The dApp Ecosystem

I was having dinner with a friend in tech last week and our conversation touched on cryptocurrency and decentralized apps (dApps). Neither of us have the depth to go very deep, but we know enough to get ourselves into trouble.

There are many smart people working on these problems, building games and applications along with infrastructure to power the ecosystem.

I have been casually keeping up with DAU numbers on DappRadar so I decided to ask my friend what he thought they were for the popular collectable cat game, CryptoKitties. Back in December, CryptoKitties took off like a rocketship when it launched—congesting the Ethereum blockchain and kitties selling for as much as a hundred thousand dollars.

His guess: 10,000 DAU. The actual count in the last thirty days hovers between 300 and 500 DAU. The amount of ether moved is also fairly low.

Contrasting this to when CryptoKitties first launched, it's quite a ways off.

Casual observers, like my friend, that heard about CryptoKitties during the launch would have no problem assuming the numbers were still somewhat consistent to then. Perhaps they factor in cryptos general decline since the winter, but still they would have no reason to assume that it dropped by orders of magnitude.

The interesting product analysis is around these lower DAU numbers. Obviously large usage numbers are good, but smaller ones aren't necessarily a sign of a product's demise.

So what happened/is happing to CryptoKitties? And can we use the answer as a litmus of health for dApps in general?

A likely explanation is one of timing and now intense usage by a small number of people. Digital, collectible cats were tightly coupled to the speculation that saw crypto's astronomical rise, causing them to crash back down inline with everything else. Timing turned sour pretty quickly.

CryptoKitties are still tied to the health of ETH, but might also be moving outside of the speculatory shadow cast by general crypto. Now the only people using these dApps are the ones that actually like using them. They likely aren't using CryptoKitties or another dApp as a means to get rich quick. They genuinely like digital cats or whatever.

Even with DAUs in the low- to mid-hundreds, CryptoKitties sees over three thousand transactions every day. That's rabid usage for a small number of people.

Having a small number of users that absolutely love a product is much better than the opposite of having many users that are indifferent. Indifference stalls growth and creates zombie products. True fans will use the product throughout their waking hours, will think about using it when they aren't, and tell everyone they know about it.

At some point though, the true fans need to start converting others into users and the product needs to grow organically.

When you hear people scoff at low usage numbers, it's always a good idea to take a step back and assess whether or not there are true fans present. Over time, true fans have the potential to form the base of a product quietly growing from a few to many, many more.

This is how Google, Snapchat, and many others got their start. The same might be said for dApps some day.