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Fintech 12 Sep 2018

Ðapps revolutionize value-exchange on the Internet

These decentralized applications use blockchain so that users can interact directly among themselves and close deals without the involvement of a central management service.

e-chat is a real-time messaging application that has thus far attracted some 10,000 users worldwide. It incorporates the functions of WhatsApp, Telegram, Line and similar products, but it’s not a traditional app; rather it’s a ÐApp, acronym for a decentralized app. The name refers to platforms that enable members to interact over the web or use a ‘mobile app’, without needing a central entity to manage the service or keep track of each record or activity carried out.

To explain in more detail: in the case of WhatsApp, when someone sends a message, before it reaches its recipient, it passes through the app’s centralized servers, which belong to Facebook, the company that then controls the communication between the service’s users. Additionally, it stores data on these interactions and the parties involved. However, in e-chat there isn’t a single entity that controls each log, rather this functionality is decentralized—shared and distributed among all of the application users—thanks to a growing chain of records called blocks, like the one made popular by Bitcoin.

Other decentralized alternatives have emerged to challenge the dominance of popular companies in the sharing economy. For example, there are users who prefer La’Zooz to Uber or CryptoCribs to Airbnb because these lesser known applications put their users in direct contact without the presence of a central authority who stores information about the parties involved in the service transaction.

How does it work?

In general, each user of the same ÐApp is a node in a decentralized network where the users act jointly like a collective registry of every movement made in the platform. In practice, nobody needs to expressly give consent; rather the process should work automatically with the system itself tasked with validating each transaction via a smart contract, a computer program that runs automatically per the conditions that are programmed in its code. With each new operation, the platform’s data is updated in each node, where a copy of the ÐApp’s full history is stored. In this way the computer resources of all the users contribute to the maintenance of the application.

The distributed nature of blockchain also guarantees numerous “security copies” in the event of a node going down. This leads us to what some experts believe to be a fundamental flaw of ÐApps: storing large amounts of data in a blockchain can become costly and significantly increases its size in megabytes, although efforts are underway to improve the process and find scalable solutions.

On the other hand, decentralized applications have the following advantages compared to traditional “apps”:

  • The encryption of the blockchain itself provides significant security. Sensitive user information (such as financial data or medical history) is protected against theft, manipulation, or computer attacks by third parties since it doesn’t exist in a centralized database.
  • Information published in social networks in ÐApp format cannot be tracked by any central entity for the purposes of learning about users’ preferences. Thus, the use of personal data for commercial purposes is averted. Similarly, there is no centrally controlled and administered censorship in these types of applications.
  • With regard to the delivery of services and rental of goods and property, the concerned parties can finalize their deals using smart contracts that are automatically executed when certain conditions have been met. For example, when someone returns a rental car, the deposit is returned to his account.
  • There are no service failures because everything is distributed out to the nodes and not dependent on central servers; so, if one part of the network fails, the rest is unaffected.

Bitcoin started it all

Application decentralization has its origins in Blockchain, the technology that underpins today’s most popular cryptocurrency: Bitcoin. Even if blockchain was first started as a way to establish payment methods between equals and without intermediaries, it will soon be proven that this encryption method can have other uses, assuming other programs can be executed over it. That is how Ethereum, a blockchain platform, was conceived in 2014.  Nearly 1,150 ÐApps have been published on Ethereum and are available on the portal, The State of The ÐApps.

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