What are dApps?
Like most cryptocurrencies, dApps run on blockchains, and most of them are open source. That means that anyone can build on existing data and that the right to ownership does not belong to a single individual. Information is shared over the network using cryptography. This process is vital to ensure the security of the blockchain.
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DeFi dApp types
With loan dApps , you can do what you probably already imagine: request or grant loans in cryptocurrencies. At the same time, the agreement of each loan is established by means of a smart contract. From the point of view of the lender, the use of these dApps has the advantage that you can earn interest on the cryptocurrency you lend and, since the operation is overcollateralized, the risk of not repaying the assets is minimal. .
From the borrower’s point of view, the advantage of these dApps is that there are no credit checks, low transaction fees, and instant deals.
Some examples of lending dApps are: Compound , Aava
Exchanges descentralizados (decentralized exchanges o DEX)
Through decentralized exchanges, users can trade digital assets with each other without the need for a central entity to hold the funds or deposit them in the first place. Instead, users link their wallets to the exchange and then verify the transaction themselves.
On Uniswap , a very popular exchange, users can also provide liquidity to the exchange in exchange for an incentive (a portion of the commission per trade that is shared among all liquidity providers).Uniswap clone script Using this method to provide liquidity to the liquidity pool avoids relying on market makers for this action. This dependency would be impractical on the Ethereum blockchain given its low transaction capacity.
The price of assets on DEXs is typically determined by automated market makers (AMMs) — protocols written into blockchain smart contracts that use mathematical formulas to determine the price.
One of the advantages of DEX is that the commissions per operation are very low due to the fact that they require minimal maintenance. Also, as long as the smart contract is robust, they are considered to be very secure.
The downside is that compared to more consolidated and centralized exchanges that can offer, like Bybit does, margin trading and derivatives, DEXs tend to target the trading variant that they offer.
Investors can enjoy peace of mind by taking out insurance that covers their digital assets. This can cover anything from a system error in a smart contract to a blockchain hack. On the other hand, some dApps also provide insurance for real events, in the same way that a typical insurer would, for example, for flight delays.
Examples of insurance dApps: Nexus Mutual , Etherisc
Through this open source technology, DeFi offers solutions for secure payments to companies and individuals. Blockchain technology helps prevent fraud, provides banking services to those who were previously unbanked, and offers payments in different cryptocurrencies and digital tokens. The best of all? Processing times are instant.
Examples of payment dApps: Flexa
Prediction Markets DApps
If you want to predict the results of an event to win money, you no longer need to go to a bookmaker. DeFi is the solution. You can predict the results of elections, sporting events, and even future developments in the world of cryptocurrencies.
Examples of prediction market dApps: Augur
Stable cryptocurrencies ( stablecoins )
Stable cryptocurrencies or stablecoins are a type of cryptocurrency that are associated with the value of a stable asset, for example, the US dollar. The fact of offering a stable value and low volatility (two factors that can notoriously plague cryptocurrencies), gives users security to carry out transactions in dApps.
Stablecoins play a fundamental role in different areas of DeFi, for example in liquidity pools . This type of cryptocurrency is usually chosen because it provides stability and, consequently, greater liquidity. Additionally, the lack of volatility in stablecoins provides an opportunity for DeFi investors to earn consistent returns.
Examples of stable cryptocurrencies: DAI
To use dApps, users will need somewhere to store their cryptocurrencies and tokens. That’s where wallet dApps come in, which can be downloaded and installed as an extension to your browser. Users can also sync them with other dApps for quick and easy transactions.
Examples of wallet dApps: MetaMask , MyEtherWallet
To transact in dApps, you don’t actually need cryptocurrencies themselves, but tokens. On the Ethereum network, Ether is used to access these tokens, in the same way that we would use physical money to buy tokens for a video game machine. Now, just as we use tokens to be able to play, tokens are used to use dApps in different ways. Like cryptocurrencies, these can be traded and their value fluctuates.
Tokens can have different functions within a dApp, and some tokens fall into more than one category.
Application tokens: This type of token provides access to a product or service in dApps.
Governance tokens: These are the tokens that help govern the protocols of the dApps. For example, if a decision needs to be made about a change within the dApp, the participants vote to implement that change.
Transaction Tokens: Used to pay for products and services in a dApp.
Security tokens : They function as a kind of investment in the manner of traditional securities, such as stocks or bonds .
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The Ethereum network hosts the majority of dApps (although there is a significant minority on other networks such as EOS, NEO and Tron). Launched in 2015, its creator Vitalik Buterin had become frustrated with the limitations of the Bitcoin network for building dApps and so conceived Ethereum in such a way that it went beyond the concept of digital money.
Ethereum technology (more advanced than Bitcoin) allows the implementation of these dApps. However, with the launch of more sophisticated dApps, the network faces the challenge of scalability to meet the additional demands. Consequently, the Ethereum 2.0 network update has arrived to address the issue.