Does Anyone Really Use Blockchain Based Applications?

I am, by all measures, a Blockchain believer. I’m 20 years old, and my first practical experience with Blockchain was buying Bitcoin several years ago, before the massive bull run to $20,000 that made everyone from your barber to your cab driver vying to get a piece of the action.

During the price run-up, I vividly remember one of my college dorm mates setting up his crypto mining rig (a gaming computer), saying it’s “like printing free money.” I asked him how much he actually made.

“A few bucks a week.”

With the masses flooding into crypto, Bitcoin was at its worst — it could take days or even weeks for a transaction to be confirmed (in normal people talk: to send or receive money), and fees were as high as $50. I thought: “There’s no way this is sustainable.” 

Sure enough, it all came crashing down, and most of the price speculators disappeared. The good news: The builders stayed, and projects had a lot of funding to play with.

But that was two years ago, so what now?

With the sheer influx of capital into the space in 2017, and two years with thousands of projects chugging along, you’d expect some pretty magical things to come out the other end.

On the surface, it looks like there’s been an abundance of activity in the space. Everyone from Walmart to FedEx to IBM is involved, and even countries like Estonia, the UAE, and of course China — with their planned Central Bank Digital Currency — are getting their hands on blockchain.

But if we peel back another layer, we’ll find that there’s a lot of talk, without much action from the most important piece of the puzzle: Users. 

Facebook has 100,000x the users of the top performing blockchain app.

Fortunately, the whole transparency part of blockchain makes confirming (or rejecting) this hypothesis very simple.

State of the DApps is a not-for-profit curated directory that analyzes Decentralized Applications. Basically, they let you see blockchain app activity.

We can go to their rankings and sort by users (24h) to get a live feed of the daily active users of blockchain apps:

As of writing this, the #1 app is COSMOCHAIN, with 16,566 users in the past 24 hours. Take a look at Facebook, and their daily active user rate is around 1.623 billion, almost 100,000x greater than the #1 blockchain app.

Not just that, but the first application listed that actually has a token with value, and therefore some barrier to entry, Splinterlands, has just 3,495 daily users.

Sure, Facebook, and companies like it, had a head start on the entire Blockchain industry. Blockchain is also a much harder technology to develop with, given the dearth of talent relative to traditional tech companies and the nascency of languages like Solidity.

None of this changes the fact that Blockchain simply isn’t getting many users. In fact, Facebook only created its famous “Like” feature around the time blockchain was born, in 2009. 

The real difference is that the Blockchain industry simply hasn’t created applications that are seamless, frictionless, and easy-to-use — you know, all those things that define a good product.

The story changes when we look at Blockchain-based applications

Clearly, Decentralized Applications, which intend to run fully on the blockchain, haven’t had much success in light of the astonishing amount of media limelight and capital influx in the space.

However, Blockchain-based applications, which use just parts of the Blockchain, change the game entirely. They aren’t fully hit by all of Blockchain’s problems, from a lack of scalability to un-intuitive architecture, because they’re not fully dependent on the Blockchain.

Of course, this also means that they don’t fully experience all of Blockchain’s benefits — it’s a double-edged sword, but one that is desperately needed for adoption.

More plainly: Hybrid applications, not decentralized applications, are the future of Blockchain.

Let’s take one example: Tokenized funds. These enable investors to receive returns from a fund by purchasing a single token. These were largely pioneered by Invictus Capital, who created the world’s first tokenized crypto index fund and the world’s first tokenized Venture Capital fund (Disclaimer: I'm a consultant at Invictus).

Since 2017, they’ve amassed over 15,000 investors in these tokenized funds, and are only growing with the addition of new funds like an Emerging Markets Solar fund. If we compare that with the typical Decentralized Application, it’s clear that such hybrid Blockchain use-cases have an easier time gaining traction.

In short: Not everything needs to be on the blockchain, but its benefits — from transparency to efficiency — can be part of valuable products and services that drive adoption.