Ethereum losing share as dapp developers choose other networks

Ethereum’s competitors have come to the fore, and are challenging the platform’s dominance by shifting the Dapp market share in favour of emerging platforms like EOS and Tron.

In January 2018, 100 percent of Dapps were running on the Ethereum network, but as of January 2019, only 28 percent of Dapps were, according to DappRadar. Of all the Dapps released in January this year, EOS and Tron together accounted for 60 percent, leaving Ethereum with only 40 percent of market share.

The need for higher speeds and greater transaction capacity, is what DappRadar’s Patrick Barile suggests is causing this emerging trend, which has been accompanied by a change in the dominant use case.

As the Dapp market has tilted towards these challenger blockchains, gambling, which has always been popular with some users, has now become the overwhelming majority use case. Research found that 95 percent of all Tron activity comes from gambling Dapps, and 70 percent of EOS Dapp activity comes from gambling. Only three of the top 50 gambling Dapps however, are running on the Ethereum blockchain.

A hollow victory?

While Ethereum might not be the best for building scalable, user-friendly Dapps, the marketplace itself is still underdeveloped — with few active users, and a rapidly changing line up that suggests few Dapps have found enduring appeal with users.

The top-ranking Poker app for example, Poker EOS, had 1.4k active users in the past 24 hours — a number that represents only 0.03 percent of the 4.8 million daily active users of mainstream Poker app Zynga.

EOS-based BetHash , which claims to be the "fairest decentralized crypto casino built on EOS", is the biggest Dapp by volume with $2.1M EOS transacted in the past 24 hours by 742 active users, according to DappRadar. In comparison, mainstream casino app Big Fish Games had an average of 3.8 million daily active users when last reported in late 2018.

Steemit, the blockchain-based equivalent of Reddit, is another relatively popular Dapp that has yet to gain significant traction outside the insular world of cryptocurrency. The social network was found to have just under 1.2 million daily active users at the end of 2019, compared with the 1.6 billion daily users of Reddit.

The demand for decentralization

Speed and scalability have made EOS and Tron popular with Dapp developers. But, as Ethereum founder Vitalik Buterin suggested in a recent podcast with Laura Shin, the same scaling mechanism that makes them efficient, presents a centralization problem: "One piece of technology that a lot of these platforms rely on is something called DPOS, delegated proof of stake, which is basically a system where the entire network is run by something like 20 to 40 computers" he said. […] "It’s basically a consortium chain where people with coins gets to control who the consortium is. I personally believe that this is nowhere near decentralized enough for a public blockchain system to really stay public in the long term."

These concerns were laid out more fully in a blog post that Buterin published this time last year, exploring the potential problems of DPOS, and explaining why Ethereum is cultivating a different approach to scaling — pursuing a "higher decentralization" which is fully trustless and doesn’t rely on specialized hardware: "With Ethereum we are trying to kind of aim for this angle of higher decentralization, which in our case basically means, we want the system to be able to process 50,000 transactions per second while only running on a collection of nodes running on people’s laptops." he said on the Unchained Podcast.

For now at least, this vision is winning out with investors. While the Dapp market might have taken a hit, Dapps in general represent a small portion of Ethereum activity. Even CryptoKitties, which clogged the network at its peak in December 2017, was thought to be responsible for only 25 percent of total activity on the network.

_As this chart from CoinMetrics shows, despite EOS and Tron occupying a larger share of the Dapp market, the total transaction volume of Ethereum remains higher. _

This leaves the majority of network capacity for real-world transactions, ICOs, and of course, speculators betting that Ethereum will eventually provide a fully decentralized Dapp platform to serve a mainstream audience.