Blockchains: The Layer 1 race may be over but Layer 2 is just beginning. (D)Apps look like the new Grail.
For many years, it has been hard for Web3 apps to provide users with a seamless experience to enable wide adoption. But, given the current trend Web3 apps are now becoming better and better at providing a user experience closer to the standards of web2. It is very likely that we will see in the next 18 months some Web3 apps reaching millions of daily active users. That was hard to believe just a year ago and will become the new reality.
The only app so far that managed to breakthrough over a million daily active users (DAUs) has been the Sweatcoin app but before issuing a token it was solely focused on a web2 architecture. Hopefully we will see more web3 native apps breaking these numbers soon. I researched the current numbers of DAUs for Defi mobile apps like Coinbase and Metamask since Defi has been the most popular application with a product market fit on blockchain. As shown on the graph below their activity is still below a million DAUs. We can argue that a more relevant metric for these Defi apps should be the number of monthly transacting users. So far they are among the most adopted mobile apps in the blockchain space.
Nodle with its DePiN (Decentralized Physical Infrastructure) application on mobile has doubled its daily active users to 100,000 DAUs in the past few months. Similarly, Warpcast, the Farcaster client is off to a good start. As indicated in this Techcrunch post, Farcaster reached 140,000 users joining the network but it is still early to get access to any reliable daily activitity numbers.
It is unlikely that future successful native web3 apps will be able to scale fast and support over a million DAUs without economics that can work and a blockchain infrastructure that can handle the volume of transactions required.
Blockchain Focus is shifting from Layer 1 to Layer 2
In this graph below I make reference to the graph made by Joel Monegro from Placeholder who wrote about the blockchain application stack in Coindesk back in 2021. At the time he explains that in 10 years all apps would end up running on the Bitcoin network. Since Ethereum is getting a lot of traction with the forecasted ETF funds and given its dynamic developer ecosystem, I tend to think Bitcoin won’t be the only Layer 1 network in 7 years from now. It may also take a lot of time for Layer 2 networks on Bitcoin to get to the level of maturity reached by Ethereum for enabling developers to build all kind of applications. Other networks like Solana or Polkadot are also in the race to support this new generation of applications but both havn’t enabled the creation of Layer 2 networks. Solana is focused on supporting all applications on its Layer 1 since scalability is part of its commercial advantage together with low transactions fees. Polkadot on the other hand, plans to stop the support for parachains and wants to bring applications to its new Core Time proposition to sell block space. Its Core Time solution seems very comparable to Ethereum with Layer 2 networks.
When I look at the graph above that doesn’t even mention all Layer 1 networks in activity today, I forecast that they will end up competing to lower the cost of records and space on the blocks they produce to have a chance to stay relevant in the future.
That’s not the only relevant criteria, the maturity of the developers ecosystem, the availability of development tools, the interoperability and the access to capital based on the different ecosystem are all important.
With Layer 2 growing role to support the Web3 apps that will enable millions of users to interact with the blockchains on a daily basis it is clear that most of the biggest opportunities will be coming from teams building apps on that layer.
Nodle and the Click App
For Nodle, the blockchain development started on Stellar with the help of the Stellar Development Foundation and then evolved to enable the project to become its own layer 1 on substrate secured by the Polkadot network with the help of the Web3 Foundation Team.
Nodle’s latest application Click is a camera application that enables anyone to capture a photo or a video and prove its authenticity by making a record on the blockchain for free. Adoption of the beta version is early but the team behind Nodle believes there is a good chance that Click could be among the first web3 apps to be adopted by million of users this year. Given the rise of AI generated content, the number of deep fakes and the global political context with 50 countries going under elections in 2024, the demand for such tools should skyrocket 🚀
Click is running on the Nodle chain secured by the Polkadot network. This week, following its announcement at the Filecoin Foundation event during ETHDenver, it will start to test its layer 2 network with a rollup on zkSync
Many other web3 applications should follow…
