Decentralized applications or DAPPs are one of the most important achievements of blockchain and cryptocurrencies. These applications are developed using smart contracts as the back end, so it’s obvious that any blockchain supporting smart contracts can host several decentralized applications. However, some other factors including the blockchain’s scalability and capacity affect the number of DAPPs that can be run on it.
Decentralized applications have the same front end as traditional applications, so you as the user don’t notice any difference. Their main advantage over traditional applications is that they are decentralized and all the users have a voice in the decision-making process. Due to their decentralized nature, they are more in line with the concept of cryptocurrencies.
Today, decentralized applications exist in different industries and have different functions. In this article, we have decided to go through 3 types of decentralized applications, namely “decentralized exchanges”, “lending platforms”, and “play-to-earn games”. Stay with us.
A decentralized exchange or DEX is a cryptocurrency exchange not owned and controlled by one single authority. These exchanges are equipped with an innovation called a “liquidity pool”. Their users can choose a trading pair and provide its liquidity. In return, they receive a specific amount of interest. This way, intermediaries are removed, and users also have a financial incentive to provide liquidity.
Decentralized exchanges gained huge popularity in a short time. Today, they also run Initial Dex Offerings or IDOs, and for this reason, many good tokens are first listed on decentralized exchanges.
Cryptocurrency exchanges are necessary for buying, selling, and trading these assets. Before decentralized exchanges, users were forced to rely on centralized exchanges. And this was a kind of paradox in that for using decentralized assets, we had to rely on centralized entities. Smart contracts helped the community overcome this challenge.
Among the most popular decentralized exchanges, we can refer to Uniswap, Curve Finance, Balancer, Bancor, and SushiSwap.
Lending platforms can be considered a real financial revolution. They came to replace the traditional banks and their services. A lending platform, as its name suggests, is a platform where users can lend their digital assets or borrow some. Users who have some cryptocurrencies and want to hold them for a long time can lend their cryptos on these platforms and earn some annual interest. This interest is actually paid by the borrower, a portion of which goes to the platform, and a specific amount is paid to the lender.
Before lending platforms, cryptocurrencies couldn’t claim to be an independent financial system. They still couldn’t provide their users will all the services of a traditional bank. With smart contracts and lending platforms, now we can claim that these currencies can replace the traditional banks.
Among the most popular lending platforms, we can refer to MakerDAO, Aave, and Compound.
Play-to-earn games are the new generation of computer games that, unlike traditional games, pay their users for the time they spend playing. The profit some professional users make playing these games is so good that has turned into their full-time job.
The idea behind play-to-earn games is that the players are spending their valuable time and contributing to the game’s community-building. It’s unfair not to share the profit with them.
Blockchain games pay their users either with cryptocurrencies or with NFTs. Anyway, players are paid with tokens that have real value and can be sold for fiat money.
In this article, we went through three important types of decentralized applications and covered their differences from their traditional versions. Of course, decentralized applications are not limited to these types and they have various categories. DAOs, derivatives, infrastructure, social media, and prediction platforms are some other types of decentralized applications, on which we will elaborate more in the articles to come. Stay tuned.