The Hunt For Killer Dapps: Hype Is Not Synonymous With Demand

Consumer-facing Blockchain applications have a problem: nobody wants to use them.

 

Despite blockchain’s incredible potential to transform financial transactions, supply chain processes, digital rights management and even our physical infrastructure, consumer-facing blockchain apps — i.e. decentralized applications or dapps for short — have not seen widespread adoption.

 

In fact, according to data from DappRadar, only two dapps have managed to sustain more than 1,000 daily active users (DAU). Both of these dapps, IDEX and ForkDelta, are Ethereum token exchanges. As of today, IDEX has around 3,000 DAU and ForkDelta around 2,000, although these numbers can fluctuate greatly from week to week. Another popular dapp, CryptoKitties, which allows users to breed and collect digital cats, saw huge initial interest followed by a rapid decline in users once the novelty wore off. Late last year, CryptoKitties peaked at near 10,000 DAU, but has since settled into a new norm of under 500. Even dapps with high cryptocurrency volume have a low number of users. Ether casino Etheroll, for instance, consistently has one of the highest transaction volumes on Ethereum with around only 50 daily users.

 

Compare these numbers to those of Facebook, which boasts around 1.4 billion DAU, or even Spotify, which nets around 5.7 million.

 

If blockchain developers really want to disrupt the digital status quo or create value for themselves and their investors, they need to build applications people A) want to use B) want to use more than existing alternatives and C) want to keep using.

 

Unfortunately, few dapps meet these criteria. Instead, a lot of blockchain startups invoke lofty ideals like decentralization, freedom, control, and privacy to attract users. Appealing to these values may resonate within the blockchain community, but most people outside of that community don’t care. Developers can’t project their ideology onto users or assume consumers share their worldview. Look at Facebook, which many pundits and users decried for their lax data security standards in the wake of the Cambridge Analytica scandal. Yet, despite widespread criticism, the controversy had nearly no effect on Facebook’s user or advertiser volume. Most people like the ease and convenience of allowing Google, Amazon, Apple, Facebook, Microsoft and the rest to control and manage their data and interactions. While some blockchain enthusiasts might find this highly centralized model offensive, it really doesn’t bother most consumers — or, at least not enough for them to change their behavior.

 

Additionally, people already have a lot of options for things like peer-to-peer ecommerce, online gambling, productivity applications and gaming (for obvious reasons, there are no other options for trading Ethereum tokens, which is perhaps why IDEX and ForkDelta have been able to sustain users). Because of this abundance of choices, dapp developers not only need to create applications people want to use, but ones people will want to use more than existing alternatives. The benefits dapps offer have to do more than just motivate usage. They have to motivate migration, meaning the value proposition has to overcome transition costs and a learning curve that’s steepened by parochial terminology and the need for intermediary steps like opening a cryptocurrency wallet. Dapps must deliver superior or differentiating value, not just show off novel uses for blockchain. The former is usually required for building a successful business. The latter only appeals to the relatively small number of people within the blockchain community.

 

Developers, however, are not the only ones to blame for lethargic dapp adoption. Investors need to do a better job of holding startups accountable. In some industries like food and beverage, many VCs require demonstrable traction before investing in a seed stage company. For these investors, the aforementioned DAU numbers would likely not qualify as proof of traction. While it’s admittedly specious to compare startups in a mature industry like food to those in an emerging industry like blockchain, investors must nevertheless hold consumer dapp startups to higher standards. Not only does this mitigate risk, but it also reminds blockchain entrepreneurs that hype alone won’t build a viable, scalable, sustainable and sellable business. They have to create products people want.

 

Finding the intersection between blockchain’s potential and consumer demand isn’t difficult, but it does require blockchain entrepreneurs to embrace startup best practices. Founders in other industries, for example, know the importance of identifying product-market fit and validating product demand prior to investing their time and other people’s money into a venture. It’s not uncommon to see B2C startups — and even B2B ones — in other industries conduct extensive consumer research and validation testing prior to raising capital.

 

Taking a more demand-driven, market-first approach to dapp development would help blockchain startups create solutions they know consumers will use while giving their marketing teams a more defined target audience. To do this, developers will have to look at blockchain from a consumer’s perspective, approaching product innovation more like P&G, which often conducts in-depth consumer research, instead of Apple, which has historically eschewed such research. The Swiffer, for instance, is a now-famous result of P&G’s obsession with research. Way back in 1994, P&G hired design thinking firm Continuum to observe consumers cleaning their floors at home. They concluded that traditional mops were highly inefficient, requiring too much time to prepare, too much work to rinse and too many passes to clean since mops often re-introduce dirty water onto the floor. Based on these observations, the team created the Swiffer. Today Swiffer products account for $500 million in annual product sales.

 

Blockchain may be changing how business works, but the laws of economics still apply. Build-it-and-they-will-come is not enough. You have to build something people want to come to. To survive a long adoption cycle and do their part to help accelerate it, consumer blockchain startups will have to stop viewing their dapps as experiments or social enterprises hellbent on fixing the internet, although that’s a noble mission. Their primary goal must be to offer a solution that adds or creates value for consumers beyond that already provided by legacy applications. Do that and the users will follow.

 

About the Author
Remington Tonar is a Partner at Brandsinger, where he specializes in strategic innovation, change management and technology strategy.