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10 years of blockchain
Bitcoin in Review Going into 2020
The State of Decentralised Applications: Current Adoption and Traction
Distributed ledger technology (DLT) has brought forward a paradigm shift on how data is to be managed. Initially conceived as peer-to-peer (P2P) digital cash in the form of Bitcoin, the underlying technology of cryptocurrencies has evolved into applications for a wide variety of real world issues that have only recently come to the fore. Perhaps the most successful application of blockchain technology, Bitcoin, has demonstrated that decentralised systems possess the capability of transforming long-established structures in a manner that benefits all stakeholders. Traits of transparency, immutability and security result in a self-sustaining, trustless ecosystem that begets accountability, an Achilles heel of traditional, centralised systems.
Given Bitcoin’s successful pilot, it was natural to explore the various applications of blockchain technology that can be applied towards current systems and processes. This came in the form of decentralised applications – or dApps – which provide an exciting look into the next phase of evolution of this nascent and exciting technology.
What are Decentralised Applications?
As compared to centralised applications that run on a single entity or server, decentralised applications (dApps) run on a distributed P2P network of computers that each represents an independent server. DApps need to fulfil the criteria of being open-sourced, where the source code of the application is open and public for anyone to use, and decentralised, thereby leveraging on decentralised blockchain systems. DApps are reliant on smart contracts, which are self-executing pre-programmed contracts and do not require any intermediaries to manage or enforce such arrangements. Smart contracts are executed on blockchain systems, where every transaction or action is both trackable and immutable.
Problems Addressed by Decentralised Applications
DApps try to solve a wide range of issues that are inherent to centralised systems. As they are native to decentralised blockchain systems, they promote a high degree of security and are immutable from hacks and intrusions.
A centralised database that hosts most of our information is vulnerable to a single-point-of-attack, since it is held in a singular location. A coordinated attack on these servers might compromise the system and consequently our data, resulting in numerous implications such as data theft and data manipulation. A distributed system architecture would mitigate these risks.
Although the data hosted in large corporations is still controlled by applications that leverage the stored data, full control is relinquished as soon as data is stored in an external server. This means that applications that leverage on hosting servers — managed by large corporations — would ultimately hand over the sovereignty of their data, assuming that these corporations act in ‘good faith’ or in the best interest of these applications.
Given that almost all of our data are stored in centralised databases controlled by large corporations, they naturally establish the rules governing these data. In addition, these large corporations also implement any changes to these rules. This entails censoring any kind of data which may be politically sensitive in each specific jurisdiction. A recent example of this was the inability of individuals from Iran to access their own work in Github, a software development program that was recently acquired by Microsoft.
Popular Blockchain Protocol for DApps
DApps are built on blockchain protocols that support smart contract functionality. There are numerous blockchains that support smart contracts, but we will focus on the six mainstream blockchains where developers are currently building their dApps.
One of the largest initial coin offerings (ICO) ever seen in the cryptocurrency market was the crowdsale of EOS, a project focused on industrial-scale decentralised applications. EOS raised a whopping $4 billion in its crowdsale. EOS leverages on a delegated proof-of-stake (DPOS) consensus mechanism and is renowned for two key features. Firstly, transaction fees in the EOS ecosystem are eradicated, and secondly, EOS is focused on solving the issue of scalability with the capacity of supporting millions of transactions per second, which is a tall order for blockchains.
Ethereum is by far the most popular blockchain platform for the development of dApps. In fact, over 80% of tokens and 62% of applications are built on the Ethereum blockchain. It is known as the first blockchain protocol that expanded the use of blockchain technology to a variety of applications using ground-breaking smart contracts technology. Ethereum is the brainchild of Vitalik Buterin, who was also a contributor to the development of Bitcoin in its early years. Vitalik decided to create Ethereum in order to facilitate the creation of applications that went far beyond the use case of blockchain as a digital transfer of value, which Bitcoin proved successfully at the time. In order to pursue such an ambition, a virtual machine with turing-completeness had to be conceived. This meant that given enough resources, the system would be able to compute everything. Featuring their own native programming language called Solidity, developers can leverage on a wide variety of tools and functionalities for the creation of any type of dApps. Ethereum is the most actively developed blockchain platform and hosts numerous standards to facilitate the efficient creation of dApps.
Tron is building a decentralised protocol for the digital content entertainment system, supported by a distributed storage facility. With a more focused niche of social media, gaming and gambling applications, Tron is more oriented towards creating a distributed infrastructure for digital content and distribution. Created by Justin Sun, Tron leverages DPOS consensus mechanisms with 27 validator spots that are constantly being contested by a 100-strong validator backup in order to maintain accountability and decentralisation.
Similar to Tron, Steem is a decentralised and censorship-resistant platform for social media and content. The project was spearheaded by Dan Larimar, a prominent individual in the cryptocurrency community. As with EOS and TRON, Steem also uses a DPOS consensus algorithm. Steem possesses a three-token system, powered by its fundamental currency, Steem coin; a stablecoin called Steem dollars (SBD) and Steem power (SP), a token that symbolises a person’s influence in the Steem ecosystem.
Known as the Internet of Service Token (IOST), the project aims to solve the inherent issue of current blockchains, namely, scalability. IOST is a scalable blockchain focused on supporting high transaction throughput of up to 100,000 transactions per second, as compared to the current capability of the Bitcoin blockchain of only seven transactions per second. IOST facilitates the creation and execution of smart contracts, providing the network with a strong infrastructure for supporting a service-oriented system.
Tomochain is a relatively new blockchain, but one which has generated considerable traction, particularly due to it being a fork of Ethereum. Tomochain differentiates itself from the Ethereum blockchain by deploying a more efficient system leveraging on a proof-of-stake voting (POSV) mechanism. A POSV system is integrated with a native voting mechanism in its protocol and facilitates security guarantees with double validation. This allows the Tomochain blockchain to support a greater number of transactions, over 2,000 transactions per second, to be exact, which is far beyond the current capacity of Ethereum blockchain, which averages between 7-15 transactions per second.
State of Decentralised Applications
Currently, there are over 2,600 decentralised applications built on numerous blockchain protocols. The dApp universe consists of applications ranging from digital wallets, decentralised exchanges (DEX), finance, games and storage facilities. There are more than 32,000 active users in the dApps market, with the number of daily transactions exceeding 300,000. This equates to over 2.88 million worth of transaction volumes in a 24-hour period.
Based on the latest report published by Dapp.com, the dApp market is still maintaining its strength with over $3.28 billion worth of transaction volume in the quarter, which is slightly higher than the first quarter of 2019. In fact, the second quarter achieved considerable milestones in terms of dApp traction with the highest number of active users, amount of transactions and transaction volume. There were over 700,000 new users of dApp in the second quarter of 2019, far beyond any other quarters. These statistics represent a positive indication of the state of decentralised applications in 2019, even though the past two years have been a brutal year for cryptocurrency prices across the board.
Unsurprisingly, Ethereum holds over 60% of the dApp market with over 1,600 dApps being developed on the Ethereum blockchain. In addition, the dApps built on the Ethereum blockchain are more diverse than the rest of the blockchain protocols, encompassing decentralised exchanges, decentralised finance platforms and social dApps. Ethereum also leads the race of total active users, with over 365,000 in this quarter alone.
The EOS blockchain comes in second place with 435 dApps being developed on its platform. However, EOS comes out top with the number of transactions generated on its blockchain, with over 189 million transactions, as compared to Ethereum’s measly 6 million. In terms of monetary value, EOS has the highest transaction volume with over $1.4 billion in transaction value.
The Tron platform comes third, with close to 412 dApps being developed. However, Tron is the most active blockchain for dApps with the largest amount of active dApp users — more than Ethereum and EOS. This insinuates Tron’s success in expanding its user base and reaching mainstream users.
Steem on the other hand, is widely regarded as the platform that hosts long-lasting applications, given that all of its applications in the first quarter were still active in the second quarter, which is a great accomplishment.
IOST and Tomochain are the new kids on the block but are quickly growing.
The future of decentralised applications looks positive. With a growing user base and transactions on mainstream blockchains, it is only a matter of time before dApps reach mainstream users.