What are dApps and use cases?

What is a dApp?

If you’ve ever thought about buying an NFT, swapping coins, or getting into play-to-earn games like Hamster Kombat, you came close to interacting with a dApp - but what exactly are they? In the simplest terms, a decentralized application, or dApp, is a software application running on a blockchain. Unlike traditional applications, dApps are often managed by a community rather than being owned by a single centralized entity.

Just as any developer can build smartphone applications for the Apple or Android OS (think Apple app store & Google play store), developers can also build on top of blockchain infrastructure like Ethereum.

For the end users, dApps might not be noticeably different than any other application, but because dApps are built on blockchain infrastructure, they have significant differences. In some cases these differences make dApps far superior to conventional applications. So here’s everything you need to know about dApps, their use cases, and nothing more!

TL;DR

• A decentralized application (dApp) is an application that can operate autonomously, typically through the use of smart contracts on blockchain ecosystems like Ethereum.
• Unlike normal apps, which run on centralized servers, dApps operate on a decentralized blockchain.
• dApps provide benefits such as improved security, transparency, and resistance to censorship.
• Beyond the many benefits of dApps, they also struggle with scalability, processing speeds, and sometimes security vulnerabilities.
• If this article about dApps and use cases is complex, please visit our Must Read guide on blockchain to learn about decentralization or scroll down to the glossary first.

How do dApps Work?

In short, dApps live on blockchains and are powered by smart contracts. More specifically, dApps consist of a frontend (the parts we see just like any regular app), and backend code (the parts we don’t see) which runs on a blockchain network.

These smart contracts which dApps rely on are self-executing contracts with the terms directly written into code. Once deployed and renounced by their developers, these smart contracts cannot be altered. This characteristic of dApps is called immutability and it ensures the integrity and security of the dApp, but also comes with some downsides.

FAQs

• What is a dApp? A dApp is a decentralized application that runs on a blockchain network, using smart contracts for its backend logic.
• How do dApps differ from traditional apps? Unlike traditional apps that rely on centralized servers, dApps run on decentralized networks, ensuring no single entity controls them.
• What are some examples of dApps? Popular dApps include Uniswap (finance), Aave (lending & borrowing), Axie Infinity (gaming), Farcaster (social media), and VeChain (supply chain & enterprise solutions).

Benefits of Dapps

• Zero Downtime: Once deployed, dApps continue to run as long as the blockchain network is active, making them resilient to denial-of-service attacks.
• Privacy: Users do not need to provide personal information to interact with dApps.
• Censorship Resistance: No single entity can block users from accessing the dApp.
• Data Integrity: Data stored on the blockchain is immutable and transparent, preventing tampering.
• Trustless Execution: Smart contracts execute automatically without needing to trust a central authority.

Challenges of Dapps

• Maintenance: Harder to update once deployed due to the immutable nature of blockchain. The code and any data published to a blockchain is therefore harder to modify compared to traditional applications, making bugs and security risks harder to address once the dApp is published.
• Performance: In the most secure dApps (such as Ethereum dApps) every node runs and stores every transaction, meaning there is huge performance overhead. This causes slower transaction times and higher costs due to network congestion. Scaling dApps is therefore harder.
• User Experience: More complex setup and interaction processes can deter average users.
• Centralization Risks: Services built on top of dApps might reintroduce centralization, undermining the benefits of the blockchain.

Popular dApp Use Cases

The dApp landscape has continued to evolve since Ethereum introduced smart contract capabilities to the world in 2015. They have found applications in various fields and they now offer innovative solutions to enterprises and consumers alike. Here are some of the most common and impactful use cases of dApps:

Decentralized Finance (DeFi): Dapps like Uniswap, Aave, Curve, and Compound enable users to engage in actions like trading, lending, and borrowing, and staking their crypto without intermediaries.

Social Finance (SocialFi): Web3 native social platforms like Farcaster, Friend.tech, dracula.app reward users with cryptocurrency for their engagement and content contributions.

Prediction Markets: Platforms like Polymarket have grown rapidly in popularity by allowing users to bet their crypto on major events, sports, and politics.

Supply Chain Management & Product Traceability: dApps can be used to track products from origin to delivery, ensuring transparency and authenticity.

Healthcare: Dubai’s EHS Digital Trust Platform is an example of blockchain being leveraged in transforming the healthcare industry.

Insurance: Nexus Mutual offers decentralized insurance products, allowing users to protect against smart contract failures.

Emissions Tracking & Carbon Offsets: Dapps can track emissions and carbon offsets by logging real-time data and verifying carbon credits on the blockchain, ensuring transparency, accuracy, and traceability.

Gaming: Games like Axie Infinity and Star Atlas use blockchain to allow players to own, trade, and monetize in-game assets.

Popular DeFi dApp Examples

Of all decentralized applications built on blockchain technology, Decentralized Finance, or DeFi arguably has found the strongest product market fit. In DeFi, peer-to-peer transactions can directly be conducted without financial institutions, unlike with traditional finance, which requires trusted intermediaries who each take a cut.

DeFi dApps let users swap between different crypto currencies, earn interest on their holdings, borrow and lend, and even access insurance policies - all of which are enabled by smart contracts! So here are prime examples of DeFi dApps:

• Uniswap - Uniswap is an Ethereum-based decentralized exchange (DEX) that allows users to swap ERC-20 tokens without an intermediary. With $3bn in total value locked, uniswap is known for its user-friendly interface and innovative features like Flash Swap and on-chain price feeds.
• Jupiter Exchange - A Solana based exchange and aggregator which provides a simple platform for swapping tokens across various blockchain networks, known for its high liquidity and competitive rates, which enhance the trading experience for users​.
• Aave - One of the most popular DeFi apps, Aave lets users lend tokens, earn interest, and borrow crypto. Having maintained a TVL of between $9.8bn - $13.6bn throughout 2024, Aave offers features like flash loans and credit delegation, making it a pioneer in the DeFi lending space.

All in all dApps represent a major shift in how applications are developed, used, and maintained compared to their traditional counterparts. They leverage the power of blockchain to provide more secure, transparent, and autonomous solutions, so while they come with their own set of challenges, the benefits we listed above such as censorship resistance and zero downtime make them highly desirable for a growing set of use cases.

Finally, dApps are often free to use and available to anyone in the world with a device and internet connection, meaning the users themselves can play an important role in maintaining network security, or if they chose, getting involved in the governance of the protocol.

Glossary

• Dapp (Decentralized Application): An application that runs on a decentralized network using blockchain technology.
• Decentralization: The distribution of control away from a central authority.
• Blockchain: A decentralized digital ledger that records transactions across multiple computers.
• Ethereum: A decentralized platform that enables the creation of dApps using smart contracts.
• Ethereum Virtual Machine (EVM): The runtime environment for smart contracts in Ethereum.
• Smart Contract: Self-executing contracts with terms directly written into code, used to automate processes on the blockchain.
• Immutable: Incapable of being changed; a key property of data stored on the blockchain.
• Peer-to-Peer Network (P2P): A decentralized network where each participant (peer) has equal status and can interact directly.
• Zero Downtime: The characteristic of dApps to remain operational as long as the blockchain network is active.
• Censorship Resistance: The ability of dApps to prevent any single entity from blocking access or transactions.
• Trustless Execution: The ability to perform transactions without needing to trust a central authority.
• Gas Fees: Transaction fees paid to compensate miners for their work validating and including transactions in the blockchain.
• Yield Farming: Earning rewards by providing liquidity to DeFi platforms.
• Non-Fungible Token (NFT): A unique digital asset verified using blockchain technology.
• Decentralized Exchange (DEX): A platform for peer-to-peer trading of cryptocurrencies without an intermediary.
• Liquidity Pool: A collection of funds locked in a smart contract used to facilitate trading on DEXs.
• Proof of Stake (PoS): A consensus mechanism where validators are chosen based on the number of tokens they hold and are willing to "stake" as collateral.
• Tokenization: Converting ‘real world’ assets into digital tokens on a blockchain for easier trading and ownership.