Ethereum is often praised as the best developer platform based on the number of dApps it has (over 1,500 according to DappRadar). However, their collective transaction volume and user numbers are woefully low. At a cursory glance, EOS dApps appear to be faring better. Its top-ranking dApp racked up 14,300 users compared to ETH’s top dApp reaching just 2,600 in the last 24 hours.
However, according to a disturbing report by blockchain intelligence firm AnChain, the majority of EOS dApp traffic and transactions is actually driven by bots.
Blockchain dApps are struggling to find a user base
From Ethereum to EOS and Tron, dApps are still desperately scrambling to be relevant. The majority of dApps fall into the categories of exchanges, gambling, and gaming, with one or two other bizarre propositions floating around such as earning free candy on the web (incidentally, that’s EOS’ number one dApp right now).
Decentralised exchanges infamously suffer from a lack of liquidity, low latency, a poor user experience, and not enough users. The IDEX exchange, for example, registered just 920 users in the last 24 hours. It’s hardly in a position to overthrow Binance.
Gaming dApps caused a stir back in the mania peak of late 2017 when CryptoKitties clogged the Ethereum blockchain, propelling its scaling issues into the spotlight.
But while digital decentralised collectable cats had their moment in the sun – with one selling for over $170,000 – that hype has died down significantly. CryptoKitties had just 175 users in the last 24 hours. And you can now scoop one up for less than $1, should you be so inclined.
Gambling dApps, especially on EOS, register much larger user numbers in general and far higher transactions. But when you consider that there are around 4.2 billion gamblers worldwide and 2.2 billion gamers, that’s hardly surprising.
Yet what most dApps are still lacking is a compelling enough argument to spur users into taking the extra steps of navigating a blockchain-based system when their favourite games already work pretty well on their smartphones and consoles.
Collectable felines and rolling dice are hardly a match for Fortnite or Grand Theft Auto. So if the number of dApps is one metric by which to measure mass adoption, the state of dApps right now is far from encouraging.
Majority of top 10 EOS dApps in Q1 driven by bot traffic
To add insult to these already lacklustre numbers are the latest findings from AnChain. According to its report based on the top 10 EOS gambling dApps in Q1 2019, bots made up the majority of unique accounts at 51% and over 75% of transactions.
To put it another way:
“Every day the equivalent of $6 million USD in transaction volume is driven by bad bots.”
What’s the significance of this? Well, bad bots is not a new topic. In fact, in the legacy economy, around 40% of internet traffic last year was made up of bots. However, this is the first time that blockchain bots have been studied in such detail.
Why bad bots are a threat to the ecosystem
Bad bots don’t just appear by themselves. Behind every bad bot is an equally bad actor with questionable intentions. The most obvious one of all is an attempt to manipulate dApp rankings by registering higher transactions and users. This is sort of like SEO bots that attempt to manipulate Google rankings.
Another intention behind bad bots could be to increase the liquidity of dApp utility tokens. Keeping in mind that decentralised exchanges suffer from low liquidity, bots are increasingly used for market making to grow asset values and increase liquidity.
Bad bots may also be looking to receive payout dividends. In order to incentivise users to engage with the dApp (particularly in gambling and gaming), most dApps pay out dividends in tokens to people who play the most.
Bad bots can even sabotage competing dApps by congesting their systems in a similar way to a DoS attack (Denial of Service) on the internet. They can also change the entire panorama of just how many people are actually using decentralised applications and how much volume is actually real.
The road to mass adoption may be longer than we thought
If trading volume is one of the main metrics to judge a cryptocurrency exchange by, Bitwise crushed its reliability by reporting that over 95% of its volume was fake. And if dApp adoption and user numbers is another, the fact that the majority of accounts and transactions are made by bots is alarming.
This industry is still rife with manipulation, and we’re going to have to weed out many bad actors before it can become truly mainstream.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.