Decentralized Applications

V&IThe road to becoming a Web 3 Developer

While Bitcoin is seen as digital gold and serves more as an instrument for storing value, a new type of technical application has emerged with the rise of smart contract-enabled blockchains. Decentralized Apps (DApps), which are intended to form the basis of Web 3 – the Internet of the future. In this article, we would like to explain what decentralized apps are and what you need to understand to get started as a Web 3 developer.

What are DApps?

DApps are a central component of Web 3 and are based on smart contracts. The first blockchain to enable the creation of Decentralized Applications was Ethereum. In addition to sending and receiving its own currency, the Ethereum network also offers the possibility of being used as a type of decentralized computer on which various decentralized applications can be executed. Not only is the blockchain stored on the Full Nodes of the Ethereum network, they also host the Ethereum Virtual Machine (EVM).

The Ethereum network can be thought of as a huge operating system on which developers can install applications with the help of the EVM. These applications are no longer executed on a central server, but on every computer running a full node. Thousands of DApps have already been developed and deployed, ranging from media and music to Decentralized Finance (DeFi) and databases. The basis for the entire process is provided by the blockchain-internal smart contract (programming) language Solidity.

Why decentralized Systems?

But why do we need decentralized systems? This need arises from several factors. Firstly, decentralized systems offer a certain degree of fault tolerance. This means that even if certain components or nodes fail, the system will continue to function. This is in contrast to the usual centralized systems, where a single point of failure can often bring the entire system to a standstill.

Secondly, decentralized systems offer more transparency. In centralized systems, users have to trust that a central authority is processing and storing their data correctly. In decentralized systems, data is distributed across multiple nodes and transactions are recorded in a public ledger, the blockchain. This leads to more transparency and creates more trust compared to a central authority.

Thirdly, decentralized systems guarantee data integrity. While there is a risk of data manipulation in centralized systems, the data in decentralized systems is verified and recorded using a consensus mechanism (e.g. Proof of Stake or Proof of Work), which guarantees the immutability of the data.

These characteristics result in different use cases for decentralized systems, especially in the areas of finance and property rights.

How does a DApp architecture look like?

Before starting Web 3 development, you should first become aware of the different levels that need to be considered for the development of a decentralized application.

Frontend Layer: The frontend is the user’s entry point into the DApp and should always be equipped with a wallet connect function. In the Web 3 world, the React programming language has established itself for the frontend due to its simple representation of dynamic applications.

Use case Layer: The use case is essentially the real benefit of the decentralized application. The key functions, tokenomics and the user behavior play a major role in it. The use case layer is the basis of the Web 3 utility and defines the concrete user benefit of the application.

Infrastructure Layer: The infrastructure includes the various building blocks for the implementation and operation of the decentralized application. The infrastructure layer includes the development environment as well as the required libraries, Oracle services, indexers and storage providers.

Blockchain Layer: This layer describes the underlying blockchain architecture and forms the foundation of the decentralized application. This includes both Layer 1 and Layer 2 solutions as well as Sidechains.

DApp use cases

The potential for decentralized applications is huge. However, the technology is still in its infancy. There is currently still a lack of lighthouse projects that ensure wider acceptance of decentralized applications and convince the masses of their benefits. Nevertheless, blockchain technology and the possibility of developing DApps have the potential to revolutionize various industries.

Various use cases lie particularly in the areas of accounting and billing. Numerous intermediaries (e.g. notaries) can be replaced by forgery-proof, automated and streamlined accounting with the help of blockchain, which reduces costs and increases the efficiency of contract processing. The insurance sector offers great opportunities here, as claims management can be automated and streamlined. The banking sector can also benefit from its use, as payment processes can be streamlined through the use of smart contracts.

In general, blockchain technology can be used in areas where the risk of counterfeiting and corruption exists, but also where fast and efficient processing is required.  The potential is there. The technology has also reached the point where it can build on already established tools and solutions. However, a successful implementation and establishment of the technology requires a methodical approach to the development and evaluation of potential Web 3 solutions.