cryptokitties dapp

In late 2017, cartoon cats appeared all over the blockchain.

Pretty soon, people were breeding these digital cats, swapping them like Pokemon cards, and selling them for over $100,000 dollars.

Cryptokitties became a sensation. It’s the simplest example of a dapp (and easily the most high-profile one out there).

cryptokitty dapp breeding

Quick Dapp definition: Dapp is short for “decentralized application.” Think of a mobile app or website application, but hosted on a blockchain. In other words, it can’t be controlled by any one gatekeeper (such as Apple).

Dapps, like Cryptokitties, open up blockchain technology to a mainstream audience. If there’s ever a future where we’re using blockchain on a day-to-day basis, we’ll probably be using dapps.

In this article, we explore the difference between apps and dapps. We also look at ten of the most popular dapps out there. 

App vs. Dapp: What’s the Difference?

Traditional Apps – When we think about traditional apps, a single entity typically controls the database and is responsible for determining whether or not that app can exist. For instance, the Apple App Store and Google Play have total control of hosting and maintaining applications.

These companies also charge developers high fees for hosting, and they earn large profits from sales. For example, Apple gets 30% of all revenue from app and in-app purchases.

Dapps – Perhaps the most fundamental difference is the way in which data is stored. While traditional apps use a centralized database, dapps run on blockchains, which are decentralized networks (i.e. no single entity owns or controls it).

dapp infographic
Credit: @angelomilan

From a user standpoint, dapp stores generally offer a much lower fee structure. They also offer more freedom in the sense that a single entity can’t serve as a gatekeeper. Truly decentralized blockchains don’t allow one party to censor users or dapps.

Thus, developers have the ability to more easily release dapps without having to worry about third-party interference or rely upon the approval of the blockchain creators. Some examples of popular dapp stores include Mobius, app.co, and iExec.

Most Popular Dapps in 2018

The following are some of the most popular dapps as of October 11, 2018. Stats were found on DappRadar. Rankings span across four categories (gaming, exchanges, gambling, and high-risk). Also, it’s important to note that rankings could change at any time in the future, especially as new dapps enter the market.

This is not a recommendation list! You might even want to avoid using some of the dapps mentioned here, especially those in the gambling and high-risk category.

Gaming Dapps

1. CryptoKitties

When it comes to decentralized application games, CryptoKitties is the clear winner of this category ever since its launch in 2017. It’s a game that allows users to collect unique cartoon cats.

cryptokitties dapp

While there have been many popular collectible series in the past, CryptoKitties adds several unique elements thanks to blockchain technology. For instance, each CryptoKitty is represented in the form of a non-fungible ERC-721 token, which allows for each entity to have specific “cattributes”. This means each cat is truly one-of-a-kind. As a result, this has lead to the growing popularity of CryptoKitty auctions.

How popular is this dapp? In December 2017, CryptoKitties accounted for massive congestion on the blockchain. At one point, it cornered 25% of all Ethereum traffic, causing longer transaction times and higher fees.

This dapp is also becoming increasingly mainstream. For example, in March 2018, the company partnered with NBA star Stephen Curry to launch the first celebrity-branded CryptoKitty collectible series.

2. Gods Unchained

The level of support within the blockchain industry (not to mention the amount of venture capital) for this dapp is impressive. Gods Unchained features Coinbase, Nirvana Capital, Continue Capital, and several others in its partners and investors list.

gods-unchained dapp

According to the project website, this is the first ever blockchain eSport. Gods Unchained is a multiplayer game where users battle each other as well as trade, sell, and store gaming cards. Smart contracts guarantee the scarcity of everything in the game from creatures to spells to weapons.

According to the future roadmap, there will be a world championship for this game early in 2019. As of October 2018, around $350,000 has been raised to go towards the payouts for this event. The fundraising goal for the tournament is set at $1.6 million. In the future, users can also expect a release of Gods Unchained VR.

Crypto Exchanges

3. IDEX

According to statistics, IDEX is the most popular Ethereum-based crypto exchange on the market today. While other exchanges like Coinbase/GDAX, Kraken, and Binance are centralized, IDEX is a decentralized exchange, commonly referred to as a DEX.

idex dapp

This means that users have full control over their own funds and own their own private keys. IDEX ranks high in terms of security and customer support. It also features lower fees than centralized exchanges. For example, market makers pay 0.1% fees, and market takers only pay 0.2%. However, fees can be higher at network traffic peak times.

DEX appears to have a massive lead over other exchanged like ForkDelta and Bancor when looking at seven-day trade volume.

4. ForkDelta

ForkDelta only lists ERC-20 tokens (tokens used exclusively on the Ethereum network). Originally, this exchange was called EtherDelta. However, it failed to live up to user expectations and was sold in mid-2017.

Later on, it was rebranded as ForkDelta by a group of traders that launched the exchange. ForkDelta uses smart contracts to complete trades.

Similar to other decentralized exchanges, it offers relatively low fees (0.3% for order executions). While trades are not instantaneously carried out as seen in some centralized exchanges, ForkDelta does offer innovative integrations. For example, it’s possible to connect a Ledger Nano S wallet to the platform.

Compared to other decentralized exchanges on the market, it ranks high in terms of trade volume and liquidity.

Gambling Dapps

The following gambling dapps are not a recommendation and anyone using them does so at their own risk.

5. Fomo3D

Gambling-focused projects are quickly becoming one of the most well-established blockchain use cases. Fomo3D, the top gambling dapp in this space, ironically pokes fun at one of the main issues with blockchain: greedy ICO project teams. According to the dapp website, “it’s your exit scam”.

fomo3d dapp

There are two games: Long Con and Quick Scam. They are built to simulate the standard hype, release, pump, and dump cycles of the countless ICO exit scams across the cryptocurrency space.

Much like a real Ponzi scheme, thousands of gamblers lost Ethereum funds (ETH) playing the game. However, in August 2018, one user actually won $3 million worth of ETH in the first-round jackpot.

At first, there wasn’t much info available on how users can win or lose the game. However, we have since seen an emergence of detailed articles trying to discern the strategies of the first-round winner.

Even with a high potential for losing funds and high blockchain congestion, multiple rounds of large jackpots make this dapp one of the most interesting, popular, and controversial gambling options on the market today.

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6. Etheroll

Etheroll is a provably-fair casino game. Unlike traditional online or casino gambling, decentralized blockchain gambling is able to demonstrate the real chances of winning. This is good news for gamblers who might be concerned about falling victim to large house edges. No deposits or signups are required to play this virtual dice rolling game.

etheroll dapp

Users can not only choose how much ETH they want to bet but also pick their probability of winning. A lower probability of winning presents a higher payout potential. A higher probability of winning presents a lower payout potential. This game is quite simple to get started wagering bets.

7. Zethr

Compared to Etheroll and Fomo3D, Zethr provides a larger selection of casino games. Users can purchase and use Zethr tokens to participate in a variety of gambling options on the platform. These include slots, dice, big wheel, and cards. Users can determine their own dividend rates.

zethyr casino dapp

Just like Etheroll, Zethr uses a provably fair algorithm for all games on its platform. This project also has a few different sites for game playing guides and platform usage stats. So for those users who might be unfamiliar with how Zethr games work, this information can help to understand more about this popular blockchain-based gambling site.

8. Augur

Technically, Augur is not a gambling dapp. On DappRadar, it is listed in the “other” category. So what is Augur exactly? This dapp serves as a prediction market. In essence, users can bet on the outcomes of future events using ETH or REP (Augur’s native cryptocurrency).

augur dapp

For example, users can bet with each other on which candidate will win an election or even catastrophic events. Unlike gambling dapps where outcomes are part of computer code, Augur makes it possible for users to create their own markets. Augur also utilizes a permissionless protocol and offers automated payouts once an outcome is declared.

Eventually, Augur aims to become more than just a betting system. It is pitching itself as a business and political forecasting tool.

High-Risk Dapps (Proceed With Caution)

9. 333 ETH

333 ETH is listed under the high-risk category on DappRadar. Why is this the case?

The reality is that this dapp does sound like a scam. Even despite this, it has become one of the top decentralized applications on the market. According to the project website, one only has to have contributed 0.001 ETH per day and will earn 3.33% daily interest (paid in ETH).

As you might have heard, there are scams (especially on Twitter) where people impersonate famous crypto influencers or project teams. They ask other users to send smaller amounts of crypto in order to get a larger sum in return.

333 ETH appears to be a similar concept. It relies upon more and more people contributing to the project. This is why some sites like Mashable called 333 ETH an outright Ponzi scheme.

This is not a recommendation and anyone using 333 ETH does so at their own risk.

10. Crypto Miner Token

The concept behind Crypto Miner Token (CMT) is similar to that of 333 ETH. According to the project website, CMT is used to help miners earn larger profits. In summary, miners that earn 1 ETH, for example, typically let this amount sit idle in their wallets.

By converting it to CMT, miners are (at least according to the website) able to earn more value. The website also mentions 10% transformation and 4% withdraw fees for CMT participants. These are high amounts by any standard and part of what makes this dapp appear fishy.

This is not a recommendation and anyone using Crypto Miner Token does so at their own risk.

Which Blockchain Will Be the Go-to Platform for Dapp Developers?

The ten dapps mentioned above all utilize the Ethereum blockchain. This is likely because Ethereum is the most well-established dapp platform and largest by trade volume on the market today. This momentum means developers continue to utilize this platform.

ethereum vs eos infographic
Credit: Bitgenste.in

However, Ethereum faces competition for the most dominant platform for dapps. EOS, NEO, and others are all building similar dapp ecosystems for developers and users alike.

Which will become the most popular? A number of factors like throughput, scalability, and security will determine which platforms are technically prepared for mainstream user adoption in the future.

There are also dapps for a variety of blockchain use cases beyond just those mentioned above. It will be interesting to see how this market changes in the coming years, especially with emerging improvements in blockchain technology.

In conclusion, dapps make it possible for blockchain use cases to move from mere ideas to real-world solutions. We are only now beginning to see the rise of decentralized applications and their potential to positively impact specific industries and drive web 3.0 and blockchain forward.

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At a Glance: 10 Popular Dapps in 2018

DappDescription
CryptokittiesA game for collecting unique cartoon cats (like Pokemon cards on a blockchain).
Gods UnchainedA multiplayer game touted as "blockchain's first esport."
IDEXA decentralized cryptocurrency exchange.
ForkDeltaAnother decentralized exchange, specifically for Ethereum ERC20 tokens
Fomo 3DA gambling app built on Ethereum.
EtherollA casino app with transparently fair odds.
ZethrAnother casino app with a wider range of games.
AugurAn app for "betting" on the outcome of just about anything - from presidential elections to the weather.
333 ETHA controversial "high-risk" app based on a ponzi-scheme.
Crypto Miner TokenAnother high-risk app. Claims to increase miners' idle profits.

Coin-Spotlight-Icon-ICX

Overview

ICON is a platform on which one can build new tokens, with their own rules of governance and features. In this way, it is much like Ethereum and the ERC20 standard that allows for new tokens to be created on the Ethereum blockchain. Where ICON differs from ERC20 tokens is that all coins within the ICON ecosystem, called the “ICON Republic”, share an ability to be traded with each other without the need for going through an exchange, a form of a built-in atomic swap.

The republic is supported by what they refer to as a “loopchain”, which is the underlying ICON blockchain that interconnects all individual tokens. The loopchain consists of ICX tokens which are used as the intermediary currency between all other tokens. However, since exchanging between different tokens within the ICON Republic is all handled by smart contracts, transactions should effectively be instantaneous and seamless, giving the impression of direct conversion.

Purpose

The goal of ICON is to create an overall environment in which companies can create tokens that suit their individual needs, and yet still be compatible with all other tokens within the ICON system, allowing for greater liquidity of assets. At the same time, the ICX coin will be a currency that people can use for purchasing goods and services.

One example they offer is of a person going to a hospital that is part of the ICON network. When the person’s visit is registered with the hospital, it alerts an insurance company that uses its own token. The insurance company may be using its own token for smart contracts to handle claims in particular way that is of no concern to anyone outside of that company. However, the insurance company, seeing that the hospital visitor is a member of their services, can issue its own tokens to the hospital or to the hospital visitor, and the hospital or visitor can receive them as a different token they find useful. For example, if the insurance company reimburses the hospital visitor, that visitor might choose to receive the tokens in the form of ICX, which they can then use to go to a coffee shop and buy a drink. Or they might opt to move the tokens into their university’s blockchain, where they also have their own token, using smart contracts or other token features to track students or course credits.

In the end, the ultimate goal is to create for everyone the benefits of custom smart contract solutions, while preserving the advantages that come with a common currency.

Technical

ICON is built much like Bancor, which uses a “delegated proof of stake” model. In ICON’s implementation, blocks are validated by people, called delegates, who vie for that status by committing tokens to what amounts to putting them in escrow. However, just committing tokens is not enough, that is essentially just nominating oneself for the role. One must also submit a proposal and exhibit skills necessary to running a node, and then one is voted into the position.

ICON also follows Bancor’s model of reserve backed tokens. Essentially, when creating tokens, one deposits a certain amount of money to ensure that no matter what, there were always be a value to the coin. If other people start buying the newly created token, driving up its price, a smart contract works to balance the price of the token with the amount in reserve.

Market

ICON has a system in place where it can issue up to 20% of its current number of tokens within the space of one year. The amount of increase it is voted on by people called C-Reps who are delegates that act as representatives for individual tokens. In some years the growth could be zero, or 20%, or anything in between. This means its effectively an inflationary currency. If in any given year a number of new tokens equal to 20% of the existing supply, it means all current token holders have their holdings reduced by 20%.

ICON is backed by DAYLI Financial Group, a large Korean conglomerate, and has a robust network within Korea of banks, insurance companies, and government institutions. As such, they’re well funded and networked, so they have the resources to see themselves through market dips and other hardships that might be too much to bear for smaller startups.

Their promotional material often emphasizes hospitals and insurance companies, which in itself is a large market. Even if they stay within Korea, and within that one business sector, they could stand to increase in value a great deal. If they can break out of that niche and find wider adoption, then their growth could be very substantial.

 

Digital currency exchange giant Coinbase announced via their official blog that they’ll soon be supporting Ethereum-based ERC20 tokens across their various platforms, including GDAX and the newly launched Coinbase Index Fund.

Coinbase currently offers only four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The addition of ERC20 token support opens up the possibility of Coinbase adding one or more of the over 500 ERC20 tokens that exist on the market currently.

Coinbase itself only lists cryptocurrencies after they’ve been listed on GDAX, though Coinbase points out that just because an asset is offered on GDAX doesn’t necessarily determine if it’s offered via Coinbase as well. Coinbase cites liquidity and price range as factors that go into choosing an asset for listing.

On GDAX, Coinbase states that it’s waiting for further clarity on regulation and the effect it may have on the classification of specific assets (ie. a security, commodity, or currency).

Both Coinbase and GDAX supporting ERC20 tokens means there will soon be a pathway to recover any funds customers lost by sending ERC20 tokens incorrectly to an Ethereum address – a mistake that is surprisingly common.

Coinbase offers secure wallets for substantial value crypto holders through Coinbase Custody, which will also support ERC20 tokens. Coinbase Custody too is likely to offer additional asset storage beyond what is offered via GDAX or Coinbase proper.

Lastly, for Coinbase’s newly launched Coinbase Index Fund, the Coinbase Asset Management division will follow their previously announced approach, that any assets added to GDAX will automatically have its market cap applied to the Index Fund’s weighted average.

Coinbase took the opportunity to reiterate that despite the newly added support for ERC20 tokens, no specific asset support or listings are being announced at this time.

A SAFT is an investment contract (security) offered by blockchain developers to accredited investors. The tokens that are ultimately delivered to the investors, though, should be fully-functional, and therefore not securities under U.S. law. The SAFT imitates the Y Combinator Simple Agreement for Future Equity, or “SAFE,” which has been widely used to finance early-stage companies for years.

What’s the problem?

The ICO model is an increasingly popular mechanism to raise startup funds from all over the world. Without clear regulations, token issuers and investors have operated under a cloud of legal uncertainty. Did these public sales result in unregistered securities? Why does that matter?

Issuing unregistered securities is a violation of Section 5 of the Securities Act of 1933. Beyond significant monetary penalties, issuers could face a maximum of five years of federal prison.

At a U.S. Senate hearing in February, Securities and Exchange Commission chairman Jay Clayton stated, “I believe every ICO I’ve seen is a security.” As technology continues to outpace regulations, the industry is in desperate need of a standard, compliant transactional framework to finance token networks.

The SAFT: A Potential Solution

The reasoning behind the SAFT framework is the fact that there is no bright line determining which types of tokens are securities and which are not.

Security tokens may serve as a substitute for traditional securities such as corporate stocks. On the other hand, utility tokens are designed to function like a Chuck-E-Cheese token, providing utility to purchase a service on its native network.

The SAFT framework initiates a way to help utility token issuers finance a distributed network without breaking financial regulations; specifically securities laws. Although utility tokens aren’t designed to be securities, they might end up being considered securities at the time of issuance by the U.S. Securities and Exchange Commission (SEC) when sold to the public.

 

How does a SAFT Work?

  1. Developers of a token-based decentralized network enter a written agreement (SAFT) with accredited investors. The document calls for investors to fund the development of the network in exchange for discounted tokens at a future date. The company developing the network registers with the SEC and does not issue tokens.
  2. The developers use investor funds to develop the network. Investors do not receive tokens at this point.
  3. Once the network is functional, tokens are issued and delivered to investors. At this stage, tokens can be sold to the public directly or through exchanges.

At a high-level, you can think of a SAFT as a deferred ICO. Rather than issuing tokens for cash simultaneously, developers create a contract (SAFT) and raise money to develop a functional platform before creating tokens.

At this time, utility tokens are genuinely functional, supporting the argument that they are not actual securities. This argument is essential as no court, regulator, or taxing authority has yet interpreted the SAFT framework.

Benefits

  • The framework can work within existing laws, one that doesn’t assume legislative change to accommodate the technology.
  • SAFTs can reduce risks for institutional investors, and public investors can still access tokens, albeit at a later date.
  • Potentially mitigates the mass exodus of crypto developers to foreign jurisdictions.

Limitations

  • The SAFT framework is not very useful to non-utility tokens that are themselves securities when sold to the public
  •  It won’t aid utility tokens where purchasers rely on efforts of the seller to increase the price after the token is already in circulation. Examples include buybacks and promises to develop functionality after the token sale.
  • The framework currently focuses on U.S. federal law and potentially deemed illegal in other jurisdictions.
  • Excludes public investors from participating in the early stages of a presale.

A Move in the Right Direction

The SAFT framework is an initial step towards an emerging standard for how blockchain network developers can responsibly innovate. It provides one approach to balancing the risk and reward among stakeholders and benefits from adhering to existing laws.

The SAFT project is a community attempt at self-regulation and has a long way to go before becoming an industry standard. That said, there is an open call for participation, and you are encouraged to join the project.

More Information

https://saftproject.com

https://www.cooley.com/news/insight/2017/2017-10-24-saft-project-whitepaper

https://cardozo.yu.edu/sites/default/files/Cardozo%20Blockchain%20Project%20-%20Not%20So%20Fast%20-%20SAFT%20Response_final.pdf