Decentralized applications (dApps) form the basis of web3. Powered by smart contracts that run on a blockchain, dApps have many features that regular applications do not — enabling functionality that was never possible before on the internet.
Today, the most popular dApps are decentralized finance (DeFi) platforms like Uniswap and Aave. But the dApp ecosystem stretches way beyond DeFi, into realms like decentralized social media, web3 gaming platforms, identity solutions, and more.
In this blog post, we will explain the meaning of dApps, their advantages over traditional web2 apps, and describe the main types of dApps. We will also explain how each type of dApp works and how to build such dApps.
What is a dApp?
dApps are open-source, smart contract-powered protocols that run on peer-to-peer blockchain networks. Most dApps use a utility-driven crypto token for governance and in-platform transactions.
dApps offer multiple advantages compared to regular web2 apps:
dApps’ backend code run on blockchains without any central entities controlling them. Once developers deploy the dApp code, no one can take it down.
Moreover, smart contracts offer trustless computation and transaction execution. Most dApps offer seamless logins with users’ pseudonymous crypto wallets.
Instead of storing user data on centralized servers, developers host dApp data on decentralized storage providers like IPFS.
Since there is no single point of failure, dApps mostly never face outages or downtimes.
It is also extremely difficult to launch a denial of service (DoS) attack on dApps.
As dApps are ownerless, no company or organization can unilaterally censor or block users from a platform.
However, dApps rely on decentralized governance structures to moderate discriminatory and harmful community activities.
Hackers cannot alter transaction data because dApps leverage sophisticated cryptographic technology to immutably store data on decentralized networks.
Moreover, a combination of public-private keys ensures users can safely authorize transactions through their wallets. Thus, malicious actors cannot tamper with user credentials.
9 Types of dApps
Web3 is evolving rapidly. There are new types of applications and services coming up all the time. But there are a few general types of dApps that have established their place in web3.
Let’s take a look at the types of dApps:
DeFi is rapidly emerging as an alternative to traditional finance. DeFi users participate in financial activities without the intervention of banks and other centralized intermediaries.
DeFi dApps offer different financial services like lending-borrowing, token swapping, prediction markets, investment platforms, payment protocols, insurance providers, and crowdfunding agencies.
Aave is another decentralized open-source liquidity protocol based on non-custodial liquidity markets. Users stake (deposit) Aave to secure the protocol and earn rewards.
Protocols that run on Proof-of-Stake (PoS) consensus mechanism enable users to stake crypto assets to validate transactions and earn passive income.
Developers can deploy thirdweb’s Staking contracts to build staking mechanisms for ERC-20, ERC-721, and ERC-1155 tokens. Thus, users can stake both fungible and non-fungible tokens with thirdweb’s smart contracts.
E-commerce dApps have the potential to offer a better customer experience compared to their web2 counterparts.
Brands can distribute NFTs to loyal customers and token gate their storefronts. NFT holders get exclusive access to special merchandise, extra discounts, and customized offers.
On the other hand, companies can generate new revenue streams with NFTs. They can either sell NFTs on their platforms or bundle them with physical items (phygital NFTs) to offer immersive real and virtual customer experiences.
A marketplace dApp is a platform for buying and selling digital assets.
For example, NFT marketplaces enable artists and content creators to tokenize their content and sell them as NFTs. On the marketplace, sellers list NFTs for direct sale or auction, and buyers purchase or place their offers/bids. OpenSea and Rarible are two popular NFT marketplaces.
Developers need a marketplace contract to build NFT marketplaces.
The thirdweb Marketplace V3 contract helps developers quickly develop on-chain NFT marketplaces for ERC-721 and ERC-1155 tokens. This contract offers features like reserve listings for specific buyers, multiple currency support for NFT payments, and additional offers for unlisted NFTs.
Developers can also deploy thirdweb’s Split contract to designate multiple wallets for revenue and royalty distribution. This contract automates revenue allocation to specific wallet addresses (like team members and artists) from secondary NFT sales.
Web3 games leverage NFTs to offer players sovereign ownership over their in-game assets and unlock new revenue streams. Thus, gamers can trade their NFTs in secondary marketplaces and track asset provenance and authenticity.
For example, Gala has come up with a generative NFT collection of DreamWorks Trolls VOX 3D avatars. Gala used thirdweb’s Edition Drop and NFT Drop contracts to pre-define claim limits, release dates, and allowlists.
Decentralized autonomous organizations (DAOs) are blockchain-based entities where participants use crypto tokens for governance decisions without the intervention of centralized intermediaries. The DAO members vote on proposals and a member’s voting power is proportional to the number of tokens they own.
A DAO functions on reputation economics. The community collectively blacklists malicious actors or slashes their token holdings and honest voters receive incentives for good deeds.
Developers can deploy thirdweb’s contracts to create DAOs, manage treasuries, and enable participants to vote on DAO proposals.
The Vote contract specifically helps developers to design code for DAO voting. This contract ensures votes for protocol upgrades, management, and distribution of funds in a treasury.
Decentralized social media platforms store user data on decentralized networks rather than company-owned centralized servers. This gives users more control over their content and provides enhanced data privacy.
Web2 social media companies sell user data to third parties and rely on advertising campaigns for their revenue. However, decentralized social media networks use a token-based system for data monetization.
In the absence of a centralized company, web3 social media is immune to censorship and unilateral control of user content. Instead, community governance is important to moderate content on these platforms.
Decentralized creator platforms empower content creators to have complete ownership over their content and connect directly with their audience.
For example, EVEN offers NFT-based music albums. Unlike web2 streaming platforms that pay a third of a penny per stream, EVEN allows creators to take 80% of revenue. Fans also get exclusive access to artist merchandise and tour tickets.
The EVEN team used thirdweb’s smart contract templates to build the platform.
Mirror, a web3 publishing platform, enables creators to publish content as on-chain digital collectibles. Publishers offer Subscriber NFTs to subscribed readers to reward them for their support.
Mirror uses thirdweb’s Signature Drop contract for signature-based minting to prevent non-subscribers from accessing Subscriber NFTs. Signature-based minting allows real-time verification to determine if a wallet can mint an NFT.
Noonshot, a no-code Web3 website builder, enables non-technical creators like artists, photographers, and illustrators to build an NFT storefront. Noonshot uses thirdweb’s SDK and smart contracts to help creators make their own websites and sell NFTs.
Mega corporations like Meta dominate the traditional instant messaging and chat application market. They collect user data and monetize them in exchange for free service. Thus, users, sacrifice privacy for convenience.
Decentralized messaging protocols offer full encryption with a random set of nodes that transfers messages. This ensures no single entity can ever read a user’s message and sell them to third parties. For example, Briar uses such technology to protect user privacy.
Wispr, another blockchain-based messaging application, uses the AES-256 encryption model. The app generates private keys for each conversation and destroys them after every session. Additionally, it converts the phone number into a Matrix ID to generate pseudonymous identities while exchanging messages.
The event ticketing industry has many problems like ticket scalping and price gouging. Scalping occurs in tandem with gouging when bots bulk buy tickets and sell them at much higher prices.
Additionally, legacy ticketing platforms charge hefty fees that adversely affect event managers, artists, and fans. Ticket fraud also remains a grave concern for the event management industry.
Decentralized ticketing platforms intend to solve these problems with trustless smart contracts and NFT-based tickets.
NFT tickets enable royalty splits from secondary re-sales. Blockchain-based ticketing also ensures traceability and transparency.
This technology helps to rein in scalpers and touts as they cannot profit from resales. Ticket provenance helps in secure ticket generation, eliminates fraud, and prevents revenue loss.
For example, SeatlabNFT is a web3 ticketing platform that offers NFT-based decentralized ticketing solutions.
How to build a dApp
Learn how to get started with building a dApp in our 5-minute guide, or see our extensive library of YouTube videos where we explain how to create different types of dApps, step-by-step:
Smart contracts are at the core of any dApp. Get started with our library of pre-built & audited smart contracts for any web3 app, with the option to add custom extensions for advanced functionality on top for any use case:
The future of dApps
Industry reports suggest that dApps are just getting started. According to dAppRadar’s 2022 report, dApp unique active wallets (dUAW) rose by 50% to 2.37 million in 2022. Specifically, NFTs, DeFi, and web3 games led the revival of the dApp industry in early 2023.
In the coming years, the industry will come up with more types of dApps and use cases. We hope thirdweb will continue to help developers to build these different kinds of dApps in the future.
The thirdweb smart contracts are open-source on GitHub, trusted firms consistently audit them, they’re 10x cheaper than competitor smart contracts, and the creator/brand deploying them completely owns the contracts.
We hope this blog helped you understand what dApps are, their advantages over web2 apps, the different types of dApps, and how to build them. If you have any further questions, join 40,000+ other builders in our Discord community— or reach out to our team directly for more info on how to get started with web3 apps.