What Are Dapps? Applications Built For the New Internet (Web3)

Web 1.0 > Web 2.0 > Web3?

The internet changed the world in many ways, including how we interact socially and economically. Over the last 20 years, software applications built on top of it have also created unbelievably useful products and services.

What are Dapps?

Dapps are applications or programs that exist and run on a blockchain. Smart contracts facilitate agreements instead of middlemen. They act as Web 3’s App Store, allowing anything to be built purely on smart contracts and code, giving users a trustless and permissionless experience.

What Makes Decentralized Apps Different From Traditional Apps?

Dapps might have a few to all of the following characteristics and features:

  • Open-source –- code can be audited by anyone, anyone can contribute, creates collaborative and competitive fast-paced innovation
  • Decentralized — operation and control are distributed (potentially to the point of becoming censorship-resistant similar to the Bitcoin network)
  • Trustless & Permissionless — users trust the code of the smart contracts, users are not required to provide any real-world identification
  • Public data/records –- data is distributed and stored on an open blockchain in contrast to a centralized data server (the blockchain is the settlement layer for data so dapps inherent its security and immutability)
  • Use of tokens — often in the form of added utility (discounts, staking yield, voting rights, etc.) or rewards for users in exchange for their contributions, also can be designed as part of securing the network (POS)
  • Democratic — protocol changes require the majority consensus of users that vote
  • No downtime — a globally distributed network of operators in combination with automation means dapps can continue to work 24/7 even if parts of the network go down

How do you interact with dapps?

To interact with a dapp, you will need a wallet that integrates with your browser. You will download the wallet’s browser extension or mobile app. Digital wallets are software applications that give you access to your digital assets. However, the tokens are tracked/exist on their native blockchain ledger.

Dapps in Finance

Decentralized finance (DeFi) is one of the most mature use cases for dapps. In traditional finance, lending, borrowing, investment services, payments, and custody are the foundational products. DeFi refers to an ecosystem of smart contracts that allow participants to offer and access these financial services P2P without relying on traditional intermediaries like banks, credit unions, or brokerages.

  • Decentralized exchanges (DEXs) — users trade cryptocurrencies including stablecoins
  • P2P Lending and borrowing platforms — users deposit assets that are lent to borrowers and gain rewards/interest from the fees paid by borrowers
  • Other forms of lending assets for yield — depositors are rewarded for staking tokens (POS blockchains only), allocating to liquidity pools, or more complex yield farming
  • Derivatives — smart contracts that derive their value from an underlying asset are used for hedging or speculation (Including options contracts seen in traditional finance)
  • Payments — users pay each other in crypto tokens which can include merchants who accept certain cryptos as payment
  • Insurance — users can get protection for their crypto wallets, DeFi deposits, and smart contract exposure

Dapps for NFTs

Similar to the DEX of finance dapps, the most used dapps surrounding NFTs are marketplaces. They allow you to trade NFT collectables with a whole host of features. OpenSea has been the leading marketplace for NFTs. However, other platforms and blockchains are meeting the market demand for better and cheaper services.

Dapps as Games

Most current blockchain games take place on chains with higher throughput than Ethereum. That includes Polygon, Flow, Wax, Solana, and BSC. However, even the Bitcoin network is getting involved in the gaming scene via the Lightning Network (LN).

Social Dapps & Other

Web2 social media platforms like Facebook, Instagram, Twitter, and Tiktok have disadvantages. Content creators get very little of the revenue, while big tech companies take up the majority of profits. Web3 social media platforms that are decentralized, uncensored, and give creators their share have been attempted in the crypto space well before the term Web3 even came about. Although they have yet to gain much traction, the potential is still considerable.

Conclusion

The adoption of dapps and Web3 comes down to them offering users and creators a better experience, service, or product than traditional centralized apps and companies. The Clip Finance dapp is bringing just that kind of experience to DeFi. For those looking to earn a yield on stablecoins, Clip Finance offers a simple-to-use smooth experience that takes out the complexity. We do this for the nontechnical, everyday user as well as crypto enthusiasts who simply don’t have the time to find the best risk-to-reward yield opportunities out there.

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