*In the past few years, blockchain platforms (such as ETH and EOS) have introduced a new computing model to the world: DApps (decentralized applications). *
**
Unlike traditional applications on smartphones, DApps are not controlled and run by a single entity or organization. These applications (also known as DApps) bring advantages such as censorship resistance, trustlessness, and reliability.
Since blockchain-based DApps are still few and still between centralization and decentralization, interacting with them can be overwhelming at first. The purpose of this article is to answer the most common questions related to DApps from three perspectives (legality, privacy, and digital asset security).
Legality of DApps
Before the introduction of blockchain, decentralized applications existed in the form of peer-to-peer platforms. However, after the popularity of Bitcoin and other cryptocurrencies, ambitious developers quickly realized that there is still a lot of potential for this technology to be developed.
In 2017, the number of DApps on the market began to grow exponentially. According to statistics, in January 2017, the number of newly released DApps was only 10, which increased to 72 a year later. As of December 2018, 177 new applications were added every month. Today, there are more than 2500 independent DApps on various blockchain platforms. However, many users who use DApps for the first time cannot be sure whether they are legitimate.
Is it legal to use DApps?
As the DApp ecosystem is still in its infancy, jurisdictions around the world have not yet supervised this ecosystem. Although no one has questioned the legality of DApps so far, governments have begun to impose new regulations on digital currencies.
Although people generally believe that cryptocurrencies are illegal, the fact is that only 4% of countries in the world consider Bitcoin and other cryptocurrencies to be illegal.
Most countries will not actively prohibit their citizens from using digital tokens as currency, commodities, and property. Moreover, many DApps do not require you to use their accompanying digital currency at all.
Take Brave Browser's token BAT as an example. In the Brave ecosystem, users can earn BAT rewards by participating in and watching advertisements, and can use the BAT they earn in the Brave ecosystem, such as tipping content creators or giving tips to content creators. Donations from the Brave development team, etc.
Since these tokens never leave the platform and ecosystem, Brave's products are no different from any non-blockchain platform with a virtual economy. Similarly, many apps on the market also provide tokens with certain underlying utility functions. So far, these companies have not been subject to legal review except for special circumstances such as suspected illegal or fraudulent activities.
If cryptocurrency is illegal in the country, how to use DApps?
Even if you live in a few countries where cryptocurrencies are considered illegal, you can use DApps without restrictions.
For example, Alluva is a cryptocurrency price prediction platform. Users can use the platform without buying and trading tokens. New users can simply create an account and access the platform.
Although some governments are divided on the issue of token economy, the vast majority of governments have no restrictions on DApps themselves. Taking Alluva as an example, the act of simply making price predictions is not illegal anywhere in the world.
I have obtained some tokens from the DApp, how can I convert it into fiat currency?
Many DApps allow users to obtain tokens on the platform for free (without pre-investment), so users who use DApps for the first time often wonder, how can they convert their tokens into legal tender? In fact, it is very simple, it can be achieved through cryptocurrency exchanges or P2P transactions.
When you enter a cryptocurrency exchange, you may need to perform KYC verification according to local rules. After the exchange has verified your personal information and supporting documents, you can trade your tokens with other tokens or legal tender.
Some banks or financial institutions may not allow their account holders to use their accounts for cryptocurrency transactions. Most DApps are still available and beneficial. Because DApps allows their platform tokens to be directly converted into products and services, it means that you can directly convert these tokens into tangible items, thus saving the work of converting tokens into legal tender.
Do I need to pay tax on the income I earn from DApp?
Taxation of cryptocurrency gains depends entirely on the policies of your country. Some countries tax cryptocurrency income as other income, while others treat cryptocurrency income as capital gains.
As for the amount of tax you need to pay, some countries have tax rates as high as 50%. It is safer to consult a local tax expert about the cryptocurrency tax payment situation in your area. In fact, you can also find information on your own. Most of them are easy to find online.
How does DApps handle user privacy?
On the Internet, protecting privacy has become more and more difficult, especially considering the recent Facebook-Cambridge Analytica scandal and the Equifax data breach. However, centralized control of large amounts of information on the Internet is far beyond the jurisdiction of social media and private companies.
As the decentralized application ecosystem continues to grow every year, it is important to understand the complexities associated with using DApp privacy.
DApp is managed by a decentralized authority, which means that all changes must be decided by the majority of users and can only be executed after reaching a consensus.
Ideally, all records of DApps operations are stored on a public, decentralized blockchain to avoid the threat of centralization. The decentralized decision-making process is implemented by the verifier of the blockchain by implementing a consensus mechanism (such as proof of work (POW) or proof of stake (POS)) deployment algorithm.
Data centralization and user privacy crisis
In recent years, as more and more data security breaches and user privacy scandals surfaced, user privacy has become a hot topic. The large tech giants with the most user data are extremely centralized.
In early 2018, Cambridge Analytica exposed Facebook's serious negligence in handling user data, which made regulators and the public extremely uneasy. With a series of news reports about Facebook's inability to protect user data, the call to support decentralization and data protection is also growing.
In another recent example, the network security company UpGuard claimed that in April 2019, more than 540 million records of Facebook users were exposed. These data are stored on Amazon's cloud computing servers. Centralization has not only data storage issues, but also access to the Internet application ecosystem.
In May 2019, a group of iOS developers sued the App Store to monopolize the app store, and Apple took a 30% commission from all APP sales in the App Store.
The difference between DApps and traditional digital apps is that they are not operated and controlled by a centralized entity. DApps run on distributed computing systems and are decentralized governance. Therefore, the decision-making process requires a large number of users to verify. But what does this mean for user privacy and security?
The following will answer some of the most prominent questions about user privacy.
Is the data safe on the DApp?
Compared with the centralized storage of large technology companies such as Facebook, DApps run on blockchains and decentralized computing systems. The stored data is not easily affected by a single point of failure, and it passes zero-knowledge proof (ZKP), etc. The encryption verification method ensures the security of data on the blockchain.
ZKP is a cryptographic verification method that enables secure and private transactions. In ZKP, the prover can prove to the verifier that they know specific information without revealing any sensitive data. This means that DApps run on an architecture that embeds user privacy by default.
What information is shared with third parties?
DApps respects user privacy, almost no user data is shared with third parties, and third parties cannot obtain user personal information through financial transaction details. Most DApps do not share any identifiable user data, because privacy and data security are the most important issues for many cryptocurrency enthusiasts and potential users.
Paying attention to user privacy is one of the main reasons why blockchain is favored by more and more people. Since DApps use blockchain and decentralized computing systems for distributed storage and processing of data, user data will not be shared or exposed to third parties. After applying anonymity, your wallet and transactions cannot be linked to your personally identifiable information except in a few cases.
Although DApps are decentralized, they must still comply with the legal requirements of the country where they are located. KYC (Know Your Customer) provides a way for DApps to be legally legal and able to overcome regulatory barriers before bringing a disruptive blockchain revolution to users. DApps use digital identity certificates (mainly issued in the form of digital certificates) to perform user KYC authentication. The digital certificate is issued by an authority, which uses encryption technology to send the private key to the user. The issuing authority generates a public key when issuing a certificate. This public key is used to decrypt the certificate. The certificate also contains the private key information of the user to whom the certificate has been issued. The KYC data used by DApps is not associated with user identity information, so user privacy is not exposed.
How does DApps protect user funds?
Bitcoin founder Satoshi Nakamoto developed the first practical application of the blockchain, but the developers found that the technology has a large number of non-financial applications. DApp use cases are undoubtedly the most promising among them, because DApps have refreshed many Internet and digital applications. The inherent concept of the ecosystem. Given that the technology is still in its infancy and most people in the world have not had the opportunity to try it out, we believe that as DApps become more and more common, your first attempt should be simple and comfortable.
In this section, we will introduce in detail how DApps handle user funds (including cryptocurrency) security on the platform. In addition, we will also explore how to protect digital assets to protect everyone from unnecessary risks.
Is the token safe on the DApp platform?
Many new users of the DApp ecosystem will worry about the security and ownership of their tokens, which is understandable. As with any cryptocurrency, the DApp owner has no right to use your tokens before you manually initiate a transaction to the platform wallet address. In addition, because digital currency is essentially decentralized, anyone can publicly view and verify transactions on the blockchain at any time, because the main advantage of blockchain technology is to improve transparency.
A digital cryptocurrency wallet allows you to become your own bank, which is an irrevocable storage solution. If you are willing to trust a third party for convenience, exchanges or online service providers can also store tokens. However, it is generally recommended to use a local wallet to store tokens, because a local wallet allows you to better control the tokens and effectively protect the tokens.
How to judge whether DApp will deceive users?
Although the vast majority of DApps that currently exist are operating within the legal scope, unfortunately, a few of them do not. As a user, pre-due diligence can greatly help you determine whether the project is trustworthy. Usually it is necessary to understand the basic knowledge of each DApp, starting from the project's white paper, development team and platform functions. Some DApps development companies that claim to have legal partnerships with large companies can see that they have invested more in the project and are relatively more trustworthy.
Some DApps used to defraud users' funds usually have obvious flaws in some or all aspects, because such projects require a lot of human and financial resources to complete, and there is no excess funds to do the project. Legitimate DApps also tend to build communities on popular social networks such as Reddit, Discord, and Telegram. Healthy interaction between users and developers is another positive indicator that DApps can trust.
Does DApp's token price fluctuate greatly?
As we all know, the prices of mainstream cryptocurrencies such as Bitcoin and Ethereum are unstable, not due to the unique instability of DApp tokens. Project owners hope to keep the token price stable and attract more new users. Because DApps are built to meet specific purposes, there is almost no speculative component in the token price. This is where DApps tokens are different from mainstream cryptocurrencies such as Bitcoin and Ethereum. Mainstream cryptocurrencies are due to changes in market supply and demand. Prices will rise and fall sharply.
As mentioned above, the best way to protect your funds is to conduct basic background checks on the DApps you are interested in, especially those that seem vague. All in all, DApp and blockchain projects with strong fundamentals are more likely to maintain price stability than a controversial project.
Conclusion
So far, we have discussed common doubts and concerns about the DApps ecosystem. With the further development of the DApp ecosystem that supports the blockchain, it will bring more benefits of decentralization to users. The continuous efforts of developers will also provide users with a safer and frictionless platform.
Comments
Post a Comment