Monetisation Models for Blockchain DApps

How do you make money as a DApp builder?

You have a great idea for an app and are trying to figure out what the monetisation model is going to look like? What do you do?

Well the traditional ways you would monetise your app would fall into one or more of these 8 categories:

1. ADVERTISING

By displaying third party ads.

2. LEAD GENERATION AND AFFILIATE MARKETING

Promoting others products and earn a commission.

3. SELLING DATA

Collect and sell users data from within the platform

4. TRANSACTION FEES

Taking a fee from users transactions.

5. FREEMIUM

The basic functionality is free but users who want advanced features have to pay for those.

6. E-COMMERCE

Selling goods and services.

7. VIRTUAL GOODS

Purchasing of in app digital items

8. SUBSCRIPTION/SOFTWARE-AS-A-SERVICE (SAAS)

Pay to use the platform.

You could leverage the existing channels that Apple and Android provides and create a mobile app that gets distributed through the Appstore and Playstore.

However there are limitations of traditional platforms that may cause you to hit the innovation ceiling.

For one the reach of your app would be limited to users with Apple or Android smart phones. Or even for people that already have bank accounts.

Why build a DApp over an App?

A DAPP is a Decentralised Application, meaning that it has its backend code running on a decentralised peer-to-peer network. Contrast this with an app where the backend code is running on centralised servers.

Some of the features of a DApp over traditional platforms are:

• Censorship resistance. Once published it’s there forever.
• Computing power is provided by the network. Anyone regardless of geographical location can be a miner and they are incentivised to do so.
• Open source allowing contributions from others. Some project teams have code published on Github.
• Trust is built in through transparency in code. Smart Contract audits can be provided by independent 3rd parties.
• Not owned by any central party so economic incentives and benefits can be shared between many. Participation benefits all.
• No barriers to entry for any persons which provides opportunities for the $2 billion unbanked people in the developing world.
• Economies of Scale meaning your costs do not increase as your user base increases.

Blockchain technology allows new ways to leverage technology to solve use cases previously not able to be solved. The best current examples are DeFi applications being built that directly connects Depositors and Lenders without the need for an intermediary.

How are current DApps making money?

The ecosystem is continuously maturing and we are now seeing new entrants coming in and grabbing market share from similar applications. This is good news for the rest of us as we see developers innovate with features previously not possible with older technology. In the DeFi space we are already seeing very strong competition on the interest rates front between the DApps.

That leads to the question if you were instead building a DApp on a Blockchain which model should you pursue?

Some DApps already out with daily active users are: Augur, Basic Attention Token, Cryptokitties, MakerDAO, Compound.Finance, Gods Unchained and Kyber. You can check out https://dappradar.com/ for a more detailed breakdown of how many DApps are out there.

1. Native Utility Token

The way Augur and Basic Attention Token would monetise is through the creation of native tokens such as REP and BAT. These tokens could be minted by the developers and then distributed through ICO’s. They original team then holds a chunk of the tokens that would theoretically increase in value as the DApp goes through user adoption.

2. Digital Asset/Non-Fungible Token

For Cryptokitties the “Generation 0" cats are owned by the developers. These then go through an auction where proceeds go to the developers. They also continuously receive transaction fees when kitties are traded between users.

Other NFTs can be mainly found on gaming related DApps such as Gods Unchained, EtherBots and My Crypto Heroes.

3. Transaction Fees

There are some DEX platforms out there that act as intermediaries to facilitate the buying and selling of your crypto assets, they also charge fees just like most decentralised exchanges. Hopefully the fees are lower than their decentralised counterparts!

4. Asset Management

With DeFi the developers may keep a small residual of all interest that moves through the system.

5. Advertising

DApps need an UI to interact with the smart contracts. Coinmarketcap might not be considered a Dapp but the website gets a ton of hits and makes money through ads on the site.

Monetisation of DApps is a tricky business if your Smart Contracts are open sourced. They can just as easily be copied and redeployed by someone else with lower fees. There has even been a case where the Tron blockchain plagiarised code from the Ethereum blockchain!

A new way where we all benefit from Token Economics

When an Appstore App gets downloaded and used, do we benefit from that? Well we could be buying and owning shares in the Apple company. I guess in a way there are small trickle down effects to individual share holders. Most of the profits however will go directly from users to the app builders.

But now there is another way that ecosystem members can benefit directly through the use of DApps. How so? Well to power a DApp you need a utility token. In the case of Ethereum this would be Ether, the utility that acts as gas to power network transactions. As more and more DApps become used, the greater the network transaction volume and the more valuable the utility to power the network becomes.

If you just own some Ether you will directly benefit from the use of the Ethereum blockchain. More DApps in the ecosystem does not necessarily mean competition. It means more transactions and the creation of market value of all of our Ether.

For those that believe that Blockchain technology will play an important part in our lives in the years to come the way you benefit is to simply own some Ether. Of course it would be better if you are a coder and could also contribute with any DApp that adds transaction volume to Ethereum.

The long term viability of Ethereum is in the end dependent on increased transaction volume. My hope is that more use cases come to life that enables this to happen.

As an Ether HODLER, if you are building anything out there at all on Ethereum…

Thank You.