dApps and the Crypto Winter

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Matthew Bonwick

dApps and the Crypto Winter

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We are big believers in all forms of decentralization.

Whether it’s delivering wealth sovereignty or engineering the next generation of applications on decentralized networks, the use cases that have been and continue to be developed in the crypto world are fascinating. On the counter end to this excitement is an overly-pessimistic mindset, it contends that the ICO boom was largely a bust and that the dApps that were supposed to disrupt died along with it.

Although some companies were created without any true initiative to solve problems and develop products, to assume that dApp development has failed is wildly inaccurate! We’re going to highlight four projects that have shipped amazing products despite the crypto winter. Namingly Maker, Augur, 0x and Gitcoin.

Maker

Launched: 2015

Founder: Rune Christensen

Token: MKR

Token Price: $437

Circulating Supply: 728,228

Valuation: $318,234,132

Conceived in 2015, this project holds the distinction of developing the token with the highest market valuation in the Ethereum ecosystem.* Maker is a decentralized autonomous organization (DAO), and its purpose is to minimize the volatility of its decentralized stablecoin, Dai. Dai is collateralized with Ether through specialized smart contracts called collateralized debt positions (CDPs), and although there are plans to expand the collateral that can be used to generate Dai, for the time being only Ether can be used. The non-stable token MKR is used to vote on the direction of the DAO such as Dai risk parameters and to pay stability fees associated with maintaining Dai generating smart contracts. Remarkably, despite launching at the height of the bull market, Dai has held its peg against the US Dollar while the value of Ether has lost over 90% of its valuation. With 2% of circulating Ether locked up in Maker CDPs and the collateral increasing at 20% a month on average, steady industry adoption and a number of partnerships with other projects, it's no wonder that Maker is highly respected within the Ethereum developer ecosystem.

An appropriate amount of MKR would be liquidated to provide the collateral to back Dai, should the collateralization ratio fall beneath 100%.

Remarkably, despite launching at the height of the bull market, Dai has held its peg against the US Dollar while the value of Ether has lost over 90% of its valuation. With 2% of circulating Ether locked up in Maker CDPs, steady industry adoption, and a number of partnerships with other projects, it's no wonder that this DAO is highly respected within the Ethereum developer ecosystem.

How Do the Tokens Work?

DAI

Dai is a stable asset issued against collateral provided to the Maker smart contracts or CDPs, the Maker smart contract is akin to a bank issuing a loan against the traditional form of collateral, say a house, in the real world if the value of your house drops below the loan issued then the bank will seek either loan repayment or will seize the underlying collateral (the house) The Maker contract does the same thing if the value of the ether backing the generated Dai begins to drop to a level under the the risk parameters set by the contract (maybe 125% collateralized) In this event the CDP will be liquidated and the ether inside auctioned off before it can drop below the 1:1 backing of ETH to DAI.

how cdp work makerdao coinaccord 01
Opening and closing a Maker CDP and how your wallet is affected.
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The process of liquidating a CDP in Maker.

MKR

The DAO token of the Maker platform, MKR affords rights to the holder to govern the direction of the DAO, for the input holders are rewarded in fees generated by opening and closing CDPs, when a CDP is closed a stability fee set by the DAO must be paid (currently the fee is 0.5% yearly with a governance call to raise it to 1% on February 12th) in MKR. Additionally, if a black swan event should occur (as an example if there were a rapid crash in the price of ether and the ratio of ETH to DAI fell below 100% collateral then MKR would be generated and sold on the open market to bring the ratio back up, this incentivizes the holders of MKR to vote on proposals that will best maintain the stability of Dai and overall positive growth of the ecosystem.

Augur

Launched: 2014

Founder: Joey Krug and Jack Peterson

Token: REP

Token Price: $13.54

Circulating Supply: 11,000,000

Valuation: $148,923,384

The first project to run an ICO on Ethereum, Augur’s vision is to become a decentralized prediction market for any event while completely altering the way we verify “truth”. Prediction markets are like many ideas brought onto blockchain and are not a new concept. Due to regulation, development has been restricted. Prediction markets come with an inherent association with gambling, and the decentralized nature of blockchain make these industries a natural fit (read our report on decentralized gambling here).

After years of development, the Augur platform was finally launched in July of 2018 and despite the hype surrounding it, within a few weeks it was apparent that Augur would suffer from the same problems that had plagued other dApps launched that year - adoption. By October, the daily active users of Augur sat around 40, and although there may be a host of reasons the main factor blamed for the general lack of adoption is ease of use. Thankfully, fans of Augur have experienced a lot of work being devoted to improving upon user interfaces and experience with founder Joey Krug saying it is a top issue for the team. Developments like Veil is a means for improving the front end experience of the dApp and hope to increase daily active users of the prediction market application as time goes on.

0x

Launched: 2016

Founder: Will Warren & Amir Bandeali

Token: ZRX

Token Price: $0.24

Circulating Supply: 584,053,225

Valuation: $141,814,689

Founded by two developers with a background in smart contract research and development, Will Warren and Amir Bandeali aimed to deliver a project that would fulfill quite exceptional goals. From its inception, 0x focused on answering the problems faced by both centralized and decentralized exchanges. Although trading on a centralized exchange has many benefits (liquidity, customer service, speed, and a more diverse range of trading pairs) they have their own set of challenges. Early, decentralized developers believed the fear of hacks and loss of assets due to illicit behaviour by central authorities would be enough to incentivize the transition of crypto traders into decentralized exchanges (DEXs). However, with limited adoption, it became clear that customers needed more than security if peer-to-peer trading was ever going to catch on at a larger scale. Enter 0x, who utilize off-chain ordering relays with on-chain settlement to remove blockchain bloat. They also provide access to shared liquidity that can be used by developers building their own 0x relays. Whether it’s a front-facing exchange like Radar Relay or Paradex, or providing the backend utility of fast token transfer ability like the previously mentioned Veil. This killer dAapp sticks out for both it’s utility and flexibility!

Some Great 0x Projects to Keep an Eye On:

Fordex: A decentralized stablecoin relayer with and a fiat on-ramp.

Veil: An extension on the Augur prediction market platform, using 0x’s off-chain transaction speed as the backend exchange protocol.

Radar Relay: An open order book relayer, with similar functionality to centralized exchanges.

Gitcoin

Launched: 2018

Founder: Kevin Owocki

Token: N/A

Token Price: N/A

Circulating Supply: N/A

Valuation: N/A

One of the goodwill projects running on Ethereum, Gitcoin was launched by Kevin Owocki, a software developer with years of experience developing open-source projects. After many hours of work at night and on weekends, Owocki set out to solve what's believed to be the biggest issue with successful open source development - incentivization. Gitcoin launched during crypto-mania and had a goal of building a strong community of developers and employers through posted bounties. The idea was to solve the connectivity and incentivization problem in a single platform. Thankfully, with a bounty fulfilment rate around 80%, it appears to be doing so. It has garnered praise and the attention of the crypto community, and even Joe Lubin and Consensys were impressed with Gitcoin’s success. Gitcoin did not hold an ICO and did not require a special token to access their services. This approach complemented their development style and allowed the Gitcoin community to ship a real workable service without the legal compilations associated with tokenization. With a strong focus on useful development through collaboration and an enthusiastic community of developers solving problems, look at Gitcoin to be an industry staple in open-source for years to come!

Think long-term!

While only four projects were highlighted in this blog, there are dozens more developing the foundational dApps with real use cases. Deep into crypto winter, the market sentiment remains gloomy, 50/50 is the best way to describe the opinions of those concerned with the short term price performance of the market. On the development side of the industry, when looking at the right projects, one may forget about the negativity all together. Everyday new milestones are reached and the with accessibility, usability, and collaboration being the focus of developers right now, look for things to get even better.

*All metrics and prices are from the time of writing.


Further Reading

https://medium.com/@AugurProject

https://blog.0xproject.com/

https://medium.com/gitcoin

https://medium.com/@MakerDAO

Original source for Maker images: https://medium.com/cryptolinks/maker-for-dummies-a-plain-english-explanation-of-the-dai-stablecoin-e4481d79b90


Coinaccord is a Canadian Blockchain Venture Studio that strives to create entirely new and decentralized models on a global scale. As a company run by humans, we want to know if we’ve made a mistake. Do we need to make a correction or do you have a different point of view on the topic? Let us know in our Medium comments.