What are dapps?

You’re probably familiar with applications (apps), the programs you use to stay organized, order food, play games, book a ride, do your work, avoid doing your work, and quite literally a million other things.

Now, there are also crypto apps, known as decentralized apps, or “dapps” for short. A dapp is simply an app that runs on a blockchain.

On the surface, many dapps will look and feel just like the apps you already use every day. But under the hood, you’ll find the innovations and decentralized benefits of blockchain technology.

Dapps are where you go to give purpose and utility to your crypto. You can invest, trade, buy, play, and explore Web3. If you’re just HODLing your crypto, dapps are how you level up.

What can I do with dapps?

A lot, and more every day! Once you’ve got a self-custody wallet, you can start to explore all the different ways to engage with dapps:

Swap: Exchange your tokens for other cryptocurrencies or fiat.

Lend/Borrow: Take out crypto loans or lend your crypto as a way to earn.

Pay: Facilitate remittance, business, and peer-to-peer payments quickly and across borders.

Earn: Invest and build savings. Stake your crypto or join a communal crypto pool to get rewards on your assets.

Shop: Use your crypto to buy gift cards, flights, products, and services.

Manage: Stay on top of your portfolio of crypto, NFTs, and other digital assets, analyze your crypto transactions for taxes and accounting, and process stablecoin payments for you or your business.

Impact: Use crypto to support communities in need and raise funds for causes that matter.

Interact: Create a unique username on Celo and join social or professional networks to find and support talent.

Collect: Browse NFT marketplaces to buy, sell, view, and show off your NFT collections. You can also create and distribute your own NFTs.

Play: Discover a wide range of games, including play-to-earn and NFT-based games.

How dapps differ from apps

Like many things on the blockchain, dapps are decentralized, with all the benefits decentralization brings. Most notably, they can give users more control over their data–how much they share, how they share it, and how it gets used by the dapp.

Let’s compare this to the traditional app experience. While your rideshare or food delivery app may be running on your personal device, everything on the backend, where the real work happens, is owned and controlled by the company that makes the app. Using their app means entrusting your private data, like identity, location, and banking information, to a company that may be lax or opaque about their security measures or *gasp* not have your best interests at heart.

They collect your data because their business model depends on it. The more data they can harvest, the more detailed info they have to sell to advertisers and make fortunes.

Blockchain dapps, on the other hand, work differently. They charge small transaction fees in exchange for their service. They don’t require any personal data and allow you to keep your identity anonymous. Doesn’t that sound nice?

This simplicity is partly because the controlling entity behind the dapp is not a company but a smart contract, the behind-the-scenes code that runs them. Smart contracts are so crucial to dapps and Web3 that we gave them their own explainer.

The benefits of dapps

On top of everything that dapps do, here’s what makes them so great:

Communal: The code of many dapps is open-source and visible to all. So if a developer finds a way to improve a dapp, they are free to make those improvements. This open-source ecosystem fosters a sense of communication and collaboration that benefits everyone.

Anonymous: Many dapps don’t need your personal information to work, just need your wallet address. Your banking info, identity, location, and other personal data stay safe.

Secure: The data on blockchains are spread among many nodes rather than just a few servers, so it’s more resilient to hacks.

Always Open: There is no off-the-clock when code runs dapps instead of people. Therefore, your crypto and places where you can use it are always available to you.

The challenges facing dapps

There is always an awkward adolescent phase with emerging technologies, especially ones as complicated as blockchain. The user experience, particularly the onboarding flow, needs some smoothing out. Developers and designers are still figuring out how to eliminate hoops, or at least make them easier to jump through–things like setting up and securing a wallet, buying or swapping the right cryptocurrency from an exchange, etc.

Additionally, dapps ask more of their users. In exchange for higher security, users are responsible for keeping their passwords, seed phrases, and other personal data safe. If you get locked out of your account, or if your account gets compromised, there’s not much you can do since there’s no central authority that can help you regain access.

So users need to do some research to ensure the wallets, blockchains, and dapps they interact with are safe and then practice ongoing diligence to ensure they’re using them correctly and responsibly.

The future of dapps

The dapp ecosystem is increasing rapidly. According to Dappradar.com, the total dapp transaction volume passed $271B in 2020. In 2021, the number of unique daily active wallets connected to dapps increased 7x. It’s easy to see why many people believe dapps will completely replace traditional apps in the coming years.

The list of things you can do with dapps grows every day, and the possibilities are exciting. Developers and designers are creating new and fascinating dapps, reinventing existing industries, unlocking novel ones, and steadily chipping away at the early challenges with dapps.

But dapps are already a great way to discover opportunities on the blockchain. Now that you know more about how they work, you’re ready to see what dapps can do for you.

Looking for a quick way to dive into dapps? Head to the Dapps Page in the Valora app to get started.

Next Lesson: What are Proof-of-Work & Proof-of-Stake?
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