From CryptoKitties to Fomo3D, how far are we from a “killer” blockchain application?
2017 was the year blockchain technology and cryptocurrencies truly entered mainstream vocabuary. Especially between the last half of 2017 to the beginning of 2018, cryptocurrencies’ meteoric rise drew many into the space. Even so, after the industry experienced popularization, there is still a distance between it and the mainstream population.
To compare its overall coverage to other internet-based technologies, blockchain technology is still a mere “ember”. It will need a “killer-class” application to bring it to the attention of mainstream media. DApp, also known as decentralized applications, is sometimes viewed as a key factor in this achievable goal.
Although public blockchains and other infrastructures are the main support in aiding the rise of DApps, what the mainstream population actually experience are the application aspects of it, such as social media, games, live streaming and online shopping. These are the products and services that the mainstream population actually come into contact with, and DApps are the bridge to link normal, everyday users with blockchain technology.
So, with such high hopes for it, what is the current developmental status for DApps?
What is the ecological structure of DApps as a whole?
How far are we from this so-called “killer-class” application?
In this article, we will discuss DApp’s ecological developmental status and structure, and the future trends of DApp.
Last year, a game called CryptoKitties rose in global popularity, so much so that it caused a congestion issue in the Ethereum network. Such is not rare in the blockchain world. After the surge in popularity died down with CryptoKitties, Fomo3D appeared in many gamer’s radars. Fomo3D was a hit almost immediately after launch, and why wouldn’t it be, with such great rewards to gain in-game. From CryptoKitties to Fomo3D, these “lit” game products are decentralized applications, or DApps, based on blockchain technology.
What are DApps? How are they different from traditional Apps?
DApp is short for Decentralized Application, it is a “new form” of applications derived from traditional Apps. DApps runs on a blockchain (Such as ETH, EOS, BCH, etc.), similar to how smartphone Apps run on iOS or Android systems.
Compared to traditional Apps, DApp is fully decentralized, running through Ethereum network or other types of blockchain network on nodes. It does not require a centralized server, and allows users’ information to be saved securely, maximizing privacy. Borrowing the features from blockchain technology such as data confirmation and value delivery, DApps have superiority in terms of community autonomy, transaction security, and motivation mechanism.
Most DApps today are based on the Ethereum network, because the Ethereum network has Smart contracts and Account mechanism; these two things are more suitable for DApps to be developed. Of course, EOS, BCH, etc. are growing fast as well. These networks will have more and more DApps in the future.
What is the current development status and ecosystem structure of DApps?
According to data from “State of the DApps” in August 2018, there were 1830 DApps based on the Ethereum network. And from the MAU distribution status, there are 88% Dapps with under 10 active users monthly; there are 6% Dapps with 10–100 active users monthly; there are 5% DApps with 100–1000 active monthly users; and with only 1% Dapps that have over 1000 monthly users. Of these 1% there are only 5 DApps with more than 10000 active monthly users.
Compared to traditional Apps, which frequently reach millions of users, DApps still have a long way to go. In comparison, blockchain technology is still in its infancy, its foundation is still far from perfect. This, along with its application potential and its popularity among the mainstream population, makes it hard to support the same user base as Apps.
From the perspective of ecological structure, current DApps mainly consist of games (referring to collectibles), decentralized exchanges, financial, lottery, social media and more. If one were to include gambling DApps into the games category, its contribution to DApps as a whole would reach up to 43%.
From these statistics one can presume that gaming type applications are most preferred for developers. Secondly, decentralized exchanges make up 16% of DApps, claiming second place in the chart. Below, we will analyze each category of DApps.
1. Gaming-type DApps
The gaming industry on the internet is one of its own mainstreams, and is popular also in the blockchain world. One can even say it is a possibility that the “killer-class” DApp might appear from inside the gaming industry. CryptoKitties is one of the classic DApps in the gaming classification. After CryptoKitties became popularized, many games followed its model and out came many virtual pet and collectible games; games such as PolyPony, FishBank, and LinkMonkey.
The most common aspect of these gaming DApps is that they all have virtual pets that are absolutely unique. If you own a pet, no one else could possibly have the exact same pet that you have. Because of this fact, the pets you own have value and collectability. In CryptoKitties, some cats can be valued at up to hundreds of thousands in USD. This allows the game itself to be more speculative than simply entertaining.
CryptoKitties’ cats have collectable value because every kitten is a part of ERC721 protocol and is given a different “gene”. These types of unique traits give some rare breeds of kitten popularity and rarity, and they can be sold at an unreasonably high price.
ERC721 is also called NFT, short for Non-Fungible Tokens. Every ERC721 token are unique and irreplaceable, every single ERC721 token has a separate and unique Token ID, and the smallest measureable unit of a token is 1.
This protocol was proposed by Dieter Shirley during September of 2017. And Dieter Shirley is the CTO for the company behind CryptoKitties, Axiom Zen. Because of this fact, CrypoKitties is the first DApp to actualize ERC721 standards.
Gaming is not just the first real application of ERC721, it is also the most used application of ERC721. In the world of games, items are vastly important. Items in-game such as equipment, weapons, mounts, or characters, all of these can be unique in a game and can be actualized with the help of ERC721 protocol. This type of unique items in a game can help achieve virtual asset value-preservation, collectability, and encourage P2P trading. It will allow for achieving the maximum potential of a game’s value, and allow virtual asset to be translatable to real-world assets.
Even with the information presented above, the current market for gaming-type DApp still mostly consist of collectible games such as CryptoKitties. There are not many new innovations in terms of gameplay, most still belong to the “lottery” category.
The August MAU of 2018, in the top 5 gaming category, there are Gods Unchained, ETH Town, Etheremon, and Cryptogirl, excluding CryptoKitties. These are categorized as TCG card games, SLG simulation game, and Pokemon-type pet capturing game. All of these games are based on the ERC721 protocol.
2. Lottery-type DApps
In the category of lottery-type DApps, there are actually many DApps that contain gaming-type elements. For example, the DApp Fomo3D that is currently popular right now is a classic case of lottery-type Dapp. Fomo3D caused a huge network congestion, and while it was suspected of being a pyramid scheme and a Ponze scheme, users were investing more and more ETH into it. Every user wanted to be the next winner, and wanted a part of the reward from the pool of asset.
Not too long ago, the first jackpot winner was announced. User with the address 0xa169DF5ED3363cfC4c92ac96C6C5f2A42fCCBF85 had won over 10,000 ETH, worth nearly 3 million dollars. The winner (a hacker) had used the logic behind miners’ mining Gas Fees, that being that miners will prioritize higher fees first, and controlled the order of the trades.
After the remaining time has reached a threshold, and that the last buyer is the hacker himself, the hacker will start massively making high fee transactions. This will force miners to prioritize his transactions, and fill the blocks quickly. During this time, all of the other trades on the Ethereum network, especially the keys users are attempting to buy on Fomo3D, are extremely difficult to be processed normally. As a result, the hacker will be able to force the game to end quicker and highly increase his chance of winning.
Besides Fomo3D, other lottery-type DApps have also experienced hackers using loopholes to win rewards, DApps such as LastWinner (Fomo3D Clone), God.Game (Mix of PoWH3D and Zethr). So one can presume that these DApps are a type of lottery and gambling, and there exists loopholes in the game that can be manipulated by hackers to take the prizes for themselves. This makes the game itself to be unfair to normal users, and goes against the principles of DApps’ decentralized system.
According to a report, up until now, Fomo3D has nearly a hundred clones (Fomo3D is open sourced and many developers simply copied and made small changes to the code). From the MAU during August 2018, there are two DApps in the top 5 lottery-type DApps that are Fomo3D clones, SuperCard, and FOMO Short.
Also, the number two on the list is PoWH3D, which is Fomo3D’s predecessor. It and Fomo3D were developed by the same team, Team JUST. The number 4 on the list, Zethr, was released during July of this year. In a short amount of time, it has gained traction and good reactions from the market. This DApp includes many ways to “play” including changing the risk-to-profit ratio, slots, dice, and Fomo type games.
3. DEX-type DApps
There are more than 10,000 digital asset exchanges all over the world. Of these, more than 400 are very active in volume. Most of these exchanges operate in a more centralized manner, and their security is often criticized. Because of this, more and more investors are now interested in decentralized digital asset exchanges.
One of the major differences between a centralized and decentralized exchange is, a decentralized exchange uses an atomic transaction or smart contract to provide on-chain transactions; a decentralized exchange also lets users to keep their own private keys, thus letting users control their own assets. These facts allow a decentralized exchange to have more security and transparency.
Compared to the current lottery and gaming type DApps, decentralized exchanges create more applicational value in the ecological status of DApps. This creates more value in the internet, because this is true value exchange through the internet itself. Tokens are the value bearing and transfer basicity, it is the key factor that activates the blockchain project internal ecology. The purpose of decentralized exchanges is to promote tokens, in a global extent, to flow more safely, efficiently, and quickly. By achieving this, it will allow the age of the value of internet to come.
According to Etherscan, the three top decentralized exchange in terms of transactions are IDEX, DEx.top, and DDEX. Of these three, the most promising is DEx.top. This decentralized exchange has only been in operation for 3 months, and has already reached its rank of number 2 DEX.
Through some research and experience, this author has concluded that this fact is due to DEx.top using “ROC”, or Replay on Chain. This deciding factor uses two ledgers, one on-chain and one off-chain. Compared to other decentralized exchanges, it allows for better user experience and saves Gas in the process.
In the DApp ecology, there are games, lottery, DEXs, but there are also media, wallets, KYC, and data storing DApps. Of course, needless to say, DApp stores and DApp browser are also crucial to the DApp ecology.
How far are we from the “killer-class” application?
From a summative perspective, the current state of DApps are more gambling and lottery than applicative. From gaming DApps to lottery DApps, its true nature is still gambling. This is partially due to blockchain technology itself being close to the financial industry, and the fact that human nature itself is inclined to making profits. These DApps use the faults of human nature to quickly gain users.
From a realist perspective, the blockchain industry needs more actual users of industries, as opposed to the current users who are looking to invest or gamble and users who have this type of mindset. DApps need to bear actual applicational value in order to bring in a real quantitative amount of users. Though, bear this in mind, speculative users are unavoidable during an industry’s infancy. This is not just a case with the blockchain industry. Let us refer to the internet bubble and its history, we can find similar patterns through this example.
In 1999, there were 457 IPO companies that went into the industry, mostly high-tech companies. In March of 2000, in the peak of the market, there were 4715 companies on the NASDAQ market. Many companies new to the market were trying to relate themselves to the internet. Some companies used the tactic of adding the suffix “dotcom” to their name or adding an “i” or “e” in front of their name, to show that they are an internet-related company. These companies’ stock prices went through the roof, and their stocks were quickly sold out.
The development of blockchain technology and the early stages of internet technology have similarities. In terms of technical skills and basic infrastructure, there are many things that need to be improved. Applications will need more business application to support it. In a short amount of time it will be hard to root itself into like the internet has. Though through generating profits and people following suit, the bubble is getting bigger, the factor to bursting this bubble will be the values to anchor actual enterprises.
In its current stage, blockchain technology has entered a “winter stage”. Entrepreneurs need to be practical and provide a solid service for their users. This will bring value to the industry and ecology. This is the way to pass this “winter stage”, and to quickly excel in the next stage. Google, Amazon, Alibaba, Tencent, etc, are all technological giants who rose after the internet bubble burst and the industry passed its “winter stage”. Because of this, the “killer-class” application of the blockchain world could very well come from this bear market.
It can be said that, a battle between the technological world and the rights of the current society inevitably begins. 2018 will be a stage for this, and it will be unstoppable.
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