2.2 How Does a DApp Function?

How do Decentralised Applications work?

Cast your minds back to our previous blog post 2.1 What are DApps? where we introduced you to the criteria of a decentralised application (DApp). We previously used this criterion to help you identify a DApp, but now we are informing you that all 4 individual bullet points are also what makes it possible for a DApp to function.

Starting with the open-source software, an ‘App’ would not be a true DApp if the source code wasn’t open to the public. Every single person using a specific DApp is able to see and contribute towards the code. Making the code accessible fastens the process for scalability of product development in terms of both quality and quantity.

Next, the above open-source software will need to use a blockchain like technology to implement the DApp, otherwise it wouldn’t be decentralised. Blockchain technology allows any DApp to record transactions which are accessible to all relevant users at any time. 

Our crypto tokens/digital assets are next, and they are used to fuel the application, we utilise these assets to add records/transactions. As we create transactions within a DApp, the digital assets binding together are the fuel for generating a protocol.

Finally, the protocol mentioned above is used to reach an agreement between all the users and relevant stakeholders on that specific DApp, and it is only when this final step has been completed that the transaction will finalise. Look out for proof-of-work and proof-of-stacks, as these are both popular protocols currently used across different DApps.

What are ICOs?

Are you exhausted by all the acronyms? Unfortunately, the list is endless, and you will be introduced to more and more as we continue to discuss different topics. But let’s stay in the moment and focus on ICOs. First of all, let’s break down the acronym, ICO stands for ‘Initial Coin Offering’ and we again want to simplify this exchange of tokens for you.

ICOs are generally powered by DApps, and their launch is the very first time DApp tokens are sold in exchange for other digital currencies (insert endless list of cryptocurrencies). The DApp tokens that you will use are digital currencies and they are made with the purpose of selling in an ICO, which consequently funds the products development and also fuels the operations of that specific DApp. 

ETH is an example of these crypto coins as they are the “crypto fuel” for running smart contracts on the Ethereum platform and would therefore be used in any ICOs for people getting involved.

BlockUno.com, 2020

All digital tokens, across every DApp are not connected to a specific asset, however they hold their value based on the technology supporting them. The value of the tokens will fluctuate based on how people value the individual DApps, explaining why people will always debate which cryptocurrency they are going to invest in before getting involved and entering an ICO to trade and purchase tokens for their chosen cryptocurrency/DApp.

How to Participate in ICOs

Now, we don’t want any of our readers to go into an ICO blind, and if you are thinking of getting your hands on any DApp tokens, then we want you to follow the below steps and be cautious.

Stay Updated – Make sure you check out popular crypto accounts on social media platforms and follow any that release relevant, up to date news about crypto and DApps. 

Prepare a Wallet – Thoroughly read the ICO details, it is so important that you understand every technical requirement before making any purchases. Check to see which wallet should be used for the specific ICO you are getting yourself involved in and also research the different digital currencies, especially as there are so many!

Time Factor – Time zones can be confusing, so check the different timings of each individual ICO to make sure you are aware of the time zone they are running on. You also need to be really quick because some ICOs have finished in less than a few minutes.

And, it is also extremely important that you always remember that not all ICOs are worth it and some may look good from the outset, but they could be a complete scam, so just be extra careful.

Analysing ICOs

Finally, because we care about our community and crypto/blockchain enthusiasts we wanted to share the below bullet points with you, giving you some check points to cover before getting involved in an ICO and making sure you aren’t a victim of a scam.

• Is the DApp solving some real-life problem?
• Have you investigated the portfolio and history of the development team for this specific DApp?
• Have you gone through the whitepaper with a fine toothcomb and looked at its technical feasibility?
• Have you joined forums and got involved in discussions with technical experts to gain third party opinions about the decision you are about to make?
• Have you put time aside to check the development roadmap of this specific DApp?
• Can you see a working prototype demo of the DApp before you take it any further?

But don’t forget that the above may only scratch the surface and these decisions are something you shouldn’t take lightly, so make sure to do plenty of research and know the details before getting involved.

Looking for more information about DApps?

Don’t worry, we have more to discuss and new content will be live next week with a continuing focus around DApps. Next Monday 15.06.2020, we will introduce you to DApp wallets, ensuring you are well equipped with the right tools to get involved in these decentralized applications, whilst remaining as safe and secure as possible.