Completing online transactions are now easier and more convenient through decentralised finance apps. These are groundbreaking applications that allow you to buy and sell products in the quickest way possible without the need of a middleman. Dive into the different complexities of this popular innovation by browsing through Cryptoshimbun:
Brief background about decentralised finance
Decentralised finance (DeFi) is a system that allows different financial products to be available on a public decentralised blockchain network. This allows anyone to use these said products without the need for a middleman. Hence, it lets buyers and sellers directly interact with one another without having anyone to facilitate the transaction between them.
As for the beginnings of DeFi, it was first introduced to the world through the Ethereum blockchain created by Vitalik Buterin. Although the white paper for the Ethereum project was announced in 2013, it was only in 2015 that it made its official debut. This involved the launch of the Ethereum blockchain that uses smart contracts and decentralised finance applications or better known as dApps.
Decentralised finance apps versus centralised ones
Decentralised finance applications (or dApps) are digital platforms that function on a blockchain or a peer-to-peer (P2P) network of computers. Since it is decentralised, this entails that it is free from any control of a single entity or financial institution. In the most basic sense, this concept is the complete opposite of the many centralised apps that you may be familiar with. Dig further into the details below:
What are their key differences?
Dive into the four key differences between decentralised and centralised applications here:
- Ownership
The easiest way to distinguish between a decentralised and a centralised application is its ownership. All centralised applications are managed by a single company while the contrary is true for decentralised ones. DApps are not controlled by a central authority and instead are being supervised by a network of computers.
- Network
Centralised application software usually runs in one or more servers controlled by one company. For end-users to utilise this, they need to download the app first. Then, the company’s server will facilitate the receiving and sending of information through their specific web server.
Meanwhile, dApps operate in a public blockchain or a string of various computers handled by different users. This gives you more control over what you are doing without anyone restricting your movements. Moreover, this utilises cryptocurrency to download and produce the program’s source code known as smart contracts.
- Middleman
A big difference between a centralised app and a decentralised finance application is their use of a middleman. The former requires a third party to complete a transaction while the latter no longer needs it. Instead, the two parties directly contact each other.
- Usage of personal information
Most, if not all, centralised applications require all users to fill in their personal information in every transaction. Although they strictly abide by data privacy rules, they are still vulnerable to chances of data breaches once a server problem occurs.
With dApps, you can rest assured that no data can be stolen since you finish your transactions without revealing any personal information using smart contracts.
Examples of centralised and decentralised finance apps
Here are some notable examples of centralised and decentralised finance apps:
Centralised
- Twitter – A social networking site that allows users to share their opinions on certain issues through tweets.
- Facebook – A digital platform where you can post statuses, share photos and videos with your friends, etc.
- Instagram – A type of social media that lets you browse through different photos and videos in your feed.
- Netflix – A large streaming platform for watching movies and different television shows around the world.
DApps
- Peepeth – A social network that is similar to Twitter but has no restrictions with posts.
- Cryptokitties – An application that allows people to buy and sell virtual cats.
- MakerDAO – This lets you facilitate loans without the need for an intermediary.
- BitTorrent – An app that allows uploading and downloading of video files.
Characteristics of decentralised finance apps
Know more about decentralised finance apps by looking through their main characteristics listed here:
- It’s decentralised
As the name suggests, all dApps are decentralised which means they are not controlled by a single authority. Since this is run on a public blockchain, it requires the approval of several nodes to complete the transaction and make any changes.
- It gives incentives
Incentives in the form of cryptocurrencies are given to all nodes who actively participate in the verification of transactions in the blockchain. These digital coins can later be exchanged for real money if you want.
- It’s an open-source network
Since dApps are open-source platforms, this allows any user to make any modifications to the network. However, this is only possible when a consensus is met among all the other nodes.
- It’s immutable
The information stored in dApps is immutable, meaning it has little to no chance of getting changed once put up on the blockchain. This is possible through the cryptographic hashes in the system that ensure all information about the transactions cannot be altered. In turn, you can feel more secure that your data is not tampered with nor easily hacked.
Different functions of dApps
Uncover the various ways that dApps are used in big industries like the following:
Finance
Known as a breakthrough technology, dApp bridges the gap between the finance and digital realms. These allow everyone to get financial services without the need for traditional banking such as decentralised lending and borrowing of money and instant settlements of contracts. As a result, you’ll save more time and money in the long term.
Gaming
Through decentralised applications, people can now get crypto tokens and earn real money through gaming. A good example of this is Cryptokitties, a popular dApp game that lets you buy and sell virtual cats. The goal is to breed a rare cryptokitty and make them appear marketable in the trading arena. Once your feline character is up for sale, you can earn as high as six figures in return.
Social media
Although most people are not aware of it, there are now various decentralised applications that are great alternatives to common social networking platforms such as Hive Blog and Peepeth.
On that note, Peepeth is known as the counterpart of Twitter in the decentralised realm. This serves as a great platform for sharing all kinds of information without anyone controlling your posts and personal data.
Give dApps a try now!
Learning about various decentralised finance apps is a good way to boost your knowledge about the cryptocurrency field. Since crypto continues to flourish today, reading more about it can help you stay updated on the latest technology that offers hassle-free experiences. Additionally, trying dApps is an easier method since it allows you to be in control of your data and personally handle your transactions.