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The numbers behind Ethereum’s highly successful, highly skewed dapp ecosystem

Posted by
Jon Jordan

Attack of the killer dapps

There are many ways of measuring success, especially when it comes to complex, multi-layered technologies such as blockchains.

But, as the name suggests, at DappRadar we’re all about tracking the success of smart contract blockchains via the dapp ecosystems they foster.

Some common metrics in this regard include the number of dapps tracked (or live), the number of active wallets interacting with those dapps, the value of the token volumes achieved by dapps, and the number of transactions generated.

Each of these has its own limitations, though, even when being used to compare the performance of similar dapps running on the same blockchain.

As for comparing the performance of different dapps running on different blockchains (or especially the metadata of different blockchains), generally it’s a case of lies, damned lies and blockchain data.

And this is why in this article, context and dataset are very specific.

The appropriate time

We’re looking at the value of cryptocurrencies and crypto tokens ’spent’ in (or send to) dapps running on the Ethereum blockchain for the period 10–17 November 2019.

There are a number of reasons for this approach and time period. The two main ones are this was the time frame for DappRadar going live with our new feature tracking the USD value of ETH and ERC20 tokens (that’s the new bit) for all dapps running on the Ethereum blockchain.

This is highly significant as for the first time ever the full value of the Ethereum dapp ecosystem, not just the value of its ETH-based ecosystem, becomes apparent.

The other reason is MakerDAO, one of the most successful Ethereum dapps, added its multi-collateralization feature on 18 November, so our dataset provides a solid comparison point for future analysis.

What do you call a dapp with no volume?

In broad terms, the dataset consists of the performance of the 1,664 dapps running on the Ethereum blockchain that DappRadar was tracking during this period.

These dapps break down in six main categories: Collectibles (accounting for 3% of all dapps), Exchanges (4%), Gambling and High Risk (together 48%), Games (26%), Marketplaces (1%), and Other (17%).

However, looking at the flow of tokens (ETH and ERC20 tokens) being moved in terms of their USD value, and it quickly becomes clear this nominal breakdown is not representative of activity.

Indeed, of the 1664 dapps being tracking, 1472 (88%) showed zero value during the seven day period.

These can be assumed to be abandoned or ‘zombie’ dapps — mainly launched during the 2017–2018 boom years — and now without users or developer support.

Ordering these zombie dapps by categories highlights some interesting trends.

Exchanges show the lowest level of abandonment, which makes sense as exchanges are the most complex dapps to make and operate. Any company attempting to do so is going to work hard to ensure it can build a solid product and attract a large audience.

In contrast, it’s very simple to develop collectibles, gambling and game dapps, and try to make a quick buck. This accounts for the very high levels of zero activity from such abandoned dapps.

Only the cream rises

Moving up the value chain, more interesting trends can be revealed by grouping together dapps in terms of the value of the tokens they generated from their users during the seven day period.

These have been organised in terms of the value of such tokens flows, starting with those 193 dapps each with a value flow of more than $1; the 132 dapps each with more than $100 etc, all the way to the top four dapps, which each attracted over $10 million of value during the seven day period.

Obviously, as the value band increases, the number of dapps in the range declines.

However, what’s really significant is how the very top dapps capture the vast majority of the overall value of the Ethereum dapp ecosystem; at least that measured in terms of the value flow of ETH and ERC20 tokens from users.

This is demonstrated in the following graph, in which the total value of dapps is shown in terms of their band. For example, the 61 dapps each with value flow of between $1 and $100 accounted for a mere 0.001% of the total ecosystem value.

Similarly, the 45 dapps each with value of between $1,000 and $10,000 accounted for 0.2%.

In contrast, the 19 dapps each with value between $100,000 and $1 million accounted for 6% of the total, and the four dapps each with more than $10 million-worth of value accounted for 64% of the total.

In business speak, the 80:20 rule is a popular meme: 80% of the profits come from 20% of the activity etc.

In the blockchain world, things are much more extreme. For this dataset, 0.2% of the total dapps DappRadar tracked on Ethereum, or 2% of active (i.e. not abandoned) dapps accounted for 64% of the total value.

Or, put another way, 18% of the active dapps on Ethereum accounted for 99% of the total dapp ecosystem value.

Currently, for the Ethereum dapp ecosystem — as with other sectors characterised by winner-takes-all network effects — the 80:20 rule is actually more like 99:20.

Show me the significance?

But, you may be asking, why is this important?

It’s a good question and one which cuts to the heart of misconceptions about blockchain technology in general and dapps in particular.

Too much attention has been placed on sometime useful but often irrelevant data, notably number of dapps on a blockchain, or overall transaction volumes.

This has particularly been the approach from advocates of so-called ‘Ethereum killers’ such the EOS and TRON blockchains.

Eleven years on from the Bitcoin whitepaper and four years on from Ethereum’s mainnet launch, however, the sector is still nascent and characterised by widespread experimentation and very low levels of adoption.

It would be foolish to expect large numbers of projects to find any level of success. Instead, as this research shows, the vast majority of dapps have failed.

These almost two thousand individual failures are not failures of the entire project, though. Dozens of dapps running on Ethereum are finding audiences, however niche.

Most importantly, a handful of projects — mainly DeFi dapps such as MakerDAO, dYdX, and Oasis — should now be seen as highly successful and validating the entire dapp ecosystem.

And this is the context in which challengers to Ethereum’s crown as the most active blockchain in terms of developer and user activity should now be judged.

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