an application to be regarded as a decentralized application (DApp), it is necessary for it to fulfill a number of requirements.

A decentralized application (DApp) must be open-source in order to meet the requirements of traditional definitions of a DApp. To put it another way, the application functions independently, without the need for a centralised body to exercise control over the majority of the tokens linked with the program. Additionally, decentralized applications (DApps) have a public blockchain that is decentralized and is used by the program to maintain a cryptographic record of data, which includes a record of previous transactions.

Traditional decentralized applications (DApps) are normally open-source; however, as the cryptocurrency industry continues to develop, DApps that are either completely closed-source or partially closed-source have gained popularity. Only 15.7% of decentralized applications (DApps) are completely open-source as of 2019, whereas 25% of DApps are closed-source. The proportion of decentralized applications (DApps) that have code that is accessible to the public is lower than the proportion of DApps that do not have code that is accessible to the public. In general, the transaction volumes of open-source decentralized applications (DApps) are higher than those of closed-source DApps.

A decentralized application (DApp) is Bitcoin, the first cryptocurrency ever created.

A decentralized application (DApp) can be categorized according to whether it operates on its own block chain or whether it operates on the block chain of another decentralized application (DApp).

The developers of the blockchain make use of smart contracts in order to execute activities and to keep the data on the blockchain updated. To manage more complicated processes, a single decentralized application (DApp) can have many smart contracts built for it. There are about 75% of decentralized applications (DApps) that are backed by a single smart contract, while the remaining DApps use numerous smart contracts.

Gas, which refers to fees paid to the validators of the block chain, is incurred by decentralized applications (DApps) as a result of the cost of deploying and executing the smart contracts of the DApp. On the other hand, the complexity of a decentralized application's smart contracts determines the quantity of gas that is required for its activities. It is possible that a detailed smart contract of a decentralized application (DApp) that runs on the Ethereum blockchain may not be deployed if it costs an excessive amount of gas. This will result in a decrease in throughput and longer wait times for execution.

Distributed applications (DApps) make use of consensus methods in order to reach a consensus on the network. Proof-of-work (POW) and proof-of-stake (POS) are the two procedures that are implemented the most frequently in order to create consensus.

Through the process of mining, proof-of-work requires the utilization of computer resources in order to create consensus. A process known as proof-of-work is utilized by Bitcoin. Proof-of-stake is a consensus mechanism that enables decentralized applications (DApps) to function by use of validators. These validators ensure the safety of the network by holding a stake and owning a percentage of the application.

Mining, fund-raising, and development are the three primary techniques that decentralized applications (DApps) use to distribute their tokens. Tokens are issued in accordance with a predetermined algorithm as incentives to miners that protect the network through transaction verification. Mining is a process that is used to generate cryptocurrency. Fundraising is another method that can be used to distribute tokens. In this method, tokens are distributed in exchange for money during the initial development phase of the decentralized application (DApp), similar to how an initial coin offering works. In conclusion, the development mechanism ensures that tokens that have been reserved for the purpose of creating the decentralized application (DApp) are distributed according to a predetermined schedule.

When it comes to the establishment and development of any decentralized application (DApp), there are three primary processes that often take place: the publication of the whitepaper for the DApp, the distribution of first tokens, and the distribution of ownership. In the first step, the whitepaper is produced, which details the protocols, features, and implementation of the decentralized application. After that, the necessary software and scripts are made accessible to the miners and stakeholders who are responsible for the validation and funding of the network. They are compensated with the initial tokens that were issued by the system as a response to their contribution. To conclude, as a greater number of players join the network, either by making use of the decentralized application (DApp) or by contributing to the development of the DApp, the ownership of tokens decreases, and the system becomes less centralized.

In contrast to traditional applications, which have their backend code running on centralized servers, decentralized applications (DApps) have their backend code running on a peer-to-peer network that is dispersed over the internet. Frontend code and user interfaces for a decentralized application (DApp) can be built in any language that is capable of making calls to the DApp's backend.

Decentralized applications (DApps) have been applied in the system of decentralized finance (DeFi), in which dapps carry out financial tasks on blockchains. There is an expectation that decentralized financial protocols, such as the Aave Protocol, which validate peer-to-peer transactions, would cause a disruption in centralized finance and significantly reduce costs.

Latency, throughput, and sequential performance are all indicators of how well a decentralized application (DApp) performs. The technology that Bitcoin uses to validate transactions is structured in such a way that it takes an average of ten minutes for a block to be mined on the blockchain that Bitcoin uses. An average of one mined block is produced every 12 seconds on Ethereum, which is referred to as Block Time. This results in a reduced latency. To put that into perspective, Visa processes around 10,000 transactions every single second. Attempts have been made by more recent decentralized application efforts, such as Solana, to surpass that rate.

Network connectivity is an essential requirement for blockchain systems, which includes decentralized applications (DApps). Moreover, high monetary costs constitute a barrier to entry. Even transactions with very low monetary values can account for a significant fraction of the total amount that is transferred. As a result of increased network traffic, the prices for the service will also increase as the demand for the service increases. Digital applications (DApps) established on the Ethereum blockchain, such as those utilized by non-fungible tokens (NFTs), are the source of this problem for Ethereum, which can be ascribed to the increased network traffic that these applications cause. There is a correlation between the complexity of a decentralized application's smart contracts and the transaction fees, as well as the blockchain itself.

A distributed ledger technology (DLT) that has the largest decentralized application (DApp) market is Ethereum. The first decentralized application (DApp) built on the Ethereum network was released on April 22, 2016. Since May of 2017, the number of decentralized applications (DApps) that are being built has increased at a faster rate. Since February 2018, decentralized applications (DApps) have being published on a daily basis. Fewer than one fifth of decentralized applications (DApps) possess nearly all of the DApp users on the Ethereum network. About five percent of decentralized applications (DApps) are...