What is a dapp?

A dapp, short for decentralized application, is an app whose core functions run on a blockchain. An ordinary app keeps its data and rules on servers owned by one company. A dapp puts them in public code that no single party is supposed to control.

How does a dapp work?

Most dapps are built from three parts:

1. The front end. This is the website or mobile screen the user sees. It looks like any other web page and is usually hosted on ordinary servers.
2. Smart contracts. These are programs stored on a blockchain such as Ethereum that hold funds and carry out the app's rules automatically. The guide to smart contracts explains them in full.
3. A wallet. Users do not create a username and password. They connect a crypto wallet, which holds the keys that prove who they are and approve each action.

When you press a button in a dapp, the front end builds a transaction and asks your wallet to sign it. The transaction goes to the blockchain, the smart contract runs, and the result is recorded publicly. Each action that changes something on the blockchain costs a network charge known as a gas fee.

What kinds of dapps are there?

• Exchanges. A decentralized exchange, such as Uniswap, lets users swap tokens directly from their wallets.
• Lending and saving. Apps such as Aave let users deposit tokens to earn interest or borrow against them. Together with exchanges, these make up most of DeFi, or decentralized finance.
• Marketplaces. NFT marketplaces list and sell tokens that represent unique digital items.
• Games and social apps. Some games record items or characters as tokens that players hold in their own wallets.
• Governance. Voting tools let token holders decide how a project is run.

How is a dapp different from a normal app?

The user keeps custody. A dapp generally cannot move funds unless the wallet signs a transaction, and there is no account for a company to freeze. The code and every transaction are public, so anyone can inspect how the app behaves.

The same features remove the usual safety nets. There is no customer service desk and no password reset, and a transaction that has been confirmed cannot be undone.

What are the risks and criticisms?

Many dapps are only partly decentralized. The website is often run by one company, which can block users or go offline, and the developers may hold special keys that let them change the contracts. Critics argue that the label can overstate how independent a product really is.

Security is the other concern. Bugs in smart contracts have led to large thefts. Criminals also build fake dapps, or copies of real ones, that trick people into signing a transaction that hands over their tokens. The guide to phishing and wallet drainers explains how those schemes work.