What Are Decentralized Applications (dApp), How They Work and What Their Pros and Cons Are!

What Are dApps?

Decentralized applications (dApps) are software programs built on a blockchain or peer-to-peer network of computers. Unlike traditional applications, dApps tend not to rely on a single, centralized server, and instead operate independently, utilizing smart contracts where possible to execute backend processes and facilitate user interactions. 

With less centralized control, dApps reduces censorship, allowing users more authority over their data and assets. Moreover, dApps offer transparency and data integrity by recording all transactions on a public blockchain. Currently, decentralized apps serve many purposes in various sectors, like finance, gaming, supply chain management, and social media.

How Do dApps Work?

dApps are typically built on blockchain networks, such as Ethereum, Solana, BNB Smart Chain, and so on. Blockchain technology provides the underlying infrastructure on which the application can operate in a decentralized manner. dApps in many ways act as the front-end of blockchain applications, giving users an easy way to access and interact with smart contracts in a user-friendly way.

The core component that enables this is smart contracts, which refer to self-executing protocols that automate blockchain actions or tasks based on predetermined terms and conditions. When a user interacts with a dApp, the smart contract on the backend guarantees and governs the interaction, ensuring that any funds are utilized or sent to the correct address based on a set of predefined rules. An example of this would be a user using a token bridge dApp such as Stargate: the smart contract ensures that the correct amount of tokens are sent and received, and any fees due are automatically deducted without the user’s intervention.

Furthermore, most dApps are governed through decentralized mechanisms, such as decentralized autonomous organizations (DAOs). This community-driven approach to governance allows every stakeholder (often token holders) to vote on decisions, such as policy changes, protocol upgrades, token burns, etc.

Users can interact with dApps by connecting their digital wallets, which often contain private keys and assets. This also allows users to pay gas fees required to transfer tokens or perform other actions on the apps. Users pay these fees with the network’s native token, like Ether (ETH) on the Ethereum blockchain.

Centralized vs Decentralized Apps 

Centralized applications and decentralized applications operate in fundamentally different ways, including their data management techniques and user interaction. Centralized applications, such as Spotify or Google Chrome, operate on a single computer system owned by a particular entity (Spotify and Google, Inc., respectively). The parent company controls the backend and operations of this application. All user interactions and data flow through the company's servers, giving the organization full control.

Since centralized apps control all the data, they can process user requests quickly. This enables the applications to be able to handle millions of users efficiently. However, there is always the potential for censorship, especially with centralized social media platforms. If the controlling company deems certain content unfit for public consumption, it can remove the content or even block the authors. 

dApps, on the other hand, are not controlled by any single entity. Instead, they run on public blockchains, which typically runs on a network of computers (known as nodes) that share responsibility for managing the blockchain. This setup offers a significant shift in the distribution of control, allowing for greater autonomy and privacy.

Because there’s no central authority, dApps are more resistant to censorship. It becomes harder to block or take down a user’s content or data. Also, actions on the app are permanent and visible to everyone on the network. These features make dApps particularly appealing to individuals who value freedom and want to avoid the control of corporations or governments.

However, dApps have their own limitations. Since every transaction on a dApp is verified by multiple nodes, this process can be slower and more costly compared to centralized apps. In the end, the choice between centralized and decentralized apps often boils down to individual needs and priorities.

Pros and Cons 

dApps offer a different approach to how everyday applications work by eliminating the need for centralization. However, dApps have benefits and drawbacks. 

Here are some pros and cons of decentralized applications.

Pros

Cost and Efficiency

dApps eliminate the need for intermediaries, such as banks or payment processors, resulting in lower transaction costs and greater efficiency. 

User Autonomy

dApps operate without a central authority, giving users full ownership of their data and assets. This reduces the risk of data exploitation or third-party misuse.

Security & Data Integrity

Because dApps operate on blockchain networks, they benefit from the security of blockchain technology. Moreover, the distributed and cryptographic nature of these networks ensures that data is immutable and resistant to tampering.

Flexibility

dApps offer developers significant flexibility. The open-source nature of many dApp platforms, such as Ethereum, allows developers to experiment and build new solutions that can be quickly deployed across various industries, ranging from gaming to finance

Cons

Scalability Issues

dApps can face significant challenges when it comes to scaling effectively. Handling an increasing number of transactions or users can cause network congestion, leading to slower transaction speed.

User Interface Challenges

Most users are accustomed to the smooth, intuitive experiences most centralized applications offer. Hence, users expect dApp developers to match and exceed those standards. However, replicating such a seamless user interface on dApps has proven to be a challenge over the years.

Post-Deployment dApp Challenges

Due to the finality of blockchains, once a dApp is deployed, updating or modifying its code can be more challenging than traditional apps. Immutability is a key security feature of blockchains but it also creates hurdles for developers in this case.

No Recourse For Frauds or Misuse

Because of the anonymity and finality of blockchains, frauds and scams are rampant in the crypto space. This also means there are many fraudulent dApps that exist. A simple mistake such as sending to the wrong address is also irreversible. Overall, it is unlikely that you would be able to undo a mistake when interacting with a dApp as compared to traditional applications such as Google, whereby you can contact customer support should there be any mistakes or issues.