The Difference Between DApps and Protocols

The Difference Between DApps and Protocols

In recent years, blockchain technology has created a new era of decentralized systems, introducing several industries with innovations and opportunities. Two fundamental emerging components are Decentralized Applications (DApps) and Protocols. While both play pivotal roles in the decentralized landscape, they serve distinct purposes and contribute uniquely to the evolution of this cutting-edge technology.

This article delves deeper into the differences and how they work together to create decentralized systems. 
 

Source: MARKET Protocol - Medium

 

What are Decentralized Applications (DApps)?

Decentralized Applications, commonly known as DApps, are software programs that operate on a decentralized network of computers rather than relying on a centralized server. Blockchain technology in DApps ensures immutability, security, and transparency.

To qualify as a true DApp, specific criteria must be met. Firstly, it must be open-sourced, allowing the community to inspect and contribute to its development. Secondly, DApps must operate autonomously, with no central entity controlling most of its tokens and their data and operational records stored in a public, decentralized blockchain. Lastly, DApps employ tokens for accessing the application, rewarding miners and stakeholders.

Blockchain-based DApps can be categorized into three types:

  • Type 1: DApps that operate on their blockchain, like the well-known example of Ethereum.
  • Type 2: DApps that utilize the blockchain of a Type 1 DApp, acting as protocols and relying on tokens essential for their functionality.
  • Type 3: DApps built on top of and utilizing the protocol of Type 1 or Type 2 DApp. Prominent examples include decentralized exchanges like DDEX or Radar Relay, operating on 0x protocol, which runs on the Ethereum blockchain.

Some noteworthy examples of DApps include:

  1. DeFi Apps: Offering financial services like lending, borrowing, and trading without intermediaries. Notable DeFi DApps include MetaMask, MultiversX Wallet, and XDEFI Wallet.
  2. Gaming Apps: Enabling players to own and trade in-game assets through blockchain technology. Examples include StepN, Cantina Royale, and Cross the Ages.
     

Source: Dapp Radar - Cross the Ages

What are Protocols?

Protocols are a fundamental set of rules and standards that govern the network's operation. These protocols provide the foundation for DApps to function effectively and communicate seamlessly within the ecosystem. 

Blockchain protocols can also  be broadly categorized into various types:

  • Consensus Protocols: Determine how the network achieves consensus and validates transactions.
  • Interoperability Protocols: Enable different blockchains to communicate and share data, fostering seamless interoperability within the decentralized ecosystem.
  • Storage Protocols: Define how data is stored and accessed within the decentralized network.

Examples of Protocols include:

  1. Biconomy: A multichain relayer protocol that streamlines the user experience and onboarding in decentralized applications (DApps). The protocol also eliminates gas fees for user onboarding and enables payment with preferred ERC-20 tokens.

Source: Biconomy

  1. Paraswap: Serves as an aggregator for decentralized exchanges (DEXs) on the Ethereum network. ParaSwap searches for token prices across popular DEXs, allowing users to find the best rates for token swaps without navigating multiple platforms.
  2. Taker: This decentralized NFT lending protocol enables instant borrowing for NFT holders and allows lenders to earn long-term returns. 

Final Remarks

In summary, the world of decentralized technology is evolving rapidly, thanks to the contributions of DApps and Protocols. While DApps serve as end-user applications, offering specific services and functionalities, Protocols form the bedrock of the decentralized network, establishing rules and standards that enable seamless interactions between DApps.