Dapps are basically decentralized apps. These apps are like standard (regular) apps; however, the main difference is that they operate on a peer-to-peer network, like a blockchain. That implies that no entity or person has control over the network. Some other key features include –
- It should use a cryptographic token for helping to keep your network safe.
- Its records and data should be public
- It should be open-source and run by itself without anyone managing it.
So, basically, dAapps are applications that run on blockchain technology. Now, unlike their counterparts that are the centralized applications for the regulated applications, dApps are open-source, permission-less, and enable the use of cryptocurrency for creating different wider opportunities. One of these opportunities is DeFi or decentralized finance which is allowed by many crypto exchanges, of which the biggest one is Binance (by its trade volume) because interest has increased in the DeFi space, so have the prospects for scammers to enjoy unsuspicious users.
Advantages of DApps
There are many benefits of DApps, and some of them are mentioned here –
- Open-source: this supports the expected growth of the dapp ecosystem, allowing developers to build improved dApps with more interesting or useful functions.
- Blockchain-based: since they are created of smart contracts, dApps can effortlessly integrate cryptocurrencies into simple functionalities.
- No downtime: a peer-to-peer system makes sure the dApps keep working no matter separate parts or computers of the network stop working.
- Censorship-resistant: without any failure, it’s quite hard for strong people or governments to manage the network.
What are the flaws of DApps?
While dApps assure to solve plenty of problems faced by general applications, they do have their side effects.
Hacks: since several applications operate on open-source smart contracts, it gives hackers a great chance to check out the networks seeking weaknesses. That has led to many hacks on famous Dapps.
Usability: many people have poor user interfaces, which have discarded many users. However, that’s something that is getting better with time.
Users: like several applications, the more visitors or customers a dApp has, the more efficient the network offers those services. That is often considered the network effect. dApps struggle from low numbers of users, making them less interactive. Also, it can make them less safe because the security of DApps can depend on how many customers it has.
Being a decentralized system, nobody requires permission to launch or develop a project on blockchain technology. That means anyone can launch a misleading or scammy project, and nobody can prevent them.
That’s why in this post, we will share some measures on how you can defend yourself from scams while trading in this decentralized app or finance space.
1. Discover what’s the reason for your project
Although there are lots of innovations happening in the world of devices presently, one thing you should know is that varieties of crypto assets bring nothing new to users. It’s a perfect example of SoS, which is glossy object syndrome where there are people attempting to piggyback on the fame of the DeFi space without attempting to innovate before getting deeply involved with the project; ask yourself the following questions –
- Does this project give something innovative and new through DApps?
- Are they adding to the latest digital economy with their projects?
- How is it unique from its counterparts?
- Is there a different value proposition?
All the above questions could really save you from losing your precious money.
2. Explore the development activity
Now because DeFi is closely related to open-source, if you know something about coding, you could check out the project code on your own. But, this may not required as if the project is large enough, other concerned parties will do the same you. They will manage everything and disclose any nasty activities that the project has. Also, you can pay attention to the new additions to the cord as this proves that there are genuine DApps developers at work and not those who just want to earn some quick money.
3. Do smart contract audits
Now, for doing this, you might require spending some money because it’s quite expensive. But, it’s a mandatory part of smart contract development, which is superb since a lot of developers arrange their code miners doing this, which boosts the danger of using this specific contract. Genuine projects can normally pay for smart contract audits, whereas scam projects normally won’t bother. Although audits are essential, no audit can assure complete security, which is why, DApps is important for you to be vigilant while depositing your money into a smart contract.
4. Know whether the founders are popular or not
Consider that not each and every project led by unidentified founders is a scam. Still, you would require being more careful with anonymity; if anything goes south, the possibility of these strange founders being held responsible is nearly zero.
You will find many projects with unidentified founders like Bitcoin and DApps that have transformed the globe, as you may already know, but you cannot ignore the risk
5. Research about how the crypto tokens allocated
One of the popular methods people can earn money is by increasing the token price while possessing a big share and then throwing it on the marketplace. That’s the reason why you should have a better knowledge of token economics. You can check through DApps how much of the tokens distributed to the founders. If it is a considerable amount, then that can be a warning sign for you because imagine 40% of the distributing supply of a token gets trade on the open marketplace. That would cause a decrease in the value of a token to nearly zero, leaving holders at a huge loss.
Conclusion
Regardless of what you wish to do in the DeFi space, you must think about or remember that there are so many scum opportunities. We hope that this article has provided you with the basic guidelines on how to support them.
