When Ethereum first came into public prominence in 2017, it was suddenly lauded as “Blockchain 2.0”, “the Bitcoin killer”, or “the blockchain with better technology”. The concept of automatically executing transactions called “smart contracts”, among the other buzzwords like “world computer”, had investors and blockchain enthusiasts head over heels.
The boom of Ethereum and the price of Ether was driven in a significant part by the utilization of the smart contract platform for executing ICOs. With a combination of the crypto market crash, ICO sell-offs, and deflated investor confidence, the recent ETH price lows in USD have declined to Q2 2017 levels, more than 90% down from its peak at ~$1,400!
Needless to say, things are currently looking a bit grim for Ethereum. With the end of the ICO era likely upon us, where will Ethereum’s usage come from? Sure, the latest hype is on security token offerings (STOs), but with the tremendous amount of regulation associated with securities, STOs won’t be such a crazy, easy, and wild ride like ICOs were. Meanwhile, we have increasingly more smart contract competitors like EOS and Cardano attempting to come into the fray, which could further dilute the marketshare for Ethereum.
Of course, one great thing about Ethereum was the amount of developer interest it was able garner. Ethereum is still miles ahead of any competition simply because of its large and active developers’ community, regardless of what everyone else says in the TPS-measuring contest. With the ICO ship having all but sailed, building on Ethereum has become ever more important. Most ICOs that have promised distributed-anything-and-everything products in the past have in fact produced nothing, while a number of more legitimate projects have so far built somewhat barely usable decentralized applications, or dApps.
DApps were supposed to be the “Internet 3.0” of our new blockchain era, with everything ranging from farming to cloud storage being distributed and decentralized. However, it didn’t take long for many people to realize that “blockchain” or smart contracts are in fact not needed or make absolutely no sense for many of these proclaimed use cases. In most cases, the application of a smart contract platform simply provides an improved level of transparency and tracking to a centralized system or database, but absolutely does not achieve decentralization or bulletproof immutability for said use case.
For several use cases however, dApps do provide an upgrade in terms of trust, transparency, or fee reduction, in comparison to traditional systems. Consequently, these dApps currently prove to be the most used dApps on the Ethereum blockchain, and probably the few only legitimate applications for “blockchain” going forward. These use cases so far are restricted to decentralized exchanges (DEXs) for trading and decentralized gambling platforms. In other words, the dApps that make the most sense so far are ones which replace third party escrow services, where users’ funds remain in their wallets and can be exchanged directly through the dApp. To put it more blatantly, if you take away the developer team/company and the users are still able to trade/exchange assets via the dApp as before, then we probably have a good dApp use case.
Finding the right use case for a dApp is only the very first step though, akin to having a great idea for a startup. What about the execution? The key to a dApp’s ultimate success, which is having many, many, real users, is its usability and adoption.
Currently, due to technical limitations with Ethereum, no dApp has yet to come close to attracting a meaningful amount of active users. IDEX, week-by-week the industry leader in dApp daily active users (DAU), consistently achieves less than 2,000 active users per day. On a few occasions in the past, severe media hype have driven up the amount of daily active users for some dApps, as we saw with CryptoKitties in 2017 and Fcoin in 2018. However, as we have seen, these spikes in on-chain activity quickly clogged up the Ethereum network and made everything associated with the network totally unusable.
Another major pain point for not only dApps but most blockchain products is the current lack of user friendliness. DEXs have come a long way in improving their UI and UX, to the point that they are almost comparable to some lower-tier centralized exchanges in terms of easy of use. For almost all other dApps though, users are still often required to use MetaMask or other more technical tools, which immediately increases the barrier for adoption. Even in the case of improved UX with DEXs, the inherent scaling limitations of the Ethereum network still manages to completely ruin the user experience from time to time, as evident when IDEX completely crashed after the simultaneous listing of two very popular coins, HOLO and NEXO, earlier in 2018.
Based on the current state of affairs, dApps do not look like the solution to onboarding mainstream users for cryptocurrency mass adoption. On a micro level, many dApps are limited by UX/decentralization tradeoffs, while on a macro level, any sort of increased usage are immediately squashed by the inherent scaling limitations of the Ethereum network. Until better scaling solutions for Ethereum are found (most likely off-chain), dApps will struggle to see their time in the mainstream spotlight.
At the meantime, the industry must continue exploring other ways to entice mainstream users to use cryptocurrency. An example, and something we are currently working on, are highly user-friendly games with crypto elements that do not require distributed ledger technology for actual gameplay. Such games with the spectacular gaming elements of traditional (non-blockchain) games, while incorporating crypto elements, should in fact be excellent entry points for mainstream gamers to become future crypto users. Users are able to earn in-game rewards for their play time in the form of cryptocurrency, which can then be converted to bitcoin or other cryptocurrencies, thus allowing users to realize that monetization of their time spent is possible.
The separation of decentralization and application may yet hold the key to mainstream mass adoption of crypto.
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Holochain makes hApps/dapps possible and in fact better than current internet and every crypto ever. Make sure you check facts
lol typical broad assumptive statements from a shitcoin shill, “better than current internet and every crypto ever”. Proof/reasoning/logic or GTFO please.