What are dapps?

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Takeaway

Unlike standard applications, dapps aren’t controlled by a central authority — they’re controlled by a community of users, and offer endless possibilities for users to connect directly to each other and maintain control of their data.

Decentralized applications, also known as dapps, are apps that run on a blockchain network or a peer-to-peer (P2P) network. What does it mean to be decentralized? Unlike a standard app, which is typically controlled by a single company (think: Google, Spotify, Doordash), a dapp is an open-source app controlled by its users. Dapps cut out the middleman, so to speak, to allow users to connect with each other directly.

As with standard web apps, the uses for dapps are potentially endless—they can be used for financial, gaming, shopping, socializing, or anything else. But many people like dapps because they offer more data control and privacy than standard apps. With standard apps, the controlling company often owns your personal information. With dapps, your personal info lives in your crypto wallet, and you have complete control over which dapps can access it.

How dapps work

Dapps have front-end interfaces for connecting your crypto wallet. Once connected, you can conduct blockchain transactions. But not just any transaction — dapps follow instructions laid out in smart contracts, which are sets of rules written in code on the blockchain. Many of the most popular dapps live on the Ethereum blockchain.

Benefits of dapps

  • Control of your data: With standard apps, your info lives on a centralized server owned by the app’s controlling company—which could potentially share or sell your data to third parties. With dapps, your info lives in your wallet, and you decide how to share it.
  • Privacy: Since you don’t have to share your personal information on dapps, transactions can be completely anonymous.
  • Lack of censorship: Because there’s no centralized authority, the content shared on dapps isn’t monitored or controlled by a censor.
  • Data portability: Right now, you likely manage dozens of unique accounts and passwords for all the apps you use. But someday, your wallet could contain all your personal info in one place, which you could plug into different services. There’s a lot of optimism that dapps could enable this in the not-too-distant future.

Things to keep in mind

  • Security issues: Just like standard apps, dapps can be the target of hackers and phishing scams. Some dapps, such as bridges that allow transfers between blockchains, are at higher risk of fraud. Dapps don’t offer the level of security that standard apps typically do, because they’re not backed by centralized companies that can protect you if your data is compromised. That means you’re on your own if something goes wrong (like a hack).
  • Usability: The interfaces of dapps might be unfamiliar from the standard apps you use regularly. Dapps may provide an entirely new model for interacting online, and there’s still a lot to figure out to ensure they’re easy to use for everyone.
  • Transparent transactions: Because all transactions are recorded on the blockchain, if someone knows your wallet address, your transactions could potentially be traced back to you.
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This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Check out Robinhood Financial’s Fee Schedule for details.

Brokerage services are offered through Robinhood Financial LLC, (RHF) a registered broker dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (RHS) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (RHC) (NMLS ID: 1702840). Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. The Robinhood spending account is offered through Robinhood Money, LLC (RHY) (NMLS ID: 1990968), a licensed money transmitter. A list of our licenses has more information. The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard®. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC is not a member of FINRA and accounts are not FDIC insured or protected by SIPC. RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

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