Decentralized applications are something everyone seems to have heard of, but no one has used.
It’s not even clear what dapps are: there’s a variety of projects who refer to their software as “decentralized applications” while being fundamentally different in both how they function and how they’re being operated.
So, how exactly do dapps work? Is there currently a market fit for them? And why with so much dapp hype we’re seeing so little adoption?
In this post, we’ll try to shed some light on these intricate matters.
The History of Dapps
Dapps aren’t new. They’ve been around since before blockchains caught the spotlight, and had, too, been regarded as a sensation at one point. The famous ones most can recall include Kazaa and LimeWire (who came right after the infamous Napster), Tor and, of course, BitTorrent.
As far as the definition goes, dapps are applications that aren’t controlled by a single entity and are run by multiple nodes in an ecosystem.
They’ve come to prominence after the advent of P2P file sharing, preceding blockchain, and have since proved immensely resilient. The websites leveraging the BitTorrent protocol for instance (from which the name Bitcoin has probably originated) are still used widely around the world despite constantly being in hot waters with regulators and having generated an avalanche of legal issues over the years.
Today, however, we mostly hear about dapps being tied to blockchain as most startups coming up with decentralized software aim to utilize the native properties of the technology to build a foundation for their apps.
Leveraging existing networks frees engineers from having to put together underlying platforms of their own and thus allows to cut down on development costs. Using systems like Bitcoin, creators can also distribute and track movements of native tokens they typically give out to backers when launching their projects.
Besides that, Ethereum and EOS, often referred to as second-generation blockchains, have layered smart contract functionality on top the “basic” proof-of-work based systems for managing a ledger and thus given a framework and an ecosystem for developers to run their code in.
The Characteristics and Benefits of Blockchain Dapps
Ideally, they should have no single point of failure. Multiples devices must operate dapps thus making it hard for malicious actors to take such systems down (killing every node on the network is extremely hard.)
They are censorship resistant and remove the need for trust as do blockchains themselves. Companies who have apps hosted on public networks can’t arbitrarily ban users, restrict their rights, or sell personal info in some Facebookish kind of scheme. Their every move is being observed and recorded; their app’s code, which users can run on their devices, is open-source and can always be audited.
Not So Decentralized Applications
Not everyone in the dapp land follows the rules to a t, however.
Praising vigorously the idea of decentralization and often using it as a selling point in their white papers, many projects do not embrace it when it comes to their governance models. What we mean is that you’ll often see a single author or a group of engineers owning a dapp’s Github repository and being able, if they decided to act maliciously, to distribute flawed code.
Other programmers in the space have sacrificed decentralization, to a degree, for the sake of usability and speediness. They are using Azure and AWS servers to host their applications or parts of them and thus bump up their soft’s performance. This is in some ways beneficial to the end user, but also creates a point of failure: it these servers, however robust, are hacked or broken down, the entire dapp won’t be able to function.
Finally, engineers on Ethereum are often the only ones owning rights to manage and upgrade the smart contracts (logic bricks) of which their dapps are comprised of. They, therefore, can alter the functionality of the applications as they see fit, or kill and remove the contracts from the mainnet altogether.
How to Interact with a Decentralized Application?
One of the easiest ways, currently, is to access the decentralized web through Metamask – a plugin that bridges Firefox, Chrom, Opera browsers with the entire Ethereum ecosystem, sparing users from having to run a node.
There are also numerous wallets one can install on their mobile devices that have built-in browsers that connect dapps, which might be hosted as regular sites or on IPFS, to blockchain networks.
So far, they all offer a quite crappy user experience.
Why aren’t Dapps Adopted Widely?
Reason #1: Onboarding.
This is possibly the single biggest obstacle hindering dapps adoption: The clunky onboarding.
For example, in order to access Augur, a decentralized oracle and prediction market platform, users need to buy ETH on an exchange (say Coinbase), then move their assets to a Metamask account (or Ledger or some other wallet) and then log in to them. Only after they’ve some spent time interacting with multiple systems preliminary, they can finally reach the dapp.
Reason #2: Volatility, poor UX.
Last year, decentralized exchanges were hot. The Bitfinexes of the world were being hacked frequently and those who had lost assets due to security breaches were determined to move their funds to a decentralized system. However, as everyone was getting ready for the big disruption, the entire crypto market crashed and projects such as 0x found themselves suddenly unable to provide liquidity they’d promised to bring. The liquidity dried up even on centralized exchanges and new tokens weren’t being listed. Furthermore, DEXs couldn’t offer a clean UX (on par with that on Coinbase) and a seamless exchange of tokens for fiat currencies.
They can’t to this day.
Reason #3: Crypto’s bad rep.
The blockchain news has often had us dumbfounded in 2017: The amounts of money that were being poured into various crypto projects, sometimes in terms of minutes, were truly mind-boggling.
A year later, we’re just as stunned at how few people are using these dapps.
Bancor, a decentralized liquidity network that raised around $150m through an ICO last year, now has about 365 daily users; Status, a connector between mobile devices and Ethereum, which scored $64m, has about 115 daily users; and Augur, which we’ve touched on briefly, only has around 33 daily users despite having collected $6m in ICO funding.
Many projects have failed to deliver on their roadmaps and their tokens have now become worthless. Lots of investors lost a lot of money.
Also, it’s become crystal clear that many people who threw money eagerly into crypto projects were merely fishing for quick profits and not planning to ever actually use the applications. They viewed the tokens as speculative vehicles and hoped to re-sell them at a higher price, nothing more.
Things have been quite messy in crypto since last year largely due to the greed of the developers and investors in the space. But this shouldn’t discourage us from driving innovation.
Developers should quit engineering applications on blockchain just because it’s technically possible and to raise money through an ICO (the craze is over and quick schemes no longer work) and focus primarily on adoption. They should conduct diligent, extensive researches and figure out if there’s a market fit for a product or service they’re planning to put out.
Centralized systems, though superior in functionality, do have shortcomings. PayPal, for example, sometimes refuses to service clients that operate in the industries it considers shady, such as adult entertainment, medicinal marijuana distribution, online gambling, and so on.
In some areas, the regulations are so stringent that it drives suppliers away, and dapps, with their poor UX, can become a viable option. However, to achieve wide adoption and have apps used not only by those suffocated by the laws, developers need to concentrate on making them user-friendly.
Want to learn more about decentralized applications, trustless protocols, and distributed P2P networks dapps are run on? Contact our expert for a free consultation now.