According to cryptocurrency researcher Kevin Rooke, Ethereum-based decentralized applications (dApps) such as Augur, AirSwap, and Decentraland are massively overvalued.
As one of the oldest and most complex dApps launched on top of the Ethereum protocol, the development team of Augur has spent most of their resources over the past three years exploring various ways to deploy large-scale apps on Ethereum’s smart contracts.
Consequently, the launch of Augur on the Ethereum mainnet in July was met with hype and respected investors went as far to state that the release of Augur on the Ethereum mainnet could positively impact the price of Ether, the native cryptocurrency of Ethereum, in the long-term.
Augur is a decentralized prediction marketplace that enables anyone to create a betting market for any topic and subject through the utilization of smart contracts. For instance, a user could create a betting line for the next presidential election of the US while placing bets on the next winner of the European Champions League in football.
The dApp has received the admiration of some of the most widely recognized public figures in the cryptocurrency community including Ethereum co-creator Vitalik Buterin, mostly due to the efforts of the team to deploy such a complex application on the blockchain.
Still, despite the hype surrounding Augur, the number of the dApp’s active monthly users hover at around 1,200 and less than a hundred users utilize the platform on a daily basis.
That means, investors of the Augur dApp, which has a market valuation of $250 million, is valuing each user of Augur to be worth $200,000, a number that obviously is not sustainable or reasonable. The market valuation of Augur is not proportional to its active user base or app activity.
This large discrepancy between market valuation and user base is present in almost every dApp with a publicly tradable token in the global cryptocurrency exchange market. With a valuation of $14 million, each user of decentralized digital asset exchange AirSwap is valued at $10,000, and every user of Decentraland, a virtual reality platform based on Ethereum, is valued $270,000.
Buterin’s Concern
In December of last year, Buterin publicly expressed his concern over the rapidly increasing valuation of the crypto market and questioned whether public blockchain networks and dApps have done enough to justify their value.
“So total cryptocoin market cap just hit $0.5T today. But have we earned it? How many unbanked people have we banked? How many dapps have we created that have substantial usage? Low added value per user for using a blockchain is fine, but then you have to make up for it in volume. How much value is stored in smart contracts that actually do anything interesting?” Buterin said.
Since then, the valuation of the cryptocurrency market has dropped by more than 50 percent and dApps, public blockchains, and cryptocurrencies have seen a decline in their user activity rather than an increase in adoption.
In the upcoming months, as the New York Stock Exchange and Starbucks emphasized in their latest announcement, it will be crucial for the cryptocurrency sector to focus on the adoption of digital assets to ensure the market’s long-term growth.
