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Decentralization, Dapps and the Future of the Web

Validated Individual Expert

What is a dapp? Exactly what its name suggests: an app that operates autonomously through the use of smart contracts, pieces of software anchored in the blockchain that are executed when certain premises established in its code are met. Unlike apps, dapps offer operate without any human intervention and are not owned by any company, and instead distribute tokens, leading to decentralized ownership among their users.

In other words, dapps are simply blockchain-based apps that run code for a specific function or use case. Like any app on our smartphone or computer, with an interface that allows users to click, scroll, type in text fields, and send data or content to use for a specific purpose. From the user’s perspective, dapps are the same as a normal app, but they have a key difference: resorting to the blockchain on the back-end to record data linked to users’ wallets.

Most dapps have typically used the Ethereum blockchain, mainly because it was the first to grow based on an ecosystem that wasn’t just focused on the use of cryptocurrencies, was open source, and the way developers used it was easy to understand. In fact, at some points, the operation of highly popular dapps such as CryptoKitties was making life difficult for the Ethereum blockchain.

Currently, according to the State of the DApps page, Ethereum is used by more than 3,000 of these distributed applications, which serve functionalities ranging from currency exchange (as in stablecoins, for example) to decentralized finance, gaming, storage, identity, governance, marketplaces of all kinds, social networks, energy, insurance, health and countless other functionalities. In fact, going into State of the DApps and taking a look at the category corresponding or closest to your industry is a very interesting exercise for anyone interested in innovation.

What makes dapps so useful? The possibility of creating platforms where we don’t have to accept a company’s terms of use and possible changes, and instead where the functionality is established by code, in a smart contract, without any arbitrariness. For some issues, such as content creation, the advantage is obvious: you upload your content to the platform, it’s univocally identified, and you get paid for them what your contract establishes, without any kind of corporate or arbitrary decision.

According to Andreessen Horowitz’s more than questionable metrics — mainly due to the huge difference in magnitudes between platforms — while Meta pays on average $0.10 per user, YouTube about $2.47 per channel and Spotify around $636 per artist, the apps distributed on the Web3 are generating approximately $174,000 for their creators. Of course, these metrics are highly skewed by the fact that, for the moment, there are still very few creators on those platforms and because the NFTs-based economy for creators experienced a boom in the form of an absurd and unsustainable bubble. Nevertheless, it shows what pioneers in an ecosystem can achieve.

For example, if you are a musician, you can upload your creations to Audius, and you will find that you get tokens from the platform for uploading songs, listening to them and sharing them. These tokens are, on the one hand, a cryptocurrency that works as a reward, but on the other hand, they represent property rights, so that the platform, in practice, belongs to its users, with an advantage for the most active ones. At the moment it has about five million users, but it could come to represent a clear trend in the industry, and arguably works on a fairer basis than traditional ones.

For the moment, like everything else on the Web3, we are talking about experiments that don’t necessarily prove anything, but this is still a very interesting movement, which could place apps on the continuum between centralization and decentralization and, incidentally, create competitors that are worthy of attention compared to traditional alternatives.

For years, creating a successful app meant not only making a lot of money, but in many cases, practically monopolizing a specific segment of activity and, in addition, being able to set the rules on the platform you had created. But if the evolution towards decentralization continues, that premise could change. Many might think that centralization in a company is the only reasonable or efficient way to manage something like an app or a platform: is that really the case, or is there really a significant value proposition in decentralization?

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