Original author: Zack Pokorny, Galaxy

Original translation: Deng Tong, Golden Finance

It has been 50 days since the beginning of 2024. We have seen the market value of on-chain tokenized Real World Assets (RWA) reach a historic high, the number of addresses participating in DeFi on major L1 and L2 chains reach a two-year high, and the L2 ecosystem of Ethereum remaining vibrant. This report focuses on some major trends emerging in the industry from the perspective of on-chain data.

• The total market value of RWA tokens reached a historic high of approximately $2.774 trillion on February 2nd, and the market for tokenized financial assets (including government bonds, private credit, and real estate) reached a new high of $1.614 trillion on February 8th. As the market value of RWA tokens reaches this milestone, native crypto assets are gaining market share in key areas of DeFi compared to RWA.

• The number of addresses interacting with DeFi on major L1 and L2 chains is close to a two-year high, reaching 445,000 addresses. DEXs are one of the most common types of DeFi applications used by users for the first time.

• In the Ethereum ecosystem (L1 and major L2s), the number of daily active addresses has reached a historic high, and daily transaction volume continues to rise. L2 revenues have also experienced significant growth last month.

RWA

On February 2nd, 2024, the market value of tokenized real-world assets reached a historic high of $2.774 trillion. It is worth noting that the market for financial assets, including government bonds, other bonds, private credit, and real estate, reached a historic high of $1.614 trillion on February 8th, 2024. Please note that these figures only consider the value of RWA tokens themselves on public blockchains, such as Ondo's OUSG and Tether's XAUT, and do not include stablecoins or issuer tokens such as ONDO and CFG. The dominance of financial assets, RWA treasury bonds/bonds, is 58.1% and has decreased by approximately 110 basis points from the historical peak as of February 26th, 2024.

Although the on-chain market capitalization of RWA tokens has reached a new high, the dominant position and usage of RWA in on-chain products have been declining. This is most evident in the collateralization of DAI, which has been steadily decreasing since late October 2023. This is a key indicator that people are increasingly inclined to use native crypto assets rather than on-chain RWAs, and in turn, there has been a general increase in demand for cryptocurrencies. The recent growth of stablecoins supported by LST will only amplify this concept and indicate a strong trend.

In addition, the productivity of native crypto assets has surpassed RWA in several aspects. We explained this in our newsletter on December 1st, using Maker and DAI as examples, where crypto-backed loans received higher stability fees compared to RWA. This dynamic still exists and is growing again as MakerDAO votes to increase the stability fees on some of its on-chain vaults. Most notably, it raised the cost of minting DAI through its stETH vault by 191 basis points. It also shows in the supply APY relative to the yield of Treasury bills for major stablecoins. The following chart shows the weighted average supply APY of borrowed amounts for USDT, USDC, DAI, and FRAX in Aave v2/v3 and Compound v2/v3. Since late October 2023/early November 2023 (just before the decline of DAI RWA collateral), stablecoin yields have consistently outperformed the yield of 3-month Treasury bills.

DeFi Users and Reserves

According to 7-day SMA data, on February 1, the number of daily active addresses (DAA) using DeFi in major L1 and L2 reached a 2-year high of 576,000. Solana has consistently maintained the most active DeFi addresses, reaching a peak of 330,000 on February 1, 2024 (the day after the Jupiter airdrop) and 196,000 as of February 20, 2024. On the other hand, Ethereum has seen a continuous loss of DeFi users over the past year (a 24% decrease from 120,000 addresses on February 20, 2023). The next section will provide more information about Ethereum's activity and user count.

Dexe has become a key component for users to join DeFi on the seven chains mentioned above. As a reference, the financial applications category in the following chart includes applications such as lending platforms and yield aggregators. Since September 2023, nearly 60% of all new users participating in DeFi on these 7 chains have started with DEX. This aligns with the airdrops and speculation frenzy surrounding DeFi over the past six months. Additionally, please note the increasing importance of NFTs in attracting new users to DeFi over the past three months.

In the three months leading up to January, DEX user retention rates have shown strong performance. Among the observed chains over the past five months, Solana has the highest DEX user retention rate, thanks to the Jupiter airdrop activity. The following chart tracks the monthly retention rates of DEX users in Solana, Arbitrum, and Optimism (the top three chains in terms of DEX retention rate) for more than a month (users who joined in month x and were still trading in month x + 1). The monthly retention rates of these users had been steadily increasing for four consecutive months (6 months for Solana) before declining in January 2024. The weighted average retention rate is based on monthly new DEX users.

Ethereum and Layer 2 

Ethereum has been criticized for a decline in user count and overall activity on crypto Twitter. While the number of daily active addresses and activity metrics such as transaction count have indeed remained flat or slightly decreased for much of the past two years, it is unfair to measure Ethereum solely through L1 when considering the promise of a rollup-centric future. When considering some of the top L2s, user growth and activity are approaching all-time highs.

The graph below shows the sum of daily active addresses for Ethereum L1 and some leading L2s across the entire network. As of February 21st, the total number of daily active addresses on these networks exceeded 1.2 million, with Ethereum L1 accounting for only 360,000 addresses. Please note that this chart only includes a portion of all Ethereum L2s.

Ethereum and transaction count on the same L2s show similar peaks. Despite the lackluster performance of Ethereum L1 transactions, there were an average of 3.14 million transactions per day within its L2 ecosystem in the 30 days leading up to February 26th, 2024.

Aligned with the strong transaction count is the growth in revenue. As of February 26th, 2024, Arbitrum, Optimism, Base, Scroll, Zora, and zkSync generated an average of $1.5 million in revenue per day using a 7-day Simple Moving Average (SMA) (these are fees paid by users to aggregators). February 26th, 2024 also marked the second highest observed daily composite revenue for chain stores.

In the 30 days leading up to February 26th, 2024, these L2s also paid over $21.6 million in data cost to Ethereum L1. This number will become increasingly significant as activities previously performed on Ethereum L1 are moved to rollups.

Summary

Here are some key signals provided by the data above:

• The demand for replacing RWA with native crypto assets in DeFi continues to exist.

• Despite the end of large-scale airdrops, users continue to flock to DeFi, but the retention rate of DEX in January has declined. This indicates that there has been some loss or surrender of users in the field of DeFi.

• Although people have noticed a decline in activity and user count on Ethereum, its L2 ecosystem remains vibrant, with transaction volume approaching an all-time high.