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What is a DApp? Learn about Ethereum’s biggest use case

What is a DApp? Learn about Ethereum’s biggest use case

Decentralized application (DApp) commonly refers to an application built on top of the Ethereum blockchain using smart contracts.

The exact definition of DApp can be hard to pin down because things change so quickly. But, the term DApp can be loosely defined by the qualities that decentralized applications share.

Decentralized applications come in many different flavors

DApps come in many shapes and sizes, but they all have a few things in common. For example, most DApps are open source. Smart contracts serve as the code behind decentralized applications running on the Ethereum blockchain. Meaning DApp users aren’t required to sign up or create a login, but instead interact with the application directly on the blockchain. Also, this means that decentralized applications are often unstoppable, uncensorable, and users’ data and interactions are permanent.

In some cases, decentralized applications interact with the world outside of the Ethereum blockchain. These DApps require information provided by an oracle to operate. For example, MakerDAO currently relies on price feeds from several exchanges to determine the price of DAI or when to liquidate CDPs.

Some DApps have their own peer-to-peer networks built on top of Ethereum which enhance or extend the functions of their underlying smart contracts. For example, 0x protocol’s network of relayers instantly relay trade orders which are later settled on-chain. While others, use other peer-to-peer networks like IPFS to host content or even their frontend interface.

Decentralized finance (DeFi) is the fastest growing category of DApp.

While not every DApp involves money, most of them do. And by far, the most popular DApps provide finance products or services on the Ethereum blockchain. Just to name a few types of DApps in DeFi: lending, DEXes, tokenized assets, payment solutions, insurance, etc. Learn more about DeFi and the most popular DeFi applications.

DApps and their users make smart contracts bigger than the sum of their parts

As mentioned before, not every DApp falls into the DeFi category. For example, DApps can be games like trading cards and collectibles with ownership stored on the blockchain. Other DApps form social networks using Ethereum accounts as logins and decentralized storage like IPFS to host user generated content.

Another common form of DApp is a DAO or decentralized autonomous organization. DAOs are like companies or organizations without a leader. They can govern the way smart contracts or DeFi protocols operate. Some DAOs even tokenize ownership and share profits like a company.

We’ve only skimmed the surface of what many might consider a DApp. But like we said, the world of decentralized applications is changing everyday. Each new project or innovation adds to the ecosystem and affects what can be defined as a DApp.

If you want to learn more about DApps, explore The DeFi List, follow us on Twitter @DefiPulse or come chat us in our Discord.

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