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With strong competition from other cryptocurrencies, ether’s value will be heavily influenced by the growth of the Ethereum network – something that is likely to depend on the rate at which decentralised applications (‘dapps’) are adopted. We take a look at the state of the dapp scene and list the top ten Ethereum dapps available right now.
Dapps – or ‘decentralised apps’ – are what separates the Ethereum network from many other blockchain networks, and are the reason some believe that ether has more potential for growth than many rival cryptocurrencies.
For those new to the world of Ethereum, a decentralised app is almost exactly what it sounds like – a software application that runs across a network and isn’t controlled by a central authority. What’s got people excited is that they’re secured by blockchain technology, meaning they are very reliable (in terms of ‘up time’) and cannot be altered without the consensus of the network. They can also include ‘smart contracts’ – legal contracts written as lines of computer code that can automatically enforce their own clauses – and issue their own cryptocurrency tokens, which are backed by ether.
These features mean that dapps have the potential to revolutionise many established industries and practices. But whether or not this potential can be realised will likely depend on the scalability of the network, the quality of dapps produced and their rate of adoption – with ether’s value likely to be closely tied to the network’s growth. Here we present a list of some of the top Ethereum dapps on the market right now:
IDEX is a decentralised exchange (DEX) – an exchange that isn’t reliant on a central authority to store funds or enforce trades. It enables users to trade Ethereum tokens including Tronix (TRX), BNB (BNB) and OmiseGo (OMG) directly with other users.
What sets it apart from some other decentralised exchanges is that it can process transactions in real time, so users can trade continuously. It is able to do this because it does not wait for the Ethereum network to mine (process) transactions before confirming them. Instead, it uses a smart contract to process and enforce transactions, with the actual transactions taking place on the Ethereum network – in the order they were accepted – after they have been approved here.
ForkDelta is another decentralised exchange that enables users to exchange ether and Ethereum-based tokens. It claims to have the most ‘ERC20’ listings of any exchange, with ERC20 being a technical standard used for the majority of smart contracts that issue new tokens.
ForkDelta formed in a ‘hard fork’ of EtherDelta – another decentralised exchange – after the latter was sold to new owners. While the newer DEX offers a standalone user interface, it currently still connects to the smart contract that runs EtherDelta (though there are plans to switch to an alternative) and, unlike IDEX, cannot process transactions in real time.
CryptoKitties enables users to collect and exchange digital cats via a smart contract, with the Ethereum blockchain used to secure and track ownership of these collectibles. The game includes a ‘genetic algorithm’ so users can breed new kitties – either using the cats in their collection, or by paying another user a ‘siring fee’ to allow their kitty to breed with theirs.
Each kitty has a unique set of ‘cattributes’ – for example red fur, blue eyes and crooked teeth – with some of these attributes being rarer than others. Some are so rare, in fact, that several kitties have been sold for ether worth more than $100,000 (at the time of exchange). The collectable nature of the game, and luck involved in breeding a rare and potentially expensive kitty has contributed to its success. But its growth has not been without issue. In December 2017, the sheer volume of transactions it was processing caused a major slowdown in the Ethereum network, calling into question the latter’s scalability.
LocalEthereum operates as a peer-to-peer marketplace for buying and selling ether, although it does not offer other tokens. It connects buyers and sellers through a smart contract to complete trades. Payments can be made using a variety of mainstream methods, including PayPal, with any ether held in escrow until the transaction is confirmed.
LocalEthereum claims that it offers many advantages over centralised cryptocurrency exchanges, as they do not have access to any wallet’s private keys and therefore are immune to the type of hacks that have befallen centralised exchanges such as Mt. Gox in the past (though it should be noted that major smart contracts have been hacked previously as well).
Bancor enables users to convert between any two tokens on its network. Its main feature is ‘built-in liquidity’, which means users are able to buy and sell non-mainstream tokens even when supply or demand for these is limited.
It is able to offer this liquidity by placing each token in its own smart contract and linking it to ‘connector tokens’ in the network at a fixed ratio. By becoming a ‘Smart Token’ in this way, a coin can be bought or sold simply by converting between the connector token. Notably, the smart contract exerts some control the supply of each coin, destroying it when it is sold and issued when it is bought, in order to keep exchange rates within the pre-defined ratios as demand shifts.
While Ethereum has made it (relatively) easy to create new tokens, the Kyber network aims to make them useful and accessible. It enables users and businesses to accept payments in a wide range of tokens – even obscure ones – because it immediately and seamlessly converts the buyer’s chosen token into the seller’s preferred coin.
This has the potential to make it easy for individuals, other dapps, vendors, payment gateways and decentralised funds to accept thousands of different coins, which could help the Ethereum network to grow. Like Bancor, one of Kyber’s key features is ‘instant liquidity’, though it offers this by paying commissions to users who contribute their idle coins to a liquidity pool, rather than by creating ‘Smart Tokens’ that self-regulate.
Decentraland is a virtual reality world that runs on the Ethereum network. Users can buy and sell virtual land with ownership recorded securely on blockchain. Importantly, users can develop their own land and control the content that is displayed there, enabling them to monetise their property however they like. This could be by running a casino, educational workshop or underwater hotel, to give just a few examples.
The game includes a custom ether token called ‘MANA’, which can be used to buy and sell property, and user-generated content. According to Decentraland, the only real limit is the user’s imagination – a claim that is backed by the developer’s roadmap, which indicates it plans to roll out custom items and control over the laws of physics in the near future.
0x (pronounced ‘zero-ex’) is a piece of open-source software – based on smart contracts – that enables users to create their own decentralised exchange. Its intention is to support other dapps and Ethereum projects that could benefit from such a service. It includes an Ethereum token called ZRX, which developers building on top of 0x can charge as a transaction fee for their services.
Transactions are completed ‘off chain’ for the most part, meaning that they are settled by smart contracts and only processed on the Ethereum blockchain when it is time for them to be settled. Much like IDEX, this enables 0x to process transactions more quickly than some other decentralised exchanges.
WINGS is a ‘DAO’ or ‘decentralised autonomous organisation’ – essentially an organisation that operates according to a set of fixed rules that are hard-coded via a smart contract. It enables other users to create and crowdfund their own DAOs using a set of standardised smart contracts that have been audited.
DAOs proposed on the WINGS system are first evaluated by the crowd to assess the project’s viability and the amount of funds that could be raised by a crowdfunding round – with users required to deposit some of their WINGS tokens to make such a forecast. If enough users agree that the project is viable, the DAO moves to a funding stage, with users who made accurate forecasts rewarded.
Etheroll is a casino that offers users the opportunity to role a set of virtual dice to win ether. Users stake an amount of their choosing and decide what they want their chances of winning to be, from a range of one to 98%. The casino then adjusts the potential reward in line with the amount of risk being taken. A bet of 2 ETH would earn 196 ETH if the odds of winning were 1% and roughly 0.02041 ETH if the odds of winning were 98%.
The casino is powered by a smart contract that is said to be ‘provably fair’ because users can check the smart contract’s code for themselves. Users can also become a part of the Etheroll ‘house’ by buying its token ‘DICE’. This confers the right to any profit the house makes (off the back of a 1% commission it charges users placing bets), although buyers are also liable for losses if the house does not achieve its expected takings.
Ether’s growth over the next few years is likely to be heavily influenced by the rate at which these dapps and others are adopted. For traders, it will be essential to pay attention to how much activity and press surrounds the network, with ether’s price likely to move in response to any major news – for example, a multinational corporation launching a dapp or a network slowdown.
At the moment however, there is still the issue of scalability, or rather a lack thereof, with questions remaining about how the network will be updated to process more than 20 transactions a second in the future. For this reason, many traders will be paying close attention to announcements surrounding planned Ethereum forks – protocol changes that must be approved by the network – as these could take steps towards meeting the scalability challenge, and help drive mainstream and enterprise adoption of blockchain dapps. Learn more about how to trade on ether.
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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.
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