If for you, the D in DAOs, dAPPS, and DeFi, stands for “dude, no clue” then you’re at the right place.
Changing times, the internet and technology have dawned upon us a whole bunch of acronyms, terms, and equally many concepts. And lately, it’s all been about crypto! While we’re pretty sure it ain’t an alien term, let’s start with a quick brief.
In the simplest of terms is a decentralized currency for the digital space, enabling the virtual exchange of assets. It is free of any central authority and essentially eliminates the fuzz of paperwork documentation. Popular ones are Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNC), Tether (USDT), and more.
Then there’s another funda that you should be well versed with, it is:
This technology is a new-age invention, literally about a decade and a half old, basically a revolution when it comes to data management and architecture. It is a digital ledger, a network of ‘blocks’, that keeps account of ownership and transactions/exchange of digital assets.
This lands us on another term, which promise! is the last one before we dive into the d-terms we are actually here for, ‘Ethereum’.
It is a decentralized blockchain-powered platform that is further made use of by developers in creating secured digital technologies and smart contracts. It also has its own currency Ether(ETH).
Note: Smart contracts are contracts that, without the need of any intermediary to meddle, and upon certain conditions being met self-execute.
Okay we lied, that wasn’t the term, one more. (pretty, please?) The one word that is common and binds the said three terms is Decentralised. Let’s quickly look at its very basic definition. If you’re familiar, feel free to skip to the good part 😉
Decentralized, as defined by Merriam-Webster Dictionary, is the dispersion/distribution/ delegation of functions and powers from a central authority to regional and local authorities.
Now, that we are through with all that we need the background of, let’s decode these Ds.
What is DAO?
Acronym for Decentralized Autonomous Organisations, DAOs are bodies led by the community or members and have no central authority. With absolute transparency and inclusiveness at heart, these are no-leadership, collective-owned entities that fundamentally aren’t rigid when it comes to their basic hierarchy and structure. Which simply implies that each is answerable to all.
You could think of these as highly similar to and even an envisioned digital version of cool n’ modern start-ups that we see these days!
These DOAs are blockchain-powered establishments that are housed on the internet and are an amazing gateway to gather and work around with like-minded fellas (who btw could be absolute strangers living on the other end of the world) on a par.
Here, all the members or token holders joining hands, share a common vision and interests, unite for a mutual mission (very important), and harmoniously take part in the management and decision-making processes in the organization. All that goes on in these processes – decisions, votes, conclusions, etc. is religiously updated on the blockchain which as to abide by and ensure fundamental transparency.
Now, this may have you wondering if there’s no big boss overlooking the management, how does the organization work really?
There may not be superior or top-level management puppet-ing things and actions from above, but that doesn’t eliminate the need for an internal constitution to keep the wheels running smooth within and in a certain decorum.
Hence, enters the picture, smart contracts. These are what hold these concerns together and facilitate systemized working. Establishing primary ground rules, these on their own, carry out or self-execute the chosen course of action when the necessary conditions are met, owing to their automated nature. Again, these rules are recorded well and in advance in the blockchain and are all open for the public eye to achieve maximum transparency.
There are popularly two types of DAO membership, aka. road to becoming a member, which is Share-Based and Token-Based. It’s through this membership that gates to operate and take part in the decisions open.
The Industry Biggies
Meet and check out some of the most popular DAOs:
- The DAO
Now hopping onto the next, dAPPS.
What is dAPP?
Short for Decentralized Applications or Apps, dApps are simply applications, similar to the mobile apps that you’re often glued to, except that these run on blockchains or peer-to-peer (P2P) networks instead. As the name itself suggests, they are decentralized, meaning are free from being under a single authoritative control.
While these on a broader view share traits to the regular mobile apps, what essentially sets things apart is their establishment on an open-source, public blockchain network, with which comes security tagging along. When it comes to dApps, it’s more of the users than the creators. How so, you ask? Once the apps are created and put on a blockchain, any piece of data put hereon by any user cannot be removed by even the creator/central authority, let alone any other user. Data manipulation is straight outta the window and freedom is ensured.
User privacy is the next big aspect that makes shine dApps in favorable light as these applications don’t require personal information for the users to explore its functions. Oh, what a dream!
In addition to this, another benefit on the cards is no downtime. Even in cases of some part of the network going down, the apps are unbothered and continue to run.
dApps are the coming together of smart contracts (yes, again!) and a front-end user interface. While the frontend user interface is similar to that of mobile applications, it is the backend that runs on a P2P network and is supported by smart contracts. It is the rules and predetermined functions written within the smart contracts that, as previously discussed, self-execute, that govern these applications.
The Industry Biggies
Here are some dApps that you have heard about:
And lastly, our last big one for this read, DeFi.
What is DeFi?
By this part of the read, we have pretty much been through and thorough with how with smart contracts, i.e. that are simply bits of code at the backend & conditioned to execute in favorable conditions, executed on blockchain networks, have enabled peer-to-peer interactions and transactions. Then we also crammed through the applications, dApps, built on P2P networks and enabled via smart contracts.
Now, comes Decentralised Finance, popularly acronymed as DeFi, which is the arriving shift in the world of finance. Under the canopy of DeFi – fall a plethora of financial services that camp on a peer-to-peer network of blockchain. One can trade, lend, borrow, get a loan, earn interest, and more, you name it.
This smart-contact-empowered decentralized financial system is an alternative to the ancient one that stays stuck in the shackles of authority and control and often offers unpleasant experiences. Basically here, you are the boss of your money.
Owing to the very nature of blockchain networks, DeFi applications are open – like for real, open to all with an internet connection; an epitome of transparency and visibility – all transactions are simply out there; and high on privacy – no personal details required whatsoever. These eliminate human gatekeepers – which implies no third-party intervention during financial transactions between two parties. Also, hello! no paperwork, phew! This further saves heck loads of time and unnecessary fees and prevents any possible resulting human errors and delays. Overall, DeFi applications readily offer local banking and currency alternatives and a global arena to explore.
Since these are dApps only, the working remains the same.
The Industry Biggies
The following are some DeFi examples:
We stand in front of a drastically different, arguably better, and definitely more advanced-tech future ahead of us, already taking place, as we speak. The world’s expanding and how and it’s certainly no less than a mandatory to keep up with all that’s brimming, DAOs, dApps, and DeFi just being a couple of many.