Thread by @sassal0x

1/ The “dApps have no active users" narrative needs to die.

The way we can measure crypto-network use is more nuanced than pointing to on-chain transactions & making a conclusion from that metric alone.

‘Daily active users (DAUs)' or ‘txs per second’ are bad metrics.

(thread)

2/ Firstly, not all blockchain txs are created equal and measuring the activity of a crypto-network in general is hard. For example, to achieve a large # of tx per second, a network like EOS sacrifices decentralization by limiting the validator pool to 21 ‘block producers (BPs)’.

3/ By doing this, EOS can offer ‘free’ transactions (which are not sybil resistant). This means that the transactions on the EOS blockchain are susceptible to spam/gaming which invalidates the 'txs per second' metric as a gauge for use of the EOS blockchain.

4/ It’s ‘free’ for users to interact with the EOS blockchain because the fees are paid through inflation to the 21 BPs (or the dapp developer purchases EOS RAM). This means that any action, such as a ‘like’ or ‘comment’ on an EOS-based social media app would count as a tx.

5/ To use the Ethereum or Bitcoin blockchain, users pay the fees themselves. A social media application on Ethereum’s layer 1 would be prohibitively expensive and clog the network. That’s why there is important work going into layer 2 tech such as plasma and state channels.

6/ As a result of all of this, layer 2 and interoperability solutions will take many ‘transactions’ off of the parent blockchains layer 1. For example, users could perform millions of ‘transactions’ inside a Plasma chain with only a few of those hitting layer 1.

7/ Another important point is that not all interactions with a dApp are on a blockchain at all. You can browse prediction markets on @AugurProject by using third party services like predictions.global or veil.market/markets By doing so, you are a DAU of Augur.

8/ Daily active user metrics also don’t make much sense for open finance apps. A few people having tens of millions of dollars in @MakerDAO CDPs is worth much more than thousands of people playing blockchain slot machines.

9/ Additionally, someone using $DAI on a centralized exchange to trade is still considered a ‘daily active user’ of the Maker dApp even though none of their trading activity is touching any blockchain layer.

10/ As you can see, ‘daily active users’ or 'tx per second' are really bad metrics for measuring use of crypto-networks. We should focus on other metrics such as fees paid on layer 1, active wallet address’ and the NVT ratio (coinmetrics.io/nvt/#assets=bt…) of a crypto-network.

10/ Thanks to @econoar for thoughts that contributed to this 🦄