What is a Decentralized Application (DApp)?
A Decentralized Application (DApp) is a software application that operates on a blockchain or a peer-to-peer network, rather than being hosted on a central server. DApps leverage the unique properties of blockchain technology, such as immutability, transparency, and security, to offer users a more reliable and trustworthy experience.
Typically, DApps involve smart contracts, which are self-executing contracts with the agreement directly written into code. These contracts automate processes and ensure that transactions occur as intended without the need for intermediaries, thereby reducing costs and risks.
DApps can be categorized into three types:
- Type 1: These are built entirely on the blockchain (e.g., Bitcoin).
- Type 2: These DApps use blockchain as a backend for storing data while processing transactions off-chain (e.g., some Ethereum-based applications).
- Type 3: These involve a mix of on-chain and off-chain interactions and often require external data or off-chain resources (e.g., prediction markets).
Overall, DApps promote user empowerment, offering features such as enhanced privacy, autonomy, and resistance to censorship, which are key advantages over traditional applications.