Why are dApps gradually replacing traditional applications?

Decentralized applications, known as dApps, are software applications that operate on a blockchain or a peer-to-peer (P2P) network of computers. dApps are distributed across the network, and control over them is collective. These applications run on blockchains, where each node stores a copy of the data.

Traditional applications like Uber or X (formerly Twitter) run on servers owned by a single company. dApps, on the other hand, operate based on the principle of decentralization. For example, they can run on Ethereum and leverage its capabilities to create applications ranging from wallets and exchanges to games, financial services, and social networks. Using X as an example: it’s possible to create a similar program, but the only person who would be able to delete posts is the author of the message.

DApps software relies on smart contracts — automated contracts that execute transactions between users without involving a third party. Smart contracts in the application ensure that the terms of the agreement are fulfilled and that there will be no discrepancies in the execution of obligations. Additionally, blockchain protocols provide user privacy by hiding personal data.

These advantages are practical. For example, in dApp marketplaces or systems for distributing rare resources, auction mechanisms can be used. Users place bids — participating in auctions for a specific asset. All bidding data is recorded on the blockchain, ensuring transparency and immutability.

The benefits of the technology are clear — there’s no need to hand over data to third parties. But why are dApps still not very popular? Because of the user experience (UX). Unlike traditional Web2 applications like Venmo, Revolut, and Fortnite, dApps are still inconvenient to use.

Developing decentralized applications is made more complex by blockchain technologies.

To use traditional applications, you simply download them from an app store. Before starting with a dApp, however, the user must download a crypto wallet, fund it with cryptocurrency to pay for transaction fees, and figure out the transfer process. This discourages newcomers — not everyone is willing to go through this.

If a person manages to figure out the wallet, they face a new hurdle — the need to sign transactions for every action. Whether it’s a purchase, an exchange, or participating in a game, this constant interaction can irritate those unfamiliar with working with cryptocurrencies. Here, the user experience can be partially improved by integrating ENS.

Additionally, dApps on Ethereum suffer from high transaction costs and low speed, especially during peak load times. This is off-putting, as there are cheaper and faster alternatives on other blockchains.

But developers are seeking solutions:

1. They choose blockchain platforms with low fees to minimize user transaction costs. Or they use decentralized off-chain storage solutions like Swarm.
2. They integrate popular crypto wallets to lower the barrier to entry.
3. They simplify the registration process.
4. They add educational materials and pop-up tips.

Tokens are the foundation of the economic model for most dApps. They serve multiple functions:

• Used for payments between users and paying for services.
• Issued to users for participating in the ecosystem, such as staking or voting.

There are many ways to monetize the technology. The primary method is transactional fees. Every operation in the system is accompanied by a fee. This approach is widely used in financial applications. An example is Uniswap.

Another option is creating and selling proprietary tokens to raise capital. Users trade or stake tokens, generating revenue for developers.

DApps can also earn money by selling virtual goods, premium features, or tools. This is especially relevant for games and educational platforms. Developers can offer users exclusive content or tools through subscriptions.

A standard option is advertising within the application. Targeted advertising can be monetized while preserving user privacy.

Industry trends are already emerging:

• In healthcare: charging for access to diagnostic tools and data-sharing platforms.
• In logistics: fees for tracking goods and executing smart contracts.
• In real estate: tokenizing properties and charging fees for transactions.
• In gaming: selling NFTs, charging for participation in tournaments, and offering play-to-earn rewards.

Key success metrics — DAU and MAU; retention and churn rates; conversion. Let’s start with the definitions.

DAU (Daily Active Users) reflects the number of unique users interacting with the application within a day.

MAU (Monthly Active Users) shows the number of unique users over the last 30 days. This metric evaluates the program's reach and its role in the market.

The DAU to MAU ratio is the «stickiness» metric. It indicates how often users return to the application.

The retention rate reflects the percentage of users who continue using the application after a certain period following their first interaction. The churn rate shows the share of customers who have stopped using the program.

Conversion measures the percentage of users who performed targeted actions, such as registering, making a purchase, or participating in staking.

Analyzing these metrics provides valuable data about the application:

• a high DAU and retention rates indicate user satisfaction
• a high churn rate signals the need to improve functionality and adjust the marketing strategy
• a high conversion rate demonstrates the success of the business model and the potential for revenue growth.

Decentralized applications leverage blockchain technology to ensure a high level of security and transparency.

Blockchain serves as an immutable digital ledger that records all transactions. This eliminates the possibility of data tampering. Decentralized Identification (DID) systems allow users to manage personal information without third-party involvement, reducing the risk of data breaches and identity theft.

DApps use smart contracts to automate operations, which means they regularly undergo code audits. This is necessary to identify vulnerabilities before they can be exploited. Additional security layers, such as MFA, make it harder for unauthorized users to access the application.

By 2024, dApps in the financial sector have processed transactions worth over $200 billion, and this figure continues to grow. The impact on specific industries is becoming more evident.

DeFi applications like Aave and MakerDAO are transforming financial management. They allow users to take out loans, earn interest, and conduct transactions without intermediaries. By 2024, the volume of operations in DeFi has exceeded $200 billion. As more people move away from traditional banking services, dApps are becoming an integral part of the global financial system.

The gaming industry is also embracing decentralized solutions. Axie Infinity, for example, enables players to earn through trading digital assets. By 2025, the blockchain gaming market could reach $5 billion. NFTs and digital items are becoming a critical component of the gaming economy.

However, the technology faces challenges. Current blockchains don't always handle high transaction volumes efficiently, and the lack of regulations raises concerns for users and developers.

But these issues are solvable, and the outlook for dApps is promising. Key trends include:

• Increased capital efficiency: The «earning yield while ready for use» approach allows users to earn income from assets without locking them up.
• Simplified interaction: New platforms like dappOS improve compatibility between blockchains.
• Partnerships for growth: Airdrops, such as those between dappOS and Binance Web3 Wallet, attract new users and expand the ecosystem.