Decentralized applications - DApps - are the key to the future success of most projects in the cryptocurrency space. Since Ethereum launched in 2015, cryptocurrency and blockchain has evolved from being purely a financial instrument into being a platform that allows for the distribution of a wide variety of DApps.
DApps offer several advantages over traditional centralized applications, like those available through the Apple and Google Play Stores. In theory, DApps are much cheaper to run than traditional centralized applications, as data transfer is distributed among users rather than being run through a centralized server. By verifying all application transactions on a blockchain-enabled distributed public ledger, users potentially maintain control over content and assets they produce and distribute.
There are many projects competing to be the first DApp platform to gain widespread adoption. Some of Ethereum’s chief rivals for creating a varied DApp ecosystem include EOS, NEO, VeChain, IOTA, Stellar, and TRON. While these DApp platforms are typically competing to prove they are the most scalable, secure, and cost-effective, there are dozens of other projects aiming to harness the potential of DApps within scores of highly-specific targeted niches.
While we’ve previously written of how DApps are still some way from achieving the goal of widespread mainstream adoption, some major categories have emerged which will be key to the future success of the DApp concept.
The first DApp to generate much press and attention was CrypoKitties, which ground the Ethereum network to a halt as usage picked up in late 2017.
CryptoKitties is a fairly primitive decentralized game, where users collect, breed, and exchange unique felines. However, it does illustrate the potential use case for gaming DApps quite nicely. At the peak of its popularity, rare CryptoKitties were being sold for as much as $170,000.
Monetization of in-game items is already a huge business. The most popular game in the world right now is Fortnite, which has generated more than $1 billion through purchases of skins and other in-game items, despite the main game being distributed for free.
Many developers are moving into the space and seeking to create the first genuine hit blockchain-based game. Some of the most noteworthy current examples include EOS Knights on EOS, Gods Unchained and Ethermon on Ethereum, and BitGuild’s Magic Academy on TRON.
CryptoKitties creators Dapper Labs recently raised $15 million in funding from firms including Google and Samsung. PlayStation creators Sony may also be eyeing a move into the space, with the recent announcement of plans to create their own crypto hardware wallet.
Other projects to watch include Bit.Game, which has launched the world’s first exchange devoted purely to blockchain gaming assets, and TrustNote, which has created the easy-to-use iToken platform for creating and managing unique digital assets. The iToken platform may be particularly interesting to smaller games developers, as it is makes it much easier and cheaper to create usable digital assets than through networks such as Ethereum.
Gaming is one of the most active areas of DApp development and many predict it will be the first area to find widespread real-world use.
2. Decentralized Exchanges
Cryptocurrency trading is currently dominated by centralized exchanges such as Coinbase and Binance, which charge users fees for trading and withdrawing tokens. Decentralized exchanges (DEXs) allow direct peer-to-peer trading of cryptocurrency. This is, in theory, both cheaper and more secure than using a centralized exchange.
Hacks and exit-scams are a risk of using any centralized cryptocurrency exchange. The collapse of BitGrail is one of the most infamous recent examples. Following the stratospheric rise of the NANO cryptocurrency, which went from around 10 cents to almost $35 per token between November 2017 and January 2018, the small Italian exchange BitGrail announced around $175 million of users’ funds had been lost.
While this type of disastrous loss of funds is a risk more commonly associated with smaller exchanges, the Mt.Gox disaster proves even the biggest exchanges can quickly fall apart. Tokyo-based Mt.Gox was responsible for 70% of all Bitcoin trading back in 2014 when news broke that 740,000 bitcoins had been stolen from its accounts. At the peak of the 2017 bull run, this would’ve been equivalent to $3 billion.
Decentralized exchanges are theoretically immune to such hacks because funds are traded directly peer-to-peer and are never stored on a hackable centralized exchange. However, we use the cautionary term “theoretically” because users of DEXs can still fall prey to hacks and scams. In December 2017, hackers hijacked EtherDelta’s DNS server and redirected visitors to a malicious clone site. Any funds transferred through the hijacked site were siphoned off by the hackers, resulting in the theft of upwards of 308 ETH.
While the EtherDeta hack was a huge deal, the sums of money involved were much less than hacks of centralized exchanges such as BitGrail and Mt.Gox. Only cryptocurrency being actively traded was captured in the EtherDelta hack, where users’ entire balances were available to hackers in the BitGrail and Mt.Gox hacks.
DEXs such as IDEX are already among the most-used DApps. As they become increasingly user-friendly, it seems likely that DEXs will continue to grow in popularity. Other notable examples include StellarX, ForkDelta, and Waves.
Closely linked to gaming DApps and with similar security and cost benefits to DEXs, gambling is a major area of DApp growth. Gambling DApps encompass traditional casino games like poker and roulette, as well as blockchain-based sports betting.
Online gambling is an enormous industry. According to Statista, online gambling was worth $37.91 billion in 2015 and projected to reach $59.79 billion by 2020. Capturing even a small share of this market would make gambling DApps an enormous business.
This is one area that requires even more caution than DEXs, however. Stateofthedapps.com has placed Ponzi scheme warnings on its info pages for the top two DApps in its gambling category, BET24 and 333 ETH. Both projects claim to redistribute tokens generated through usage of the DApps to its users.
Some notable current examples of gambling DApps include EOSBet Casino and TRON Dice.
4. Social Media & Content Distribution
The security and ownership of content shared through social media networks is a massively contentious issue. Within the last few days, Facebook has been rocked by yet another scandal regarding its handling of user data, as it emerged the private messages of 81,000 users had been harvested through malicious browser extensions and sold.
Social media networks that operating through DApps should sidestep these risks entirely, as messages are never viewed or stored on a centralized server.
We recently reported on the Elastos carrier service, which is currently installed in 230,000 Chinese set-top TV boxes. This service enables users to securely transfer files, send messages, and conduct video calls peer-to-peer.
Steemit is the most noteworthy current implementation of blockchain-backed social media. Founded by Dan Larimer of EOS and Ned Scott in 2016, Steemit is a blogging platform where users can reward content curators through with the platform’s native Steem tokens. In May, Steemit announced that the platform had surpassed 1 million active users.
TRON also seem intent on making content distribution an integral part of their DApp ecosystem following their purchase of file-sharing platform BitTorrent. We delved into TRON’s future plans in a recent article which you can read here.
5. Supply Chain Management
Supply chain management is one of the most natural utilizations of blockchain technology. With some many moving parts within any distribution system, an immutable shared record of what products are where makes a lot of sense.
VeChain is arguably the most promising project in this area. One of the key ideas behind VeChain is using RFID chips implanted in products to verify their authenticity. VeChain has assembled an impressive list of partners and expressions of interest in its services. The MyStory DApp can be used on smartphones to verify the authenticity of expensive wines, while designer labels such as Luis Vutton have been linked to future use of the platform. VeChain operates out of Shanghai and authentication of goods is a particularly acute problem within China, where scandals such as the distribution of harmful fake baby formula in 2008 show that there is a pressing need for this kind of service. VeChain’s partnership with Bright Foods shows this project has already gone some way to capturing this highly lucrative market.
WaltonChain is another platform focusing on providing supply chain management services. It was announced in September that WaltonChain will be working with stores in Seoul’s Dongdaemun shopping district to optimize distribution and logistics.
Other projects looking to carve out a niche for supply chain management DApps include OriginTrail and WaBi.
6. Automated Payments
One of the key innovations made possible by Ethereum’s implementation of smart contracts is to allow for automated payments to be made once certain conditions have been met. This concept has already been implemented in Brooklyn, where energy generated through solar panels is automatically traded between residents using Ethereum smart contracts.
Perhaps the most exciting implementation of this use case will be in enabling driverless cars to refuel and engage in ride-sharing schemes without human oversight. We previously wrote of how projects such as IOTA and VeChain are partnering with major players in the automation industry to develop these use cases. Two of the most interesting developments in this sector so far include Volkswagen’s proof-of-concept demonstration for IOTA-enabled automated payments, and VeChain’s partnership with BYD to enable automated distribution of carbon credits.
7. Voting & Identity Services
While digitization has transformed virtually every area of our lives in recent decades, the mechanism of casting a vote in an election has remained virtually unchanged in centuries. This is because democratic elections need to be both anonymous and resistant to tampering. Casting votes in person and then counting these votes by hand has long been seen as the best way to guarantee the integrity of a democratic election.
Blockchain technology allows for verification of voters while keeping voting preferences anonymous. This is an area that is likely to see real-world adoption within the next few years. As part of a collaboration with the Seoul Metropolitan Government, ICON recently demonstrated a voting DApp which utilizes a blockchain ID to allow for secure and anonymous voting.
Blockchain-enabled identity verification and secure distributed data storage can also be used in other sensitive areas, including healthcare. Last month, Ontology Network announced a partnership with Japanese healthcare services provider Genkicell Chain to develop an experimental platform for use in Toyohashi City.
8. Financial Services
The technology that makes DApps possible was originally designed to facilitate payments, with Bitcoin designed as a borderless digital currency. Ripple has generated a lot of headlines in recent months as it expands its partnerships with both established banks and upstart financial service providers.
The potential use cases for DApps in this field are enormous. The Bill and Melinda Gates Foundation is working with Ripple Labs and Coil to develop Mojaloop, a DApp targeting the millions within developing countries without access to traditional banking services. We’ve previously written of how fintech startups and challenger banks are already integrating cryptocurrency services into their platforms.
Other significant projects include OMG and Quoine, both of which aim to create a means of exchanging value utilizing blockchain technology, and SALT, which enables peer-to-peer loans via blockchain. Other areas being targeted by upstart projects include insurance and crowdfunding.
The Future Outlook
Throughout 2017 and early 2018, scores of projects exploded in value based on hype surrounding their disruptive potential. With a bull market now firmly entrenched in the cryptospace, it seems that the days of speculative hype fuelling value growth are gone. Instead, the focus now is on the race to real-world adoption.
Platforms such as EOS, TRON, and VeChain have been working hard to attract Ethereum-based projects to their networks. It’s impossible to say exactly how long it will be until any DApp achieves true widespread adoption. But there are a lot of very interesting projects working to make widespread adoption a reality.