A dApp wallet, short for Decentralized Application Wallet, is a digital wallet designed specifically to interact with decentralized applications (DApps). The dApps are built on a blockchain like Ethereum, Polygon, or Binance Smart Chain, etc. Before looking at what dApp Wallet is, let’s look at how dApps work.
What is dApp?
A dApp, or a decentralized application, is software built on a blockchain. The main difference between a dApp and a traditional application is that a conventional application is typically hosted on a centralized server and controlled by one single entity or organization. On the other hand, dApps are built on blockchains, which means they run on a distributed network of nodes.
Apart from the primary feature of dApps, which is that they run on a distributed network of nodes, other parts of such applications are:
- dApps are typically Open Source. Open-source applications are those whose source code is made public to anyone. Users can make modifications to such applications according to their preferences. Also, such types of applications can be inspected by anyone willing to carry out such a task. The characteristic of an application for being open source ultimately makes it transparent to the outside world, which helps develop a relationship of trust with the users.
- dApps use blockchain technology for Storing Data, Security, and transaction processing.
- dApps have Smart Contracts integrated into them. Smart contracts are self-executing and have a predefined set of rules and agreement that is written directly into the code. This feature allows DApps to automate different processes.
- DApps use a variety of cryptocurrencies or other digital assets to do actions such as swapping, staking, or lending.
There are, however, certain negative aspects of DApps which you should also familiarize yourself with:
- dApps can be Expensive to use. The expense part of the dApp depends on various factors. Some dApps have high Gas Fees. These fees are charged by the blockchain to execute your request. Gas Fees can be high due to Network Congestion or the blockchain facing Scalability issues.
- Smart Contract Complexities can also make dApps expensive to use. The more complex the smart contract is, the higher the gas fees and computational resources required to complete a process.
- If a smart contract is Not Properly Coded, you could be exposed to suffering financial losses. A lot of hacking activities are associated with dApps because the hackers have an interest in exploiting a smart contract that has some loophole in it which makes it vulnerable to outside attack.
Integration with a Wallet:
DApps require users to interact with them by signing transactions, accessing their assets, and providing data. To facilitate these interactions, DApps often integrate with digital wallets. Here’s how the integration works:
- Users can access a dApp through either a mobile application, web browser, or desktop application. The interface of the dApp is linked to the application of the digital wallet.
- When users perform actions within a dApp, such as making a DeFi trade or buying an NFT, the wallet is responsible for securely signing the transaction with the user’s private key. This ensures that the user maintains control over their assets and authorizes the action.
- dApp wallets are designed to be compatible with multiple dApps running on various blockchain networks. This allows users to access and interact with a wide range of applications.
Difference between dApp wallets and crypto wallets?
We have seen people asking on search engines whether dApp wallets and crypto wallets are the same thing. It is important to note that while both of these applications share some similarities, some major differences in functionalities make these two applications unique from one another. Let’s look at the features of both types of digital wallets that make them different from one another:
Crypto Wallet:
A crypto wallet can be a software or hardware wallet, selected and used for storing, managing, and transferring your crypto assets. These wallets can hold many different types of cryptocurrencies, provided that they have support for storing them. A crypto user selects a crypto wallet keeping in mind the specific types of cryptocurrencies he wants to store in them. Some crypto wallet companies offer storage of more cryptos than others. There are two main categories of crypto wallets:
Software Wallets:
Software wallets are essentially an application or software program that you can download and install on your mobile phone, tablet, or a computer. Software wallets are typically connected to the internet so that you can have easy access to your crypto funds at any time and at any place. You can store your crypto funds or transfer them at your preference. Some software wallets, however, are designed in a manner that they are kept isolated from a network. This feature makes it a safe option to store crypto as it makes you less vulnerable to online attacks.
Hardware Wallets:
Hardware wallets are physical devices, like a USB or a smart card, where you can store your crypto assets. Hardware wallets are typically not connected to the internet when not in use, so this gives its users an extra layer of security. One drawback of owning a hardware wallet is that if you lose it and cannot find it again, then your digital assets are lost forever.
dApp Wallet (Decentralized Application Wallet):
The primary difference between a dApp wallet and a crypto wallet is that a dApp wallet is a specialized type of cryptocurrency wallet designed for interacting with dApps that operate on blockchain platforms. One example that can explain this statement is Trust Wallet. Trust Wallet is well known for its strong support for Ethereum-based tokens and dApps. dApp wallets include additional features that are responsible for performing seamless operations of dApps. They include a built-in web3 browser for accessing DApps, the ability to sign transactions to interact with smart contracts, and compatibility with the tokens used within those DApps.
In summary, while all dApp wallets are cryptocurrency wallets because they allow users to store and manage cryptocurrencies, not all cryptocurrency wallets are dApp wallets. dApp wallets are specifically tailored to facilitate interactions with decentralized applications, making them more suitable for users who want to engage in the DeFi ecosystem, NFT marketplaces, and other blockchain-based applications. Standard cryptocurrency wallets, on the other hand, focus primarily on the secure storage and transfer of digital assets without the DApp-specific features.
