Decentralized applications (DApps) are digital applications or programs that exist and run on a blockchain or peer-to-peer (P2P) network of computers instead of a single computer. DApps (also called “dapps”) are outside the purview and control of a single authority. DApps can be developed for a variety of purposes including gaming, finance, and social media.
The Benefits of DApps
- Censorship-resistant: With no single point of failure, it’s very difficult for governments or powerful individuals to control the network.
- No downtime: Relying on a peer-to-peer system ensures the Dapps continue to work even if individual computers or parts of the network go down.
- Blockchain-based: As they are made of smart contracts, they can easily integrate cryptocurrencies into the basic functionalities of the Dapp.
- Open-source: This encourages the widespread development of the Dapp ecosystem enabling developers to build better Dapps with more useful or interesting functions.
How Does A DApp Work?
Firstly, DApps function like usual apps for desktops or mobiles. They also work as a website page. The only difference is that it is not hosted on any local or cloud servers like the other apps and web pages. DApps work on a public blockchain that is nothing but a network of nodes. You’ve already known that blockchain is a public distributed ledger. However, it is also known as a network of nodes maintaining an identical ledger.
To build a DApp, you must deeply understand the working of a blockchain.
A blockchain tends to maintain an open ledger that records the data, and similar or identical copies of the ledger are managed across the network on nodes. Nodes are computers that run on your software to become compatible nodes. Since blockchain is an identical ledger, there are innumerable copies of the ledger across each network node. This makes the network immutable.
If there is a lack of compatibility on one ledger, that ledger would be canceled from the system. Therefore, it would decrease the chances of hacking and increase security which makes DApp development even more attractive. Mining is executed by the miners who verify the transaction and transmit it to the network to secure it. Mining takes a lot of algorithmic and computing work; hence, a DApp developer is compensated with the tokens by the users.
DApps require users to have a wallet, which holds tokens relating to that specific blockchain. For example, DApps running on the Ethereum network will commonly use Ether tokens.
Potential Cases of DApps
- Cryptocurrency investment. Fun fact — cryptocurrency is the first working model of a DApp. They’re made on a public blockchain just like DApps and are used for speculative investment and ICOs. Since the financial crisis of a decade ago, crypto like Bitcoin and Ethereum emerged to solve global economic problems with their decentralized blockchain functions.
- Blockchain-based application. Apps like Chainlink are blockchain-based cryptocurrency networks. It is a platform that provides a link between smart contracts and factual world information. It is built on Ethereum which is a popular blockchain for DeFi DApp development.
- Property registrations. Removing the middlemen who deal with real estate and gain commission, this DApp provides a platform with no such interference for the users.
- Tether. It is a cryptocurrency built on top of Ethereum’s blockchain. An equal amount of fiat currency funds its tokens. This means that your funds will remain constant instead of increasing and decreasing like other cryptos.
- Gaming. Gaming DApp platforms are the new talk of the market. Users can play games and earn real money. This sort of application is free to use up to a particular duration. Certain collectible card game splinterlands are built on Hive and EOS’s blockchain.
- Collectibles. Collectible DApp like crypto kitties is built on Ethereum’s token that is similar in value to other tokens, but differentiates based on visuals and nature, making each of them unique.
Ways To Monetize Your DApps
1. ICO and Token Launch
One of the essential attributes of generating revenue from a DApp is backing it with a token and putting it forward for crowd sale. The DApp developer puts it on sale during crowdfunding. This means that your token will provide profit to the token holders or some selected token holders. Non-fungible tokens are a great example of how it works.
For example, recently, Biconomy raised a whopping $9 million in crowdfunding hosted by Mechanism capital. Big names like Coinbase took active participation in the event. However, in your DApp development, you must keep in mind the core functionality of your token before going ahead with crowd sales.
2. Charging a Transaction Fee
Charging a certain amount of transaction fee is helpful in DApps monetization. This method has proved to be profitable for DApps like CryptoKitties. They charge around 3.75% of the transaction fee for every successful auction.
Consider this as a general example of how Ethereum DApp will be monetized:
- A buys something from B utilizing your service
- C% of that amount goes to a service provider (you)
- So, (100-C) % will go to a service provider.
Make sure that you’re charging a fair amount in your DApp; otherwise, someone will copy your smart contract and broadcast a version of it with lower fees and, sometimes, no fees at all.
3. Charging for Premium Functionality
Traditional application earns through freemium models where all essential services are free, and access to advanced features is chargeable. Same way, gaming DApp can make use of this functionality.
Understand with an example:
Let’s say that in your gaming DApp, gamers will have to take some coins or wins to up their level, which gets harder consequently. So what you can do is, enable users to skip the more laborious process by charging definite fees for the same. In this way, those who are playing DApp for free would achieve results as well.
Adding a membership program or subscription to your contracts will help monetize your DApp. You can limit certain functionality to your subscribers or users with a premium membership. Membership duration in your DApp can be time-based, like monthly access or usage-based.
This one is less popular since we’re looking into DApps, but one can surely go for it considering its popularity in traditional apps. Many brands choose to advertise and make money from it.
If your DApp is for a social and global cause, add a donation button. In this way, some generous donors will find their way to your crypto address.
As you can see, there are dozens of ways to make money from your DApp. However, you will need to create it first to monetize it, so let’s dive into the developing process.
Examples of Decentralized Apps
UniSwap is one of the leading decentralized exchanges. This dApp allows for seamless exchange of ERC20 tokens on Ethereum.
Rarenote provides personalized information on medicines under development and clinical trials for rare disease patients.
OpenSea is the largest peer-to-peer marketplace for NFTs, including gaming items, digital art, and other blockchain-based assets.
How Much Does It Cost to Run DApps in 2022?
We cannot know the exact cost for developing DApps, it depends on your company’s objectives and features of the app. But a prototype of a decentralized application may cost between $60,000 and $80,000, depending on its feature set, and the price for developing a full-fledged solution will depend on how many front ends you need, etc.
Guides to Develop An DApp:
1. Recognize the Problem
Before beginning DApp development, identify problems you need to solve. Will a DApp be your ultimate solution for these issues? Analyze if you want to remove the centralization or third parties in your application and start over with a distributed ledger?
Whatever it is, the first step in DApp development is about identifying the problem and figuring out if this application would be able to solve them.
2. Create Proof of Concept
Your next step is working on validating DApp’s idea and showcasing its potential. Validate with minimal resources before investing a heavy sum. For example, before launching a new car model in the market, engineers take a test drive. This helps them in identifying any loopholes and working on them before market launch.
Similarly, in proof of concept, you test and analyze your DApp model’s potential. It is an essential process in DApp development.
3. Select a Blockchain
Once the proof of concept (POC) is successful, head over to find the perfect distributed ledger for your DApp development, this is your next step towards your plan execution. You can make a list of your requirements and find a related blockchain.
Every blockchain comes with its share of advantages and limitations. The most popular blockchain for DApps is Ethereum. In this case, users need to purchase DApp’s native token to interact with the DApp.
3.1. Build smart contract
A smart contract or combination of smart contracts is where you’d put the decentralized logic of your dApp. Whether it’s going to be simple transactions, a chain of algorithm computations, or something else, all of these automatically executing features will need to reside in smart contracts.
Since smart contracts function on a blockchain, you’ll need to pick one or a few blockchains if you envision a cross-chain DApp. Typically, founders choose to create a dApp on Ethereum, but other chains support smart contracts too.
The Ethereum network is an easy pick because it has many users who already have crypto wallets and can onboard faster. However, if you plan to introduce your own crypto wallet, the users don’t even need to know which blockchain your dApp works on.
3.2. Build front-end
To create a captivating user experience, plan on starting with a prototype:
- low-fidelity UI
- high-fidelity UI
- user testing
- reinforce the UI/UX based on the feedback
Take into account that calling a smart contract function from a user-facing UI takes some time as transactions are not executed immediately on a blockchain. It’s a good idea to have some sort of animation built-in on the front end to show users their action is still in progress until it gets verified on the chain.
3.3. Create centralized back-end
If you’re building Ethereum dApps that require massive data storage or plan on running reports or envision any other functionality that’s out of the scope of on-chain transactions, you will need a web solution on a private server.
Such an admin portal will connect to smart contracts and front-end applications for customers to offer additional features to you as a business owner (to control your dApp) and users.
Like with any other app development project, you should start testing your dApp as early as possible during development. Every new build has to go through a thorough QA process.
While testing front end apps is a more or less standardized procedure, smart contract testing is a little unique in that you have to use a testnet to verify its functionality.
Otherwise, once you’ve deployed a smart contract to the mainnet, such as Ethereum, you can’t longer modify it. This means any lurking bugs that made it to the mainnet will remain intact.
4. Launch Your App
You’re ready to launch your DApp after testing. However, it would be best if you were careful before rushing into things in the DApp development stage. Take your time because it is non-changeable after embarking on the production server.
Another solution is seeking a professional’s advice throughout the DApp development process.
Blog: How Much Does It Cost to Run DApp in 2018 by Hackernoon
Blog: Beginner’s Guide To DApp Development by Henry Evans
Blog: How to Develop a Decentralized Application: Non-Techy dApp Guide for Business Owners by Konstantin Kalinin
Blog: An Essential Guide To DApp Development by Opengeekslab