The road that cryptocurrencies and blockchains have traveled is a long, winding one that has led us all to a path with so many possibilities. dApps, or decentralized applications, have been prominent in recent years thanks to their contribution to the utilization of blockchain technology.
This has resulted in an incredible amount of attention, which has fueled the industry. Let’s take a closer look at dApps and their growth in the market.
What are dApps?
As they’re still relatively new and new developments are constantly being made, it’s difficult to answer this question simply so the best approach would be to identify what would make an application a dApp:
Since dApps function over the blockchain, they’re bound to function in a decentralized capacity. This means that all records must be stored within the blockchain it relies on, ready for public viewing.
dApps have no central authority to dictate developments. They are meant to function autonomously with decisions made by a consensus of the users in their network.
The community of users behind the dApp should also have an agreed-upon cryptographic algorithm for the application. The protocol is meant to show the dApp’s proof-of-value.
Since dApps are reliant on the work of their community, whether it be processing power or man-hours, the user base must have a way of receiving rewards. Rewards can be anything the developers choose but most commonly come as cryptocurrencies or tokens.
To make things a little easier to understand, let’s look at a few examples of dApps. To keep things organized, we’ll sort them out according to their type.
Type 1 dApps function on the main network of their particular blockchain. You can look at these types as the base layer. An example of this would be Bitcoin which works off of the Bitcoin blockchain.
Type 2 dApps sit on top of the first layer. Users using Type 2 dApps will need to use the coins of the specific dApp to access them. A good example of this is Omni, a dApp that uses the Bitcoin network for its functionality.
Type 3 dApps sit at the topmost, above the previous two layers. These dApps use the protocol of the second layer to operate. An example here is the SAFE (secure access for everyone) Network, a dApp that uses Omni’s protocol to issue its own SafeCoin.
It should also be noted that different blockchains will have different fees for the use of their network as well. For example, Ethereum users will need to pay gas fees to transact with ETH. Because of this, Ethereum users need to find out when ETH gas fees are at their lowest.
The Category Driving dApp Growth
Now that we have a better understanding of dApps, let’s talk about the growth of the dApp industry and see which category is driving its development.
2021 would turn out to be a critical year for dApps all over. In that year, NFTs (non-fungible tokens) would rake in $23,000,000,000 USD. NFTs like the Bored Ape Yacht Club, CryptoPunks, and CryptoKitties would fuel this growth, increasing the user base thanks to the trends created by influencers. This would lead to a huge influx of users looking to buy Ethereum for the best price, all eager to participate in the developing market.
What also helped this growth was the sheer number of success stories of users participating in NFT minting and making a huge profit once they sell their NFT in the public market. With all that attention, big-name brands like Adidas, Nike, and even Coca-Cola would begin developing their own NFTs as well. Celebrities and influencers would soon follow, boosting the popularity of the industry even further.
What would turn out to be a game-changer though would be the introduction of crypto games (pun intended), especially play-to-earn games. This charge would be led by Axie Infinity and would have the industry see an average of 1.4 million unique active users. The sheer number would account for half of the total usage of the network and would propel in-game trading volume to $4,500,000,000 USD in 2021. The majority of unique active wallets would turn out to be connected to crypto games. Splinterlands, for example, would attract over 650,000 unique active users to its community in October 2021 alone. All this growth would lead to increased interest from venture capitalist firms, with investments rising to at least $127,000 USD in blockchain games.
The video game category would also see a huge jump after the announcement of the Facebook Metaverse. The announcement caused a stir in the community, opening up discussions on the different metaverse-inspired games and projects—so much so that in-game assets like land would see an increase in value as high as 500%. The attention on the metaverse would also spark growth in the whole market, with blockchain-based virtual worlds reaching an all-time market cap high of $3,600,000,000 USD. All this would result in an industry growth of up to 2.7 million active users, all connected to dApps.
The Growth of the Decentralized Industry
While the numbers might point to NFT being the driving force behind dApp growth, crypto games would end up attracting more users consistently. These crypto games are attracting more investors as well, helping the industry find room for more growth at a much faster rate.
All this is to say that the crypto community isn’t focused on just surviving anymore—these days, it’s all about growth and development.