Demystifying the Strange Decentralized World of Web3: DAOs and DApps
April 15, 2022
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by Stephen Kanyi

Late last year an organization made up of more than 17000 people put together a $40 million bid on an early copy of the U.S Constitution. Although it was outbid by hedge fund billionaire Kenneth Griffin, this organization is like none we had ever seen before. First, they are distributed all over the globe with little to no knowledge of each other’s location or even their names. All they know about each other is a code name, the name of the organization; ConstitutionDAO and their purpose.

In another similar scenario a browser, with more than 9 million active users is attempting to disrupt the online advertising model by putting consumers in control. True to its name, Brave is taking on the colossal advertising industry by attempting to replace it with a system based on blockchain technology that will ensure that publishers, advertisers and users do not get short-changed in the process.

Both these cases are examples of the new internet being created. A new ecosystem based on blockchain technology and its central tenet is decentralization. This is Web 3.0

The Old Order

The internet, when it first arrived was invented with a vision to enable instant communication between different nodes. The key point to note here is that Tim Berners Lee and all the pioneers involved in the earlier years of the internet did not mention the role that gatekeepers would play on the internet. Theirs was a system that could empower the common man to share information and maybe other things, with virtually anyone on the globe.

Unfortunately, however, this is not what happened. Instead, the internet, what came to be known as Web 2.0, grew to become a pyramid, with big tech at the very top. These are the companies that are essentially intermediaries between common people trying to share information with each other.

Think of Google, Facebook, Twitter, and Email; this is essentially what they are, companies with huge servers and thus the gatekeepers to the internet. Moreover, most of them have found ways to profit from extracting valuable data from our online activities (often without our consent) and selling it to the highest bidders for billions of dollars of ad revenue.

The ‘old order’ in essence, for good or bad, are companies and individuals that have figured out ways to profit from user data. And, while this may have worked for the early years of the internet the world is changing rapidly. More and more people are getting online every single day and data is thus becoming more valuable. Moreover, threats to privacy and online security are increasing.

Our gatekeepers for all their ingenuity are no longer capable of ensuring the protection and safeguarding of our privacy. We need a new way of doing things, a new order for the internet.

Renegades

Necessity, as they say, is the mother of invention. And with Web 2 there was a big gap, a trust gap if you will. You see although the internet made it possible for people from all over the globe to communicate and collaborate with each other it cannot ensure trust between each other. After all, you cannot simply trust someone thousands of kilometres away.

And with finance getting more digitalized, trust has never been more essential in online commerce. The problem is, until recently, there was simply no way to ensure trust between two parties carrying out a transaction. That is why third parties and intermediaries like banks and giant tech companies like Google existed. They facilitated communication, collaboration and transactions between different parties.

But late in 2007, a cryptographer with the pseudonym Satoshi Nakamoto came up with a brilliant idea that is now threatening the old order. With novel technologies in blockchain and cryptography, Satoshi along with a small group of friends invented Bitcoin, the first-ever cryptocurrency.

Besides Bitcoin, the underlying technology behind the cryptocurrency has been a revolution in the making. Many institutions are now leveraging technologies such as blockchain, distributed ledgers and smart contracts to create unique solutions for a variety of problems. These are the technologies creating the strange world of Web3 and at the heart of it are DAOs and Dapps.

DAOs

Decentralized autonomous organizations (DAOs) are first an organization i.e a group of people who have entered with another to reach a coordinated goal. DAOs however differentiate themselves from traditional organizations in a number of ways.

First, they are exclusively online with members rarely if ever interacting with each other in real life. In fact, legend has it that the whole Bitcoin group was the first-ever DAO.

Second, they operate with rules and targets informed by blockchain technology, a permanent record of digital information that is not run or managed by any central authority, and acts as a ledger of digital transactions online.

The key point to note here is that DAOs have no leader, hence the ‘decentralized’ part of it. Instead, decisions are made collectively. Like most groups however DAOs do have members who have more say than others. When someone becomes part of a DAO, the person buys into the group’s specially made crypto tokens. The more tokens a member owns, the more votes they have to cast.

Even without a recognized leader, DAOs do still have rules that every member is supposed to follow. These rules are etched online as code, so if someone were to break them, then the group’s funding can be locked and no member can access it.

These rules are inscribed on the blockchain in code form, in what is called a smart contract.

DAOs leverage the most out of decentralized finance, so-called DeFi. This refers to any number of new financial applications and transactions powered by the blockchain. This means most importantly that they do not have to go through any authority. Rather, they rely on code to facilitate their transactions.

Dapps

Much like DAOs, Dapps are decentralized. Only now, dapps are applications that don’t run on one server but harness the excess power of thousands of computers globally and that can be controlled by business automation software that ensures if a specific parameter is met, only then can a function be carried out.

Dapps run atop a blockchain, peer-to-peer (P2P) network that acts as a kind of operating system. In short, dApps take the whole concept of open-source to a whole new level allowing developers to create online tools that are not controlled by any centralized entity.

DApps will pool resources across numerous machines globally,” said Juniper senior analyst Lauren Foye. “The results are applications which do not belong to a sole entity, [but] rather are community-driven.”

Smart contracts or self-executing business automation software can interact with dApps, they’re able to remove administrative overhead, making them one of the most attractive features associated with blockchain.

Bitcoins is arguably the first dApp. It has since been joined by several others launched just within the last few years.

They include Chainlink for data validation, adventure game EOS Dynasty and the aforementioned Brave browser. According to its greatest fans, dApps are the future of software. Their decentralized nature ensures that they are truly accessible and of the lowest cost possible.

A Decentralized Revolution

DAOs and Dapps represent the first wave of the decentralized world that Web3 is building. Both in finance and software, these movements are wrestling power and control from the powers that be. Instead of centralized entities in the name of banks and big tech Web3 will put more power in users’ hands so that no one single person will benefit at the expense of the other. This is what true open-source really means

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2 comments

2 responses to “Demystifying the Strange Decentralized World of Web3: DAOs and DApps”

  1. […] The transition to Web3 is in top gear. With decentralization at its central tenet, armed with Web3 technologies like blockchain and cryptocurrencies the internet is going through somewhat of a revolution to create a completely decentralized platform. […]

  2. […] Now as you have guessed the key ‘selling point’ of this new approach is nothing else but decentralization. In fact, decentralization is not only at the centre of Bluesky, it is the very reason for the whole Web3 movement. […]

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