Years on and dozens of experiments later, Ethereumstill remains the number one choice among developers of decentralized applications for deploying their products and services. The “2020 Q1 Dapp Market Report” published by Dapp.com clearly demonstrates the ongoing trend, as the statistics show that 635 DApps, or roughly half of all functioning DApps on the market, are based on the Ethereum network with 616,369 active users.
Even despite the seemingly gloomy mood prevailing in the global economy, Ethereum is living through its Golden Age in the rapidly developing decentralized finance market. In the first quarter of 2020, the average daily rate of activity of wallets interacting with DApps on Ethereum increased by 16% compared with the previous quarter. The “2020 Q1 Dapp Industry Review” report conducted by DappRadar clearly demonstrates the growing trend.
So, why exactly are DApps developers staying loyal to Ethereum despite its upgrade delays, poor scalability and strong competition from the likes of EOS?
2017: The first and only platform for DApps
Today, Ethereum is not the only platform offering developers tools to launch their own applications, but that was not always so. For the first DApps such as Bancor, which appeared back in 2017, Ethereum was the only proven and trustworthy solution. Nate Hindman, the head of growth at Bancor, told Cointelegraph: “When Bancor launched in June 2017 as the first-ever DeFi protocol, there were no public contenders to Ethereum, so the choice was easy.”
With $120,000 spent by its users in the DApp every day, Bancor remains committed to the choice of Ethereum, as its DeFi use and development remains the most mature and battle-tested, according to Hindman.
Aave, another large finance DApp that ranks ninth in the number of daily transactions, has also been building on Ethereum for a few years now. In an interview with Cointelegraph, Stani Kulechov, the platform’s CEO, noted: “When we started to build on Ethereum, it was the only network with smart contracts.”
Both projects also pointed out that, being the pioneer platform for DApps, Ethereum has managed to retain its leadership in terms of liquidity and security, which has contributed to them staying loyal to the platform for many years.
Other blockchain projects have successfully improved the Ethereum tools, offering even more viable solutions. Among them is Ava Labs, a blockchain platform co-founded by Emin Gun Sirer — a professor at Cornell University and a prominent blockchain scholar. He shared his vision with Cointelegraph on the matter:
“Before Ethereum, many would have scoffed at the very notion of decentralized finance, and written it off as a pipedream. Ethereum has proven what’s possible when you combine a community of talented developers with a compelling sandbox that they could use to create their visions.”
Kevin Sekniqi, a colleague of Sirer and a co-founder of Ava Labs, agreed that when the project started, there were no compelling alternatives that could solve the scalability and performance issues holding DeFi back from reaching its full potential.
A broad range of development tools and quality user experience
The Ethereum network is known for its unique user experience that stands in a league of its own. The network’s development kit includes numerous templates, MetaMask integration capabilities, transaction loggers and its own browser built on the Ethereum Virtual Machine — known as EVM — for faster onboarding.
The platform has extensive functionality capabilities, allowing developers to create hundreds of thousands of diverse applications, unlike Bitcoin applications, which are united by a single part of a multifunctional protocol.
Such versatility was achieved by using the unique EVM, which is a specialized software that supports the launch of any application, regardless of the written language, and allows the deployment of any application that doesn’t have its own platform. It thus becomes redundant to create a separate network to take advantage of the blockchain’s capabilities for solving any problems, allowing developers to use the ready-made Ethereum system.
Consequently, a team developing a new DeFi product really wants to have all of these features when starting out in order to concentrate on building products, according to Francesco Vivoli of blockchain-based loan marketplace Raise. He added when speaking with Cointelegraph:
“We chose Ethereum because of the strong, well-understood safety guarantees provided by the network, superior development tools and great sources of documentation available.”
The functionality of the Ethereum network allows developers to create a vast scope of solutions, including but not limited to smart contracts for supply chain management, applications such as utilities or games, services for user identification, decentralized asset exchanges and even electronic voting systems for political elections.
The network effect and experienced developers
Thanks to the large number of developers involved, the availability of extensive documentation and constant updates, Ethereum is considered to be the best platform for deploying any infrastructure, whether it be games, financial instruments or social networks. This task does not require much experience or fundamental knowledge in programming, as the applications for it are created on the basis of a basic decentralized architecture.
Such versatility and huge support from a community of experienced programmers allow developers to troubleshoot effectively and launch their applications with minimal bugs. A report published by Consensys on June 1, 2018, found that the Ethereum community had about 250,000 developers at the time, and 94% of all blockchain startups were built on the platform. It seems Ethereum is the only blockchain with such a large amount of technically educated engineers. This is, according to Bancor’s Hindman, the key to the smooth operation of the system:
“The core Bancor team works mostly on the contracts, so it is helpful to have a robust ecosystem of third-party developers hacking on the contracts and deploying interfaces to engaged users, who are excited to experiment with new on-chain financial applications.”
Many developers refer to the powerful network effect of Ethereum as a compelling factor for building DApps. Among them is MakerDAO, the most popular Ethereum-based DApp, according to Dapp.com. Niklas Kunkel, the head of backend services at MakerDAO, explained to Cointelegraph what this network effect means for DApps:
“Ethereum embodied the core ethos of decentralization very early on which attracted a large passionate developer community. Networking effects, especially the composability of protocols, are extremely powerful and cannot be understated. Developers choose to build on Ethereum because they inherit an entire ecosystem of primitives including Dai, Uniswap, Compound, and MetaMask. The moat is just too big, and growing larger every day.”
Another blockchain platform, Status Network — which ranks twelfth in the 30-day volume of transactions conducted by its users — has also opted for Ethereum due to its networking effect. Jonathan Zerah, the head of marketing at Status Network, told Cointelegraph:
“When new developers join the world of blockchain, they tend to gravitate towards the largest communities with the most experience, tools, and collaborative projects, and we’re seeing this phenomenon manifest in the rising DeFi movement right now.”
Zerah added that the Ethereum community has the widest audience for the mass adoption of DeFi and Web 3.0 technologies. Beni Hakak, the CEO of LiquidApps — a technology company focused on optimizing decentralized development — shares the same point of view, stating: “The network effects of Ethereum, particularly in the DeFi sector, give the ecosystem a distinct advantage that keeps it growing.”
The importance of the network effect for building financial applications is also demonstrated by Raise, a blockchain platform that built a loan marketplace on Ethereum. Its founder, Francesco Vivoli, explained to Cointelegraph the project’s choice:
“An incredibly strong developer community, which not only generates a network effect — it allows new projects to leverage documentation, libraries and others’ expertise — but also attracts the attention of larger businesses and venture funds as these do their own due diligence on the applicability and viability of blockchain solutions.”
Security and stability
The availability of experienced users and developers in the community allows Ethereum to undergo constant testing and bug-fixing, thus contributing to the overall security and stability of the system.
Ethereum’s pride and joy is the decentralized virtual machine that any developer can use to deploy DApps. The smart contracts manage the resources of the EVM using the code written in the original Solidity programming language. Developers rely on scripts built on “if-then” principles, and nodes of the blockchain execute the commands automatically.
The given approach made it possible to create applications based on Ethereum that work strictly in accordance with the established algorithm without failures, censorship, fraud or participation of third parties. If one of the nodes executing a smart contract fails, it will not affect the stability of the application as a whole, as the resulting data remains unchanged.
With $63.2 million in transactions made daily by its DApp users, 1inch.exchange explained its preference for Ethereum due to its 51% attack resistance. Sergej Kunz, the co-founder and CEO of 1inch.exchange, told Cointelegraph that the “Ethereum network is the most reliable and secure from 51% attack than any other Proof-of-Work blockchain with smart contracts due to really high miner rewards.”
Kunz added that it’s better to have a stable and less upgradable framework in order to keep the whole system very secure. Social network Sapien also opted for Ethereum due to its high level of protection against 51% attacks, according to Ankit Bhatia, the project’s co-founder and CEO.
Ethereum’s stability is another factor mentioned by respondents. Michael Astashkevich, the chief technology officer of Smart IT — a software development and consulting company — explained to Cointelegraph why Ethereum is considered to be the most stable blockchain for DApps: “Blockchain developers appreciate the complete, comprehensive and up-to-date documentation that is available for predictable development processes. It can also boast stable and resilient client applications.” Astashkevich also noted that unlike other blockchain networks such as Waves or EOS, the Ethereum framework is truly decentralized, which is very important for engineers that both build and use DApps.
A viable business model
The monetization of an application is the ultimate essence of its creation and the guarantee of its continued existence. As such, developers often choose infrastructures for their apps based on the availability of a strong and reliable audience. Ethereum boasts a vast community and the ability to launch smart contracts for issuing versatile ERC-20 tokens.
The introduction of the ERC-20 standard provoked the explosive growth of token sales from 2016 to 2017. Despite the fact that token sales have dwindled in numbers and no longer rake in the same revenues as before, Ethereum-based applications still monetize their assets on crypto exchanges and even launch new exchanges. In particular, DeFi DApps — including finance apps and decentralized exchanges — are booming now, with a combined volume of over $11 billion in the first quarter of 2020, according to Dapp.com’s market report.
Having a viable business model is the only way for any blockchain ecosystem to survive and become sustainable, according to Steven Pu, a serial Silicon Valley entrepreneur. He told Cointelegraph:
“The most sustainable way to build an ecosystem of developers is to ensure that they can make money. A viable business model often overrides any technical advantages. In the case of Ethereum, it was the first blockchain ecosystem in which developers could make money, predominantly via issuing tokens.”
Along with an extensive network of experienced developers, Ethereum attracts new projects and their large communities of users that are ready to use new tools in addition to helping and improving the monetization of products. 1inch.exchange’s Kunz told Cointelegraph that for his exchange, the interaction with such a large community and participation in Ethereum hackathons provides priceless experience: “The Ethereum community has people — real people who are already onboarded and use it on a daily basis.” Sapien’s Bhatia further added:
“It’s consistently one of the most active open source projects on Github and the number of Ethereum dApps is always growing, proof that we’re not alone in laying our trust in Ethereum and its future.”
So, despite the delays to the deployment of its 2.0 network, Ethereum has numerous success factors acting in its favor, many of which remain unattainable for the majority of its competitors. However, while Ethereum remains popular among many developers and projects, there are some that opt for alternative frameworks due to its poor scalability and throughput and slow development. These are the issues that might be decisive when it comes to building large-scale platforms with millions of transactions to be processed.