what are decentralized applications dapps 
decentralized applications or dapps are software programs that run on a blockchain or peer to peer p2p network of computers instead of on a single computer rather than operating under the control of a single authority dapps are spread across the network to be collectively controlled by its users they are often built on the ethereum platform and have been developed for various purposes including wallets exchanges gaming personal finance and social media understanding decentralized applications dapps a web app such as uber or x formerly twitter runs on a computer system that is owned and operated by a company with authority over the app and its workings no matter how many users there are the backend is controlled by the company dapps operate a bit differently they run on a p2p or a blockchain network for example bittorrent tor and popcorn time are applications that run on computers that are part of a p2p network which allows multiple participants to consume feed or seed content dapps are similar but run on a blockchain network in a public open source decentralized environment they are free from control and interference by any single authority for example a developer can create an x like dapp and put it on a blockchain where any user can publish messages once posted no one except the message originator can delete the messages a centralized app has a single owner the application software for a centralized app resides on one or more servers controlled by the owner users interact with the app by downloading a copy of it and then sending and receiving data back and forth from the company s server a decentralized app operates on a blockchain or peer to peer network of computers users engage in transactions directly with one another rather than relying on a central authority to facilitate them the dapp might be free or the user might need to pay the developer in cryptocurrency to download and use the program s source code the source code nearly always uses smart contracts which complete transactions between people smart contracts remove the need to trust that the other party will execute their part of a transaction the apps also rely on blockchain protocols that hide personal information importance of dappsthere are several dapp features that can dramatically change the facilitation of information or resources because dapps operate on decentralized networks there is no need for an intermediary this can lead to reduced costs increased efficiency and greater accessibility for example instead of having to rely on a bank imagine having nearly 100 control of every aspect of your finances this can have major implications for many industries especially the financial sector because dapps leverage blockchain technology these solutions can also help improve security in many business and personal processes blockchains make data immutable by leveraging cryptographic techniques and distributed automated consensus because the ledger is shared and compared across all users data cannot be altered dapps are accessible to anyone with an internet connection it doesn t matter where you live all you need is internet access this global accessibility democratizes access to many different types of services digital assets and information blockchain based dapps maintain transparent records of transactions meaning users can verify the integrity of data without relying on centralized authorities this transparency is critical for distributed and anonymous networks because users need to know the system is trustworthy dapp usesdapps have been developed to decentralize a range of functions and applications and eliminate intermediaries examples include self executing financial contracts multi user games and social media platforms dapps have also been developed to enable secure blockchain based voting and governance they can even be integrated into web browsers to function as plugins that help serve ads track user behavior or solicit crypto donations some examples of practical uses for dapps include scams involving dappsscams have been perpetrated through dapps ponzi schemes in which early investors are paid using the investments of more recent investors to create the appearance of big profits have been known to occur on dapps fake initial coin offerings icos have been used to raise funds for developing a new cryptocurrency or dapp that the fundraisers have no intention of creating phishing attacks which use fake websites or emails to trick people into revealing sensitive information have been seen on dapps in addition some dapps have been used to distribute malware or viruses which can compromise users devices and steal sensitive information users should be cautious and do their due diligence when interacting with dapps as the decentralized nature of these applications can make it difficult to track or hold perpetrators accountable industry analytics group dappradar found that 312 hacks and vulnerabilities affected dapps in 2022 leading to losses of around 48 billion 1 financial losses decreased by 96 to 1 9 billion in 2023 but the frequency with which hacks and exploits were used increased by 17 3 2 in the first quarter of 2024 losses increased by 9 to 407 million compared to q1 2023 s 373 million 3advantages and disadvantages of dappsmany of the advantages of dapps center around their ability to safeguard user privacy dapps use smart contracts to complete transactions between two anonymous parties free speech proponents point out that dapps can be developed as alternative social media platforms a decentralized social media platform is resistant to censorship because no single participant on the blockchain can delete or block messages ethereum is a flexible platform for creating new dapps providing the infrastructure needed for developers to focus their efforts on finding innovative uses for digital applications this could enable the rapid deployment of dapps in several industries including banking and finance gaming social media and online shopping american cryptographer and computer scientist nick szabo introduced the term smart contract in 1996 as a graduate student at the university of washington 4dapps are still in the early stages so they are experimental and prone to certain problems and unknowns questions arise about whether the applications will be able to scale effectively also there are concerns that too many applications requiring computational resources will overload a network causing congestion the ability to develop a user friendly interface is another concern most apps developed by traditional centralized institutions have an ease of use expectation that encourages users to use and interact with the app getting people to transition to dapps will require developers to create an end user experience and level of performance that rivals popular and established programs because they are decentralized dapps are not subject to the oversight and auditing most centralized applications are exposed to if the application s programming is rushed unaudited or sloppy hackers will find it easy to break into it once deployed a dapp is likely to need ongoing changes to make enhancements or correct bugs or security risks according to ethereum it can be challenging for developers to update dapps because the data and code published to the blockchain are hard to modify 5promotes user privacyresists censorshipflexible platform enables dapp developmentexperimental may not be able to scalechallenges in developing a user friendly interfacedifficult to make needed code modificationssecurity issues if programming is sloppyregulatory considerations for dappsone of the primary challenges regulators face with dapps is their decentralized nature traditional regulatory considerations are usually based on a specific location since dapps are not centralized it s tougher to regulate activity based on where transactions occur consider the general data protection regulation gdpr and its implementation within the european union dapp providers that serve the eu audience must comply with gdpr requirements regardless of their home jurisdiction in december 2023 a european subnet of the internet computer protocol icp a blockchain dao was launched that provides an infrastructure and set of tools developers can use to create compliant dapps 6 if using the icp becomes the standard way of ensuring compliance the apps lose their decentralized standing because the icp is centralized nodes must be voted in by the dao and can only be located in the eu 7some dapps issue tokens or conduct token sales to raise money this may raise regulatory concerns as authorities work to protect investors it is viewed by regulators as an unregistered securities issuance in a similar manner dapps involved in financial services such as decentralized exchanges dexs or lending platforms must adhere to anti money laundering or know your client regulations to prevent money laundering and terrorist financing there is also a consumer protection element even if the user is not exchanging money or goods this includes personal data privacy and security protection agreeing to the transactions via signature puts users at risk platforms such as metamask warn users to be aware that they could lose funds if they re unaware of what they agree to when using dapps 8example of dappsone popular example of a dapp is cryptokitties 9 cryptokitties is a blockchain based virtual game that allows players to adopt raise and trade virtual cats the game is one of the world s first forms of interactive blockchain dapps 9each cryptokitty is unique owned by the user and validated through the blockchain like other types of tradeable assets its value can appreciate or depreciate based on the market cryptokitties are considered crypto collectibles because each digital pet is one of a kind and verified on a blockchain another example is uniswap a decentralized exchange protocol built on ethereum 10 uniswap enables users to trade directly with each other without needing an intermediary like a bank or broker this dapp uses automated smart contracts to create liquidity pools that facilitate trades users can trade their tokens directly from their wallets providing a seamless and secure trading experience again the existence of uniswap is made possible by the decentralized nature of the application 