The spectacular rise and subsequent fall of CryptoKitties has been described as heralding the failure of dApps (decentralized application), recently described as “costly novelties” and “a flash in the pan.” One commentator has even said that “beyond any initial interest in a dApp, they struggle to maintain any form of meaningful user base, once all the excitement has died down.” Certainly interest in the largest dApp platforms has dropped precipitously: the latest Diar report shows that the seven largest dApps (ranked by ICO funding) have now lost 74% of their users, on average. But is this a valid perspective? Are dApps truly on the way out, or is it much too early to sound the death knell?
What is CryptoKitties?
CryptoKitties is a virtual game, based on the Ethereum blockchain. Each CryptoKitty is unique, representing a token on the network, though the developers point out that they are not a cryptocurrency, and instead should be viewed as a cryptocollectible. CryptoKitties are released at intervals, and each has a distinct appearance, details of which are stored in a smart contract. Users interact with their cats, and can buy, sell, and breed them. In December 2017 a single CryptoKitty sold for $100,000; as of September 2018, it’s possible to purchase a new CryptoKitty for approximately $55 USD.
What are dApps?
Decentralized applications (dApps) are applications that run on a decentralized blockchain platform. Once the blockchain is created, contracts (records) stored on it are permanently available. Changes to individual entries can be made, but original versions will always be retained. Despite their name, many dApp platforms are not actually decentralized, for the simple reason that truly decentralized applications allow the creators little influence once they are launched.
Have there been other notable dApp disappointments?
The decentralized banking app Bancor, which raised $153M in its ICO, went from a peak of 1747 daily users to 457 daily users. And Augur, a prediction market protocol that lets people place wagers on future events, has dropped to fewer than 50 daily users within 3 months of its launch.
Do valid dApp use cases exist?
Use cases for dApps include token systems, identity systems, decentralized storage, and decentralized autonomous organizations. Here are a few currently in development or available:
- Golem is an open-sourced, decentralized supercomputer, representing a decentralized sharing economy. Its first use case, released in September 2018, is CGI rendering: users request processing over the Golem network, and set the price they are willing to pay. Processing speed is determined by price. Golem’s next planned used case is training machine learning models, with the goal of providing tools that will allow developers to host a machine learning stack on the Golem network.
- Status, currently in beta testing, is an “Ethereum discovery tool” that allows users to browse, chat, and make payments on the Ethereum network—like a web browser for blockchain—and it does this by turning users’ phones into light client nodes on the network. Because Status is an open source platform, it provides access to numerous dApps.
- Ujo uses dApp interconnectivity to create a platform that lets artists create, control and distribute their content. Ujo employs Ethereum’s smart contracts to automate payments to rights holders based on user-defined licensing agreements. It also uses decentralized file storage using P2P networks, thus eliminating the need for centralized storage providers. And because artists face challenges working with traditional digital service providers (what happens to content when a service shuts down, for example?), Ujo links to open identity system uPort, ensuring that artists retain control of their identities as well as their content. Finally, Ujo will link to decentralized metadata, ensuring open access to information about rights holders, making licensing easier and ensuring artists receive royalties.
- One such metadata dApp is JAAK, a network that “will allow the music and media industries to collaborate on a global view of content ownership and rights.” JAAK has partnered with music industry heavyweights including BMG and Warner Music Group, and these partners see dApps like this as the future of the music industry, as “a clearer picture of recordings and copyrights could yield untapped benefits for artists and writers.” Indeed, the CTO of BMG described metadata as “the lifeblood of today’s music business.”
CryptoKitties is an application with no brand legacy. Its true value lies in the application, not the content. It is important to remember that the application endures long after the content is discarded. As existing fans discover and adopt these broader use cases based on dApp platforms, interest in them will revive, and the value of dApps with practical everyday applications will only grow.