Are decentralised applications already becoming obsolete?

One must admit a certain sense of fatigue when it comes to hearing the word “decentralisation”.

After all, people have been hyping up the benefits for years of removing intermediaries and having software running over nodes that can’t be censored or shut down.

But, Houston, we have a problem. They also can’t scale to onboard a meaningful number of users, which begs the question – are decentralised applications (dApps) becoming obsolete?

The state of dApps in Q3 is nothing short of dire

According to the Q3 Dapp Market report, which analyses 2,791 dApps over six blockchains, total transaction volume dropped by a massive 40% when compared to the previous quarter. Moreover, less than 150 new dApps were launched throughout the entire quarter. That’s less than the monthly average for the first half of 2019.

If that wasn’t discouraging enough, dApp users are also fleeing decentralised applications like rats from a sinking ship. A measly 36% of dApp users from Q2 used dApps at least once in Q3.

It gets worse. Only 1,350 of the registered dApps are even active. Ethereum still takes the lion’s share when it comes to the number of active dApps at 604 (compared to its closest competitor EOS at 346).

However, when it comes to transaction volume, EOS falls only slightly shorter than Ethereum at $727,864,820 compared to $804,362,687. Since EOS has almost half the amount of dApps that Ethereum has, one could come to the conclusion that it is significantly more popular in terms of usage.

What do people use dApps for?

The type of user varies greatly with the blockchain. When it comes to EOS and Tron, the overwhelming majority are gambling dApps. Gambling dApps make up 63% and 86% of the total dApp transaction volume for EOS and Tron respectively. Ethereum seems to be the developer blockchain of choice when it comes to financial applications, otherwise known as DeFi (decentralised finance).

The only ray of light for the world’s most popular decentralised developer blockchain platform is the fact that DeFi has seen huge growth in Q3. In fact, more than $535 million of Ethereum’s total TX volume came from financial services (some 58%). 80% of TomoChain’s total TX volume also comes from financial dApps, while 79% of IOST’s comes from gambling.

Questionable traffic and ‘decentralisation’

It’s not entirely certain whether or not all this traffic is coming from real human users. According to a report in July of this year by AnChain that analysed EOS’s top 10 gambling dApps, as much as 75% of transactions were made by bots in an attempt to make usage statistics look higher and to manipulate rankings.

Beyond the fact that public blockchains like Ethereum are struggling to scale, yet another piece of disturbing information came out recently. Ethereum’s colourful creator Vitalik Buterin is famed for pouring scorn on other blockchain projects such as EOS, Tron, and TomoChain. In fact, he scathingly attacked them earlier this year for being “centralised piles of trash”.

However, it turns out that more than 60% of Ethereum nodes run on the cloud – mostly on Amazon Web Services. This means that Jeff Bezos’ company indirectly operates nearly 25% of all Ethereum nodes. This proposes several problems. To start with, decentralisation. Is it really possible to call Ethereum a decentralised blockchain when it is at the mercy of a centralised entity?

Moreover, what would happen should Amazon, Alibaba, or Google Cloud decided to shut down the nodes? A large part of Ethereum would suddenly go down and potentially even disappear.

The takeaway

Currently, dApps and the ‘decentralised’ blockchains they’re built on are struggling to stay relevant. That said, the verticals of gambling and finance appear to be having some success (albeit modest), with DeFi actually growing in Q3 despite the overall slump.

In many ways, so much has changed from this time last year, and in others, it feels as if time has stood still. Unless Ethereum can crack on and sort out its scaling issues and address its node hosting problem, the future of dApps looks somewhat bleak.