Why do we need DApps?

The Value Equation. In general, successful work involves the creation of value for stakeholders; most people will not work without reward (be it emotional, physical, currency, opportunity, social status or other) for very long. This value equation, and the accompanied sense of fairness, is an innate trait in each of us.

That ugly 2nd law of thermodynamics – Entropy in systems. As systems mature, be they cultural, social, business or other, they tend to become less efficient to the producer and consumer. Its natural that highly profitable Value equations draw the attention of others that believe they have a right to a share of the profits. From the highway bandits of the Silk Road to your local DMV, its easy to see how the longer a system exists, the more bureaucracy attaches its self to the host, until the system eventually collapses.

It may be helpful to visualize this in terms of a journey, An ideal value equation/execution of an idea is simple: There is a demand for a good or service. Someone meets that demand at less cost for all stakeholders than the current model. The excess gained from this model can then be consumed for other endeavors, in the best interests of the stakeholders.

However, over time, organizations and individuals insert themselves into the model with the end goal of acquiring some of this excess gain (profit), using laws, access to resources, social pressure or other. Eventually, a simple model is now a complex labyrinth or defined and subjective obstacles that destroy the value of the model and redirect the work of the creator to non-productive efforts that will often act against their best interests.

DApps – The flea and tick collar of modern commerce. The essence of DApps (and DeFi and DAOs, actually) is to enable the stakeholders to regain control over their Value equation over the non-productive entities that would take value from the system. An electrical engineer might see this as circuit optimization, a programmer might see this as a DGAN and a project manager might see this as a critical path that maximizes earned value – but the important part is that a DApps empowers creators and consumers to regain control over their intellectual property by legally removing barriers.

What is a DApp?

A decentralized application – or dapp – is like a digital app found on any smartphone or laptop, with the additional feature of employing blockchain technology to keep users’ data out of the hands of the organizations behind it. Just like cryptocurrency is decentralized money, dapps are decentralized apps.

The blockchain stores copies of its expanding stack of data on a large number of participating computers, known as “nodes,” all at once. These computers are owned by users, not by the creators of the dapp. A full explanation of how blockchain technology works can be found here.

Dapps are as varied as conventional apps: They can provide social networks, games, entertainment, productivity tools and so on. Many are designed as tools to help consumers access decentralized financial services, or DeFi. This latter function is so widespread that the Ethereum network white paper categorized dapps into “financial,” “semi-financial” and “other.”

Ethereum has been the dominant host for dapps so far. At its foundation, one of the primary goals of the network was to make dapps easier to create.

Dapp users may feel more secure in the knowledge that the creators of the application cannot control how it is used – at least, not in the conventional way. For example, the creators of a social network dapp are powerless to remove a post or exclude a user. They are also unable to sell users’ data to other entities because dapps run autonomously once they’re launched.

How is this possible? It’s all down to the use of smart contracts – computer programs deployed and on a blockchain designed to execute the rules of a contract without human involvement. For example, a smart contract could be coded to issue a loan once a user deposits a sufficient amount of collateral into it. Dapps are also commonly open source, meaning that anyone can view and use the underlying code.

Decentralized autonomous organizations, or DAOs, can be seen as a kind of dapp. They aim to use an intricate arrangement of smart contracts to achieve the functions of a traditional organization without the need for corporate executives and hierarchies. They determine policy entirely through a weighted voting system where members who lock away more tokens possess greater voting power. The idea behind this concept is that those who have committed more funds to a DAO will be more likely to participate in it honestly, for the good of the organization.