DApp Ecosystem Report: Blockchain Bots

Key discovery:

In 2019Q1, blockchain bots were responsible for:

1. 51% of unique accounts and 75% of unique transactions on the EOS network

2. 30.7% of unique accounts and 19.3% of unique transactions on the TRON network

3. 8.2% of unique accounts and 1.3% of unique transactions on the Ethereum network

All told, bot activity accounted for hundreds of millions of dollars in transaction volume across the DApp ecosystem.

Disclaimers:

1. AnChain.AI is NOT affiliated with TRON, EOS, or Ethereum foundation.

2. Bots are common in blockchains as they are throughout the legacy internet. Good bots, bad bots, and neutral parties are expected parts of the ecosystem.

3. Bot presence is, among other indicators, a key component of our proprietary Blockchain Ecosystem Intelligence. Bot presence should be only considered as one of the many valuable metrics for evaluating the health and security of a blockchain ecosystem.

4. We examine data from top gambling DApps on each blockchain. While we believe gambling DApp activity to be generally representative of total blockchain activity, it may provide a less accurate representation of certain blockchains moving forward in a market as dynamic as blockchain.

Abstract:

AnChain.AI leverages artificial intelligence (AI) to reveal the prevalence of bot activity within the EOS, TRON, and ETH blockchain DApp world. To date, this analysis is the largest scale study of bot presence within the most active DApp ecosystems.

Similar to the legacy internet’s epidemic of content scraping bots, cryptocurrency businesses are inundated with a wide variety of bots which make it difficult to distinguish true business metrics from manipulated ones, as noted in the recent SEC filing by Bitwise.

This report concludes our research series on bot activity across the three most prevalent DApp ecosystems as of Q42019. In our research, we have discovered that bots account for a significant portion of activity across the broader DApp ecosystem, with notable attention paid to the manner in which an ecosystem’s construction influences the ease of bot deployment, its subsequent profitability, and ultimately, bot presence.

We believe that our research captures a representative snapshot of the current DApp development landscape, and has served to reveal key concealment strategies and bot behaviors, through which DApp and blockchain developers alike might combat bot-based exploitation as the industry strives for greater legitimacy and becomes subject to more scrutinous external auditing.

Snapshot of the DApp Ecosystem

EOS Bot Presence

AnChain.AI discovered that in Q1 2019 blockchain bots contributed to 51% of unique accounts and 75% of transactions on the top 10 gambling DApps on EOS.

1. In both accounts and transactions, the top DApp in the ecosystem by accounts exhibits very little bot activity.
2. However, the remaining DApps that comprise the top 10 show substantial bot-driven account creation and transaction behavior.
3. Note the dramatic spike in total transactions from DApp-1 and DApp-2, and even the substantial gap between DApp-1 and DApp-3 and DApp-4

TRON Bot Presence

AnChain.AI discovered that in Q1 2019 blockchain bots contributed to 51% of unique accounts and 75% of transactions on the top 10 gambling DApps on TRON.

1. The top 3 DApps on TRON saw relatively little bot activity, particularly relative to their total volume of activity.
2. DApps 4–10 demonstrated significantly greater bot activity, particularly DApps 4, 7, and 10.
3. ‘Group Botting’ is a bot strategy we observed exclusively on the TRON network. The strategy involves a group of bots that, on an individual level, appear relatively inactive, but when observed together reveal a pattern of tightly-coordinated activation, transaction, and deactivation.

Ethereum Bot Presence

AnChain.AI discovered that in Q1 2019 blockchain bots contributed to 8.2% of unique accounts and 1.3% of transactions on the top 10 gambling DApps on ETH.

1. Only the most populous DApp on Ethereum features any significant bot activity.
2. Even this DApp observes a small volume of bot activity relative to others studied.
3. The Ethereum ecosystem is highly diverse, with far fewer gambling DApps represented in its top 10 than TRON or EOS.
4. The Ethereum ecosystem has the smallest gambling DApp environment by far of the three studied. It is absolutely possible that the gambling DApps of Ethereum are not representative of the ecosystem as a whole.

Key Discoveries

Ecosystem Influence on Bot Activity

The construction of a blockchain, the profitability of a DApp ecosystem, and ease of account creation all play a critical role in determining the likelihood of bot-based exploitation.

As discussed in our prior examination of the TRON blockchain, TRON’s free accounts and free bandwidth lend themselves to the aforementioned ‘group botting’ behaviors, while Ethereum’s comparatively low transaction volume and speed limit bot activity to relatively scarce and low-frequency behaviors.

An Overview of Ethereum, TRON, and EOS

The design emphasis behind each blockchain can be observed in their respective bot activity:

• The fastest, TRON, observed considerable ingenuity in bot activity and a thriving, enormous gambling DApp environment, with total weekly transaction volume of nearly $50 million USD.
• Similarly speed-oriented EOS observed huge relative volumes of bot-based DApp activity.
• The slowest, Ethereum, saw extremely limited bot activity, and a comparatively miniscule gambling DApp environment, with total weekly transaction volume of $10 million USD and even fewer users than that number might suggest. Conversely, Ethereum sported the largest number of non-gambling DApps in its most-trafficked DApps.
• The most diverse, Ethereum, observed only 1 gambling DApp in its top 10 by daily users, compared to 4 of the EOS top 10 and 5 of the TRON top 10. This likely relates directly to its comparatively low speed (PoW versus PoS), limiting the viability of both gambling DApps themselves, as well as the ease and efficacy with which bots might be deployed

Why Does Bot Detection Matter?

Blockchain technology and its associated financial markets are still in their relative infancy, and are subject to a great deal of speculative volatility. New blockchain protocols and currencies are constantly being created within this space, and more often than not, user activity, transaction volume, daily volume, and other growth metrics are used as proxies for how well they are performing.

Bot activity calls into question the integrity of such metrics and makes the industry much more difficult to understand, regulate, operate, and secure.

In order to truly understand the health of the blockchain industry and the various crypto-assets within, it is crucial to understand how much of the activity taking place within the marketplace is authentic, and how much of it is being driven by bots with unclear incentives.

Within the blockchain industry the impact of trading bots on cryptocurrency exchange volumes, a primary driver of the overall cryptocurrency market, was recently analyzed in an SEC filing report by Bitwise Asset Management. [2]

This report concluded that “95 percent of reported Bitcoin volume is fake.” This fake volume is being driven by trading bot accounts that skew blockchain transaction volume datasets to the upside, fooling investors, regulators, builders, operators, and enthusiasts in the process.

Our Recommendations

It is evident that the DApp, as the most relevant application of blockchain as of this writing, is currently being heavily influenced by bots; something that the industry has a responsibility to understand and address.

Fortunately, just as in the centralized internet, it is real human users who are the main drivers of the decentralized blockchain ecosystem as they drive real capital into the ecosystem and drive adoption. Organic growth of the DApp ecosystem is the key to its success, so ensuring this ought to be a top priority for all DApp developers, operators, investors, and crypto enthusiasts alike.

Although the blockchain industry is currently unregulated, it is clearly trending towards greater scrutiny, and as the top crypto exchanges come under the SEC’s oversight trading bots will likely be dealt with in a compliance and regulatory context.

That said, the blockchain industry needs to raise awareness on the prevalence of bot activities in blockchains, starting with DApps.

Our recommendations to various sectors:

Blockchain Rating Sites:

• All DApp rating sites ought to leverage bot detection engines to make sure the rankings are fair and up-to-date with real-time metrics, and the practice of using static blacklist addresses databases should be done away with.

Blockchain Protocols:

• As the platforms where the DApps are hosted and run, protocols ought to discourage DApps from using cheating bots in order to fake volume, transactions, etc. in order to appear higher on rankings.
• Protocol teams have all of the available data for each of the DApps within their protocol, so they ought to lead the charge with transparency and re-focus on driving organic growth which will benefit themselves and the industry in the long-term.

DApp Teams:

• Focus on organic human user growth. This will drive sustained success in the long run.
• Invest in good bots that help improve product quality and increase liquidity.
• Do not manipulate usage and volume metrics by building or encouraging bad bots.
• Defend against malicious bots, such as BAPT (Blockchain APT hackers).

Crypto Exchanges:

• Reputation systems akin to a FICO credit score need to be in place in order to block suspicious accounts related to bot activities.