Blockchain & DeFi Usage Ebbs, Gaming Drives Momentum
Stock Analysis & Ideas

Blockchain & DeFi Usage Ebbs, Gaming Drives Momentum

After a year defined by new records and milestones for the blockchain universe, the opening three months of 2022 were undeniably volatile as externalities like the conflict in Ukraine weighed heavily on market sentiment.

Unlike the end of 2021, interest surrounding decentralized finance (DeFi) and non-fungible tokens (NFTs) cooled to a degree, mirroring a slight drop in unique active crypto wallets interacting with decentralized applications (dApps) daily over the same period. 

Despite a pullback in activity compared to the final quarter of 2021, green shoots are still showing through the chaotic backdrop, with blockchain gaming’s appeal accelerating further.

Moreover, a rebound in token valuations towards the end of March potentially set the stage for another bullish phase for the aggregate crypto market. 

Underscoring these developments, decentralized application analytics provider DappRadar has unveiled its first report for 2022, titled the DappRadar Q1 2022 Report.

The report elaborates on industry trends that unfolded during the first quarter across multiple segments. Key findings from the report covering the areas of dApp usage, DeFi, NFTs, hacks, and funding include the following: 

  • Blockchain usage climbed 396% year-over-year compared to the first quarter of 2021, despite slipping 5.8% compared to the figures recorded during the final three months of 2021.
  • Unique active wallets connecting to dApps daily dropped to an average of 2.38 million users during the first quarter of 2022, not far from the 2.50 million figure exceeded during the fourth quarter of 2021.
  • Blockchain gaming is setting the pace among the major application segments, commanding the position of the biggest destination for dApp users, accounting for approximately 50.5% of average daily users, equivalent to nearly 1.2 million wallets. 
  • Gaming and accompanying infrastructure were primary destinations for investors during Q1, collecting $2.5 billion in aggregate funding.
  • NFT sales, ignoring marketplace LooksRare, which accounted for 60% of all sales (amid allegations of wash trading), fell by 2% compared to the previous quarter. Still, the number of active wallets and trades rose over the period. Ethereum’s NFT dominance is also being challenged, as NFT trading activity on Solana and Polygon rose by 34%, dwarfed by Avalanche’s extraordinary 582% surge. 
  • Yuga Labs, the creator behind Bored Ape Yacht Club, has emerged as a powerful brand in the NFT space after acquiring the Meebits and CryptoPunks IP from Larva Labs. The Web3 brand now represents 44 of the top 100 NFT collections by capitalization held within Ethereum. 
  • Security remains a considerable challenge across DeFi after $1.19 billion was lost to exploits and hacks during the first quarter, accounting for 35.8% of all blockchain funds compromised to date. Of the amount, 75% was stolen from bridges, highlighting the technical flaws that DeFi must address.
  • DeFi protocols saw total value locked (TVL) at the end of March drop to $214 billion, falling 8.4% compared to the end of 2021, as overall unique active wallets interfacing with DeFi tumbled 20.5%. Terra was the big DeFi winner during Q1 after announcing its efforts to accumulate Bitcoin for its reserves, helping the ecosystem raise its TVL to $23 billion and positioning the network second only to Ethereum by value locked.
  • The social possibilities and impact of blockchain were on full display as UkraineDAO and other organizations harnessed Web3’s fundraising potential to deliver humanitarian aid to conflict zones. 

Despite being overshadowed by the conflict unfolding in Ukraine, the latest DappRadar report underlines the idea that overall blockchain activity, even in a period of consolidation, is still strong, especially amid the convergence of gaming, DeFi, and NFTs.

Looking forward to the next quarter, expectations are pointing towards increased maturity amongst these activities as they come together under the banner of the metaverse. Finally, DeFi security will likely remain in focus after the flaws discovered in cross-chain bridges. 

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