dApp – a decentralised application (dApp) is one that isn’t controlled by a central authority. Twitter is an example of a centralised app, with users relying on it as an intermediary to send and receive messages. As such, users play by the rules it enforces and the algorithm it uses to control content.
A dApp is distributed on a blockchain, with users able to send and receive data directly without the need for an intermediary. Peepeth is a Twitter-like dApp. It claims that as an app it doesn’t optimise for advertising revenues, an issue it says users of centralised apps suffer from.
Defi – short for decentralised finance. Finance is traditionally centralised because it relies on intermediaries. For example, if you want to send money to a friend or relative, you rely on your bank to send it to the recipient’s bank. Defi requires no intermediaries, with participants able to send and receive assets directly. In theory, this makes transactions faster and cheaper.
DAO – decentralised autonomous organisation. A DAO is a group of people who work together towards a shared goal and abide by rules written into the project’s self-executing computer code. Bitcoin (the project, not the currency) is an example of a DAO.
Distributed ledger – in traditional finance, an organisation such as a bank holds a ledger of all its customers’ transactions. In defi, the ledger is shared and synchronised among users in different locations around the world. A blockchain is an example of a distributed ledger.
Double spend – If you handed a shopkeeper £5 for a sandwich, you would no longer own the £5 and couldn’t spend it again, and sophisticated anti-counterfeit measures prevent people from making copies of physical currency. Even with digital transactions, central authorities such as banks can secure and check their ledgers to verify the legitimacy of a payment.
However, digital information can be copied. In theory, a single Bitcoin could be copied 100 times and spent 100 times. A distributed ledger such as blockchain prevents this.
When you send a Bitcoin to someone, you destroy your version of it and create a new version for the recipient. Both destruction and creation are recorded on everyone’s copy of the ledger, preventing you from claiming you still own the spent coin and trying to spend it again.