DappRadar Q1 research report: DeFi TVL increased by 37.44% month-on-month, and NFT performed strongly

Compilation of the original text: Bitui BitpushNews Mary Liu

Compilation of the original text: Bitui BitpushNews Mary Liu

in the first quarter of 2023dappSummary

Summary

• In Q1 2023, there will be 9.7% fewer daily active wallets (dUAW) interacting with dapps on-chain compared to the previous quarter.

• In the first quarter of 2023, the total locked value (TVL) of DeFi increased by 37.44% quarter-on-quarter to $83.3 billion.

• The ARB airdrop was launched on March 23, resulting inArbitrumThe daily transaction volume reached a record 2,728,907, surpassing theEthereumandOptimism。

• Social-based dapps registered 210,600 dUAWs this quarter, up 2,250% from Q3 last year; social dapps accounted for 12% of on-chain activity on DappRadar.

• NFTStrong performance in the first quarter of 2023, with transaction volume increasing by 137.04% to $4.7 billion, the highest level since the second quarter of 2022. However, monthly transaction volume fell 15.65% to $1.7 billion in March, while monthly sales fell 4.63% to $2.7 million.

• OpenSeaIn the first quarter of 2023, it lost its dominance in the NFT market, and its market value share was the lowest since February 2021.

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1. Dapp industry overview

Following a dynamic quarter for the dapp industry, the number of daily unique active wallets (dUAW) interacting with decentralized applications decreased by 9.7% compared to the previous quarter. An average of 1,735,570 wallets are connected to dapps per day, and despite the decline, certain segments and blockchains are still showing growth.

Blockchain games continue to dominate the industry, with an average dUAW of 791,474 in Q1, a decrease of 8.58% from the previous quarter. This category dominates the industry with 45.6%. The average dUAW of DeFi in Q1 of 2023 is 399,522, a decrease of 14.73% from the previous quarter, occupying a 23% advantage in the dapp industry.

Social dapps have become one of the most popular verticals in the industry. This category includes all Web3 platforms for social networking, messaging, and content creation, with an average of 210,644 dUAWs in Q1 2023. Compared to the previous quarter, the category declined by 4.9%, but grew by a staggering 2,250% since Q3 2022, with social dapps now accounting for 12% of on-chain activity on DappRadar.

On the blockchain side, BNB Chain remained the most active blockchain this quarter with an average of 449,543 dUAW, despite a 28.62% quarter-on-quarter drop. This is followed by Wax, which has grown 9% over the past 3 months to an average of 397,273 dUAW. Polygon had a strong quarter as its daily unique active wallets grew by 25.93% to 197,343 daily unique wallets.

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2. DeFi TVL soars to $83.3 billion, Layer 2s on the rise

The DeFi industry has been in the spotlight in the first quarter of 2023, with DeFi's total value locked (TVL) reaching $83.3 billion at the end of the quarter. This is a significant increase of 37.44% from the previous quarter, indicating a growing interest in decentralized finance. Contributed to the popularity of scaling solutions such as Arbitrum, Fantom, and Optimism. Notably, the price of Ethereum is up 48% this quarter, reaching $1,803 at the time of writing.

One of the main factors driving the hype around DeFi this quarter was the highly anticipated Arbitrum airdrop, which attracted a lot of attention from traders. However, on March 11, following the SVB debacle and subsequent USDC decoupling, the DeFi market experienced a dramatic drop in TVL, falling 9.6% from $79.28 billion to $71.61 billion. This created panic among investors, leading to massive sell-offs and a drop in TVL.

Fortunately, on March 13, USDC reserve deposits held by Silicon Valley Bank were fully opened to the public, which helped to stabilize the market. The announcement caused DeFi TVL to surge 13% to $81.15 billion, but most importantly, it helped the market quickly regain trust and showed robustness along the way.

In terms of the top blockchain protocols in the DeFi space, Ethereum dominates with a TVL of $55.8 billion. This is a 48.32% increase from the previous quarter and 66.95% of the entire DeFi TVL.

BNB Chain ranked second with an increase of 20.69%, reaching US$7.2 billion in the first quarter of 2023, of which PancakeSwap is still the most used dapp in the industry, with a UAW of 1.37 million in March. Tron remains TVL's third-largest blockchain, worth $5.2 billion, up 17.55% amid SEC charges against Justin Sun and the Tron Foundation (including allegations that TRX is a security). Despite this, TVL has remained fairly stable.

Arbitrum and Optimism maintained their positions in the TVL Blockchain Top 10 and their dominance continues to increase. Arbitrum was one of the best-performing projects during the quarter, growing 118.40% to $3.2 billion. Optimism hit $1 billion in the quarter, up 85% from the previous quarter. This shows that Layer-2 solutions are gaining popularity in the DeFi space.

Surprisingly, Solana's TVL increased by 127.05% to $791 million. This growth appears to be driven by the recently launched DAO building tool SPL Governance, which has achieved a TVL of $179.75 million. Additionally, Solana’s token, SOL, also saw a 115% increase this quarter.

On March 23, the highly anticipated airdrop of Arbitrum tokens took place, triggering a frenzy in the crypto community. The Ethereum Layer 2 scaling solution distributed over 1 billion ARB tokens to over 600,000 users, stabilizing the token's market capitalization at around $1.5 billion. Between Claims and Trading mode on, the daily volume on March 23 was 2,728,907, more than Ethereum or Optimism.

While the token’s price peaked at $11.80 on launch day, it has since stabilized around $1.23, with its current market cap putting it ahead of its closest competitor, Optimism.

In addition to individual users, ARB tokens will be distributed to the most successful decentralized applications (dapps) in the ecosystem. Popular Web3 companies such as Uniswap, Aave and OpenSea have moved to Arbitrum in recent months, taking advantage of its similarity to the Ethereum blockchain architecture.

One of the most successful projects on Arbitrum is the decentralized exchange (DEX) GMX, which allows its users to trade leveraged through financial instruments called perpetual futures. Additionally, GMX has positioned itself as the leader in Arbitrum's DeFi space, accounting for over 80% of all TVL. There are also dapps dedicated to games and NFTs on the blockchain, and Treasure has quickly become a well-known Web3 game studio in the industry.

Arbitrum's token distribution is not limited to users and dapps, but is also distributed to the community through the DAO. The Arbitrum Foundation aims to decentralize its network and give the community control over its ecosystem and technology. This airdrop and DAO are just a few of its many plans to give all sub-communities a voice.

It should be noted that all investor and team tokens have a four-year lock-up period, the first unlock occurs within one year, and the remaining three years are unlocked monthly.

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3. The Future of Social Networking: How Social Dapps Lead Web3

Social dapp is becoming a new trend in the blockchain industry, and more and more decentralized applications are being developed to facilitate social interaction and collaboration among users. These dapps utilize blockchain technology to ensure data privacy, security, and transparency, and provide features such as user profiles, messaging systems, and content sharing capabilities.

One of the leading social dapps is Hooked, a BNB-based dapp with an average of 120,584 daily unique active wallets (dUAW) in Q1 2023. Hooked is a community-driven social protocol that provides a gamified experience and integrates wallets and decentralized identifiers (DIDs) into its ecosystem. Galxe, another popular social dapp with 39,953 dUAWs, aims to build an open and collaborative network of credentialed data accessible to all developers in Web3.

With 30,407 dUAW, CyberConnect is a decentralized social graph protocol that enables users to create profiles on the BNB Chain as an anchor for their decentralized identities. With an average of 3,146 dUAWs, Lens Protocol provides a platform for the decentralized community to create and manage its own governance mechanisms.

Finally, Phi with 2,405 dUAW is a social platform based on ENS and on-chain/off-chain wallet activity that enables on-chain identity visualization.

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4. The NFT market is off to a wild start with $4.7 billion in sales

The NFT market is off to a good start this year, with the first quarter of 2023 being the best quarter since Q2 of 2022. Although transaction volumes fell slightly in March, the overall performance was impressive.

The NFT market saw a 137% increase in transaction volume in the first quarter, reaching a total value of $4.7 billion. in February due toBlurTrading volumes fell by 15.65% in March after the token was inflated. NFT sales fell only 4.63% in March, with 2.7 million NFTs sold. However, total NFT sales in the first quarter of 2023 were 19.4 million, an increase of 8.56% compared to the fourth quarter of 2022.

Ethereum remains the dominant blockchain in the NFT market by volume, accounting for 89.50% of the market share in March. Additionally, Ethereum’s quarterly transaction volume increased by 245.43% to $4.1 billion in Q1 2023 compared to Q4 2022.

CryptoPunks is the most traded NFT series on Ethereum with $241 million in volume, a 1,214% increase quarter-over-quarter. In March 2023, Yuga Labs' NFT collections dominated Ethereum, accounting for 38.61% of the total NFT volume on Ethereum and 34.55% of the entire NFT industry.

Surprisingly, Solana ranked second with a transaction value of 242 million US dollars, an increase of 4.55% month-on-month. NFT aggregator Monkey Kingdom boosted the Solana NFT protocol in March, with $7.9 million in transaction volume, doubling from February. Back in December, two of the most popular NFT series on Solana announced that they would be bridges connecting Ethereum and Polygon, and on March 27th DeGods and one of the co-founders of y 00 ts announced the first sale of y on Polygon 00 ts, which marks the successful bridging of one of the series.

Additionally, Polygon is off to a good start to the year, recording $29.8 million in volume in March, although it was down 24.20% from the previous month. However, looking at the quarterly numbers, it recorded $85 million in transaction volume in Q1 2023, a 125.04% increase quarter-on-quarter and one of the best quarters since Q4 2021.

Polygon’s popularity among NFT creators has been on the rise in recent months. This is due to its low fees and fast transaction times compared to other blockchains, making it an attractive option for those looking to launch and trade NFTs. In addition to this, on March 8, cryptocurrency exchange Binance announced the launch of Binance NFT, and the Polygon network has been incorporated into its market-supported blockchain.

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5. Challenge the leader: Blur vs. OpenSea

The NFT market is growing rapidly, with new players emerging. In the first quarter of 2023, Blur dominated the NFT market, with increased transaction volume and market dominance. The market has a transaction volume of $2.7 billion, an increase of 783.89% compared to the fourth quarter of 2022, and a market dominance rate of 57.44%. In March, Blur still dominated the market with 70.5% despite a 6.56% decline in transaction volume to $1.2 billion.

Blur owes its rise to its unique features and products. One of the big reasons professional traders are flocking to Blur is its promise to users that it will reward them with future airdrops of BLUR tokens, totaling around 300 million BLUR during the next giveaway "season". With a fully diluted market cap of $2.5 billion for the token, the Blur team is more than willing to wield its financial clout to entice NFT traders to stick with them.

On the other hand, OpenSea, once the NFT market leader, now faces stiff competition from Blur. In Q1 of 2023, OpenSea recorded a quarterly increase of 68.41%, with a transaction volume of US$1.4 billion and a market share of 31.10%. However, in March, OpenSea's deal volume fell 35% to $381 million and its market dominance was 22%. This is the smallest market share since February 2021.

The home market for the CryptoPunks NFT collection turned out to be one of the best-performing NFT markets in March, with volume reaching $30 million. The market was up 90.46% from the previous month, the highest amount since July 2022.

It’s worth mentioning that CryptoPunks are currently seeing a lot of trading activity on the Blur marketplace. According to recent figures, a staggering 87% of all CryptoPunks traded volume happened on Blur, amounting to a staggering $216 million. Even more interestingly, the average transaction size on Blur is 7.34% lower than on CryptoPunk's native NFT marketplace, with an average transaction size of $114,453.69.

While Blur's rise has been impressive, the market needs to be careful about how it manages its user base and perceives its loyalty.

What's more, there are knock-on effects of Blur's rise to dominance in other areas to consider. The NFT world should celebrate the fact that there is such a dedicated and creative platform dedicated to meeting the needs of traders. Still, when the prosperity of one market or user comes at the direct or indirect loss of another, big problems can start to surface.

Blur claims that OpenSea is a centralized opponent in the NFT ecosystem, but having a group of NFT whales with only a few hundred NFT whales paying royalties and market dominance is not the most decentralized system either. The Web3 ecosystem needs to ensure it innovates and caters to the needs of everyone in the space, not just professional traders. Rather than making them wonder which platform will honor the royalties of their work in which way, there is a decentralized way for artists and project leaders to control themselves.

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6. $373 million lost to hacks and exploits in Q1 2023

According to the REKT Database, the total amount of funds lost to hacking and exploits in the first quarter of 2023 was $373 million, a sharp drop of 92.60% compared to the $5 billion in the previous quarter. However, this does not mean that the crypto market is completely free of security concerns.

One of the most notable hacks that occurred in the first quarter was that of Euler Finance, which resulted in the theft of millions of dollars in various cryptocurrencies. Attackers stole nearly $196 million, including DAI, USD Coin, StETH, and Wrapped Bitcoin (WBTC). The attack was carried out via a flash loan attack, which utilized a multi-chain bridge to transfer funds from the BNB Smart Chain to Ethereum. The funds were then deposited into the encrypted mixer Tornado Cash, making it difficult to track and recover the stolen funds. According to a tweet from BlockSec, the Euler exploit returned 51,000 ETH to Euler Finance on March 25. However, some of the stolen money remains in the hands of the hackers.

Another major hack that occurred in Q1 was the BonqDAO and AllianceBlock exploit, where attackers manipulated the BonqDAO price oracle to increase WALBT prices. This manipulation allowed the attacker to mint over 100 million BEUR, which was then used to manipulate WALBT prices and liquidate multiple treasuries, enabling the attacker to extract illicit proceeds totaling 113.8 million WALBT and 98 million BEUR, worth over $10 million.

Interestingly, more than half of the hacks that occurred in the first quarter occurred on BNB Chain, of which 18.2% occurred on Ethereum and 9.1% occurred on Polygon. This highlights the need for heightened security measures on these chains and for users to be extra vigilant when conducting transactions.

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7. Q1 blockchain game dominance increased to 45.60%

The blockchain gaming industry has been growing steadily over the past few years, and the first three months of 2023 will be no exception. While daily unique active wallets (dUAW) interacting with gaming dapps on-chain declined slightly in March, the industry’s overall dominance has increased over the past quarter.

In March, the number of daily independent active wallets interacting with the game dapp chain was 741,567, a month-on-month decrease of 3.33%. In terms of quarterly performance, there was an 8.58% quarter-on-quarter drop, with an average connection of 865,783 dUAW. While these numbers may seem disappointing, it must be considered that the industry is still relatively new and constantly evolving.

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8. Silicon Valley bank failure spurs demand for stablecoin regulation

The recent collapse of Silicon Valley Bank (SVB) has sparked a discussion about the need for stablecoin regulation. Stablecoins are digital currencies backed by a reserve asset (usually the U.S. dollar) and designed to maintain a stable value. USDC, issued by Circle Financial, is one of the leaders in the $100 billion+ stablecoin market. However, when SVB collapsed, Circle revealed it had $3.3 billion in deposits in the closed bank, causing the stablecoin to trade below its $1 peg for about three days, as low as 88 cents.

The incident highlights the fact that the stablecoin market desperately needs a set of rules of the road. While Circle and other stablecoins claim to hold 1-to-1 collateral for every digital dollar they mint, Circle holds $11 billion

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9. Conclusion

After a dynamic first quarter of 2023, the dapp industry has seen its fair share of ups and downs. Nonetheless, on-chain metrics and market trends suggest that the crypto space is poised to grow and the future remains bright.

14.07% fewer daily active wallets (dUAW) interacting with dapps on-chain in Q1 2023 compared to the previous quarter. However, despite the decline, the total value locked (TVL) in DeFi increased to $83.3 billion, showing the resilience of the decentralized finance space.

At the same time, the NFT market performed strongly in the first quarter of 2023, with transaction volume increasing by 137.04% to $4.7 billion, the highest level since the second quarter of 2022. Despite a slight decline in March, NFTs continue to attract the attention of investors and collectors.

A notable trend in Q1 2023 is the growing dominance of blockchain gaming, which currently accounts for 45.60% of all on-chain activity. Platforms like ImmutableX and Polygon are leaders in gaming, and their partnerships and innovations are paving the way for the future of Web3 gaming.

However, the crypto space is not without its challenges. In Q1 2023, $373 million in funds were lost due to hacks and exploits. This is a sharp drop of 92.60% from the previous quarter's $5 billion, showing the resilience and adaptability of the blockchain ecosystem.

The collapse of Silicon Valley Bank also highlighted the need for stablecoin regulation. As more and more traditional financial institutions enter the crypto space, we must develop clear guidelines and regulations to ensure the stability and safety of the market.

Despite these challenges, the overall sentiment in the cryptocurrency market is optimistic and bullish. The first quarter of 2023 demonstrated the resilience and adaptability of the blockchain ecosystem, with on-chain metrics and market trends suggesting the future remains bright.