With the decentralized application space evolving rapidly, let’s take a look at some of the best examples that caught our attention in 2020.
With the crypto market making a crazy comeback this year, an increasing number of casual investors all over the world are beginning to understand the potential that blockchain technology possesses. For example, over the course of 2020, decentralized applications gained a remarkable amount of traction, with the total locked volume across all decentralized exchanges rising from under $40 million back in December 2019 to a whopping more than $26 billion within a span of just nine months.
However, it’s important to understand the core concepts underlying decentralized finance, or DeFi, and decentralized applications, or DApps, as many routinely use the two terms interchangeably. For starters, while both innovations share many similarities — such as using blockchain technology, eliminating third-party intermediaries, and providing users with complete control over their finances — there are a few key differences that are worth pointing out.
One key distinction is that DeFi is a form of DApp, with DeFi primarily being concerned with financial use cases, whereas general DApps have a wide range of applications that are not limited to the domain of finance alone. For example, DApps can be used for the development of gaming and gambling platforms and educational systems, or even in the creation of novel tools like privacy-oriented internet browsers such as Brave.
Why DApps, you ask?
From a usability standpoint, DApps can be deployed for all of the same purposes that regular smartphone apps are good for. However, the difference lies in the fact that unlike most Android and iOS-based applications that make you sign shady agreements essentially forcing you to forgo your basic privacy rights, DApps offer users a wide array of transparency-related benefits — along with other advantages such as:
- They are open source: As is implied by the term “decentralized,” DApps are open source, meaning their source code is freely available online and can be redistributed or modified by anyone who wishes to do so. This allows users to quickly spot flaws that may be present in their underlying software, thereby bolstering the platforms’ overall security in a big way.
- They offer attractive incentives: A core aspect of many DApps is that they provide users various incentives, typically in the form of interest yield, airdrops, or other usage-based rewards. In fact, a large reason that the concept of “yield farming” gained so much attention in 2020 is that it enabled crypto investors to earn rewards simply by making use of various permissionless liquidity protocols.
- They are reliable: DApps are devised using consensus mechanisms that help their networks arrive at agreements about the state of the blockchain. As a result, it is virtually impossible to tamper with such platforms.
The first entry on our list is an absolute no-brainer because it nearly single-handedly brought the concept of decentralized exchanges into the consciousness of the global crypto community. In its most basic sense, Uniswap is a protocol built atop the Ethereum ecosystem for swapping ERC-20 tokens without the need for buyers and sellers to create demand.
And while most casual crypto enthusiasts/investors continue to make use of centralized trading platforms like Binance, OKEx and others due to their overall accessibility and brand reputation, there are a few key areas where Uniswap has completely changed the game, including:
Asset ownership: The original idea behind Bitcoin (BTC), as well as most other cryptocurrencies, was to make it possible for individuals to create, transfer and hold their assets without the need of any intermediary financial authority such as a bank. In this regard, when it comes to centralized exchanges, one’s crypto is basically in the custody of a third party unless they choose to transfer their funds to a cold wallet — an option for which the owners have to pay a sizable processing fee!
When it comes to Uniswap, users never relinquish custody of their assets for even a single moment, thanks largely to the use of smart contracts that execute trades in a totally trustless manner.
Ease of use: To initiate an exchange on Uniswap, all one has to do is select the assets that one seeks to facilitate an exchange between, click on the “connect wallet” button and confirm the transaction in question. That’s it! Once done, the acquired tokens are reflected in one’s account without the assets ever having to go through a third-party platform.
Advanced liquidity options: Perhaps the most unique aspect of Uniswap, as well as most other decentralized exchanges, is that it allows users to play an active role in its liquidity pools by staking their coins, thus enabling them to receive a cut of the platform’s trading margin as an incentive.
InterPlanetary Search Engine
With search data manipulation increasing these days, a large number of tech-savvy individuals are realizing that the internet is no longer the decentralized utopia they once thought it was.
As things stand, a few players such as Google, Bing and Baidu have a complete monopoly over the global search engine sector. Not only that, they have unclear data ownership policies, leading to recurring issues such as customer information leaks, and advertising tracking.
InterPlanetary Search Engine, or IPSE, is a decentralized search engine built atop the EOS blockchain that makes use of the InterPlanetary File System, which allows users to browse the internet while also being incentivized to share any unique content they may have.
Some of the core advantages of using the platform include seamless consumer data protection thanks to IPSE’s asymmetric encryption technology and the need for explicit user approval for any ad tracking activities, for which one is compensated.
Other benefits include:
- All of the content available on IPSE is permanently traceable as well as end-to-end encrypted.
- IPSE does not make use of a “bidding-based ranking” system, thus making sure that search results are never swayed by the whims of a few moneyed players.
- Decentralized storage of data means that hackers can never get complete access to the system because they cannot attack all of the nodes simultaneously.
For a whole host of people, the word “DApp” still immediately draws a link to CryptoKitties, a game first launched in 2017 that allows players to breed, buy and eventually sell digital cats that are represented in the form of nonfungible ERC-721 tokens.
In its most basic sense, a nonfungible token, or NFT, can be thought of as a cryptographic asset that represents a value store that is completely unique in nature, such that it cannot be mutually interchanged for another NFT. For example, in CryptoKitties, every cat is different and cannot be swapped directly for another one, for the simple reason that each cat has its own intrinsic qualities such as behavioral traits, physical appearance, etc.
Though it sounds juvenile, since its inception CryptoKitties has remained extremely popular and at one point even accounted for a whopping 10% of Ethereum’s daily transactions. As a result, it is viewed by many as being the perfect entry point for the crypto-curious into the world of decentralization and NFTs.
CryptoKitties offers players nothing more than pure entertainment, but its continued popularity has had a massive impact on the development of the NFT space, as well as the wider Ethereum ecosystem.
While CryptoKitties pioneered the NFT space, Rarible is now carrying on the movement. Rarible is a community-owned NFT marketplace that leverages its governance token, RARI, to power its platform.
On paper, Rarible simply allows users to secure digital collectibles using blockchain technology. Sounds ordinary, right? However, what sets Rarible truly apart from other platforms like OpenSea, a peer-to-peer marketplace for rare digital items, is the fact that Rarible seeks to become much more than a platform for securing and trading art and digital collectibles.
Instead, Rarible aims to allow individuals to create — or more precisely, “mint” — NFTs, which in the future could be a big boon for content creators of various kinds, especially as issues such as copyright, piracy and data plagiarism continue to affect the world of digital media.
For example, using Rarible, an artist can sell their creations such as books, music albums or films using nonfungible tokens that are stored on a blockchain, thus eliminating the chance of any data forgery. Furthermore, another benefit afforded by this technology is that it enables artists to offer prospective buyers a sneak peek of their content, such as a preview or a trailer, only releasing the entirety of the content once a purchase has been completed successfully.
Lastly, since gaining a considerable amount of traction this year, the team behind Rarible has been putting a lot of emphasis on making the platform completely autonomous so that it can be run using a community-governance-based model.
The second game to make its way onto our list, Axie Infinity draws heavily from the Pokemon universe. For example, players can collect and raise fantasy creatures referred to as “Axies.” But unlike CryptoKitties where all one can do is raise and trade their collectibles, in the Axie Infinity world, individuals can team up their pets to battle other users, thus adding a real element of action and adventure into the mix.
The popularity of this game has increased so much over the past year that it has grown to become the most-played game in the Ethereum ecosystem, with the NFT-based digital pastime currently boasting 18,000 monthly active users.
Due to its rapid growth, the team behind this project has been testing out new ways to scale the game and even recently launched the public testnet of its very own sidechain, called “Ronin.” The inaugural validator of Ronin was Paris-based video game giant Ubisoft.
Taking the sixth and final spot on our list is Steemit, a social DApp meant primarily for bloggers. It is built atop the Steem blockchain and allows verified users to create blog posts on any topic they desire as well as add tags, photos or anything else to their accounts for various incentives.
For example, if one’s posts are interesting and are able to garner enough “likes,” users are presented with rewards in the form of either Steem, Steem Dollars (SBD) or Steem Power (SP) tokens.
Steem is like any regular cryptocurrency such that it can be powered up into Steem Power tokens, traded for Steem Dollars, transferred to other accounts or simply traded across various cryptocurrency exchanges.
Steem Power tokens, on the other hand, are vested into the platform and serve as a metric of how much influence a user has within the Steem network. The more Steem Power a user holds, the more power they have to influence the value of any posts or comments they upvote and thus earn curation rewards in the process.
Lastly, Steem Dollars are stable-value currency tokens that are pegged to the U.S. dollar in a one-to-one ratio. Steem Dollars can be traded for Steem or transferred to other accounts for various commercial purposes.