FPF: From dApps –> Killer dApps
Today I’m taking a closer look at the blockchain ecosystem. It’s well known that the majority of investors have been body bagged by the bear market of 2018. And while much of the hubbub around the market has died down, builders remain diligent at work as they try to create blockchains “killer app”.
If this is the first time you’ve heard the term, I don’t mean apps that “kill” blockchain – those that demand sufficiently high transaction throughput rates already create massive bottlenecks as is. Blockchains “killer app” will be broadly used by the global population.
So what is the killer app?
Venture twins Justine and Sophia Moore reviewed decentralized applications in their latest article on the consumer blockchain landscape, digging into the following areas:
- What dApps look like today
- Necessary components for mass adoption of dApps
- What they’re targeting from an investor’s vantage point
According to the top 50 dApp’s, the dominant categories are gaming (42%), gambling (22%), and exchanges (18%). It’s understandable why gaming constitutes the majority of dApps in the ecosystem today – games are fun. Though on a more fundamental level, there is lots of excitement around the use of blockchains to build digital markets for in-game assets.
Despite the swath of blockchain gaming applications, there’s a problem: they don’t scale. Proposals to port games such as Fortnite to a blockchain are nothing short of laughable until network throughputs increase by orders of magnitude from where they are today. That’s the key driver behind weekly transaction volumes of ~$18.5k and Daily Active User (DAU) count of 77.
There’s no doubt about it: cryptocurrency is blockchain’s “killer app” as the market stands today. Justine and Sophia made that claim in their article and I agree. Why else would gambling applications have the highest DAU count (860) while only representing 9 of the top 50 dApps?
Relatedly, that’s why exchanges are the only other dApp category that has gained traction. Granted, the numbers are still small – weekly transaction volumes is ~$3.2M and $3.3M for exchanges and gambling categories, respectively – though they blow all other categories out of the water.
Though even if one of these is to become blockchain’s killer app, we are FAR away from the finish line. This is evident from Chris McCann’s post in which he notes the massive chasm in DAUs between dApps and traditional applications.
Be wise, decentralize (as necessary)
Of all things halting the use of dApps, usability takes the cake. Willy Woo has a great thread on the thought here where he argues that platforms with the most intimate user experiences will capture the most value in the long run.
That’s why folks eat up IoT, AR, and VR gadgets – they allow us to learn more about ourselves. Not to mention the tech is astounding.
From another vantage point: that’s why value traveled from companies that monetized hardware, then software, and now data. That concept sits at the heart of Placeholder VC’s investment thesis and is preached by most of, if not all other venture capitalists involved in the ecosystem (I’d imagine).
Fully decentralized applications are the next step forward in that intimacy. Having control over your own data is powerful, and privacy is demanded more than ever in today’s age.
Yet as data shows, dApps are rough around the edges. Scalability pain points are a massive impasse for the broad use of dApps, and the UI/UX of current dApp platforms are both cumbersome and demanding on end users.
Gambling and exchange categories are the prominent dApps today because users see value in transacting and speculating with cryptocurrencies… e.g. blockchains “killer app”.
In other words: projects should aim for what John Backus calls MVD – Minimum Viable Decentralization. Sure, that isn’t as enthralling as a fully decentralized product, but people aren’t going to use fully decentralized products. They’re going to use the ones with a seamless feel and larger groups of users – even if 99% of it remains centralized.
The bottom line: the consumer blockchain ecosystem will *only* change with scale.
P.S. – there are certainly more takeaways to the above. If anyone is looking for additional reading, I recommend checking out these articles (repeating those listed above for visibility):