2023 Begins with a Comeback: NFTs and DeFi Show Recovery Signs

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NFT market continues growth, as market diversifies across marketplaces and blockchains

2023 has started with a strong and bullish trend, particularly in the NFT market. On-chain metrics have shown significant growth and activity, indicating a thriving and promising quarter for NFTs, DeFi, and games. 

Key Takeaways 

  • DeFi’s TVL growth continues as it reaches $74.6 billion, up 26.82% from the previous month; Lido Finance becomes the largest DeFi protocol proving the demand for LSDs.  
  • The NFT market registered $946 million in trading volume and 9.5 million in sales count, up 38 and 42% from December. 
  • Driven by the rise in popularity of its NFT collections, Polygon recorded a 124% increase in trading volume and 157.39% increase in sales count, 
  • OpenSea has an increase in trading volume of 66.58% reaching $495 million in January 2023. This represents 58% of the total trading volume of the NFT market.
  • More than $14.6 million were lost due to exploits in January 2023, the lowest amount registered since January 2022. 

Table of Contents

  1. Dapp Industry Overview
  2. DeFi’s TVL increases by 26.8% showing signs of recovery
  3. NFT market spikes to $946 million and 9.5 million sales count
  4. Blur emerges as a major NFT market player with $187 Million trading volume
  5. The gaming sector accounts for 48% of the industry’s usage 
  6. January reports the lowest exploit losses compared to last year 
  7. Conclusion

1. Dapp Industry Overview

​​The dapp industry experienced a decrease in the number of daily Unique Active Wallets (dUAW) in January 2023, with an average of 1.7 million dUAW. That’s a drop of 9.55% compared to December 2022.

The DeFi sector holds 377,039 dUAW, a decrease of 9.23%, while the blockchain gaming sector saw a decrease of 0.89%, with 839,436 dUAW. The most promising sector in January was the NFT market, which had a growth of 24.56% from the previous month, reaching 146,516 dUAW.

Dapp Industry Unique Active wallets

Analyzing on-chain activity by blockchain shows that WAX was the most popular network in January. The gaming and NFT blockchain saw an average of 394,480 dUAW, an increase of 3.39% from the previous month. Alien Worlds and the NFT marketplace Atomic Assets were the top dapps on the WAX blockchain. BNB Chain came in second with 392,882 dUAW, a decrease of 27.69% from the previous month. PancakeSwap remained the most popular dapp on the BNB Chain, with 1.29 million UAW in January.

protocols by average daily unique active wallets

In third place we find Polygon with 191,985 dUAW. The sidechain ecosystem made a splash late 2022, and now saw a decrease of 5.22% from the previous month. Benji Bananas and Planet IX were the most popular dapps on Polygon. Especially Planet IX had a good month, seeing a 44% increase and reaching 141,580 UAW. 

Hive came in fourth place with an increase of 12.31% reaching 182,800 dUAW. Per usual, Splinterlands dominates the activity on Hive, and the trading card game saw an increase of 5.87% in its UAW, reaching 340,520 UAW.

The best-performing blockchain in January was Solana, with a 70% increase it reached an average of 53,683 dUAW. The growth was driven by the increased adoption of Solana DeFi dapps such as Raydium, MeanFi, Saber, and Orca. It looks like the Solana ecosystem is recovering from the damage caused by the FTX collapse.

The Ethereum ecosystem also saw an increase in its Unique Active Wallets, seeing the activity increase 39% and reaching an average of 116,255 dUAW. The popularity of NFT marketplaces such as OpenSea and Manifold and the increased activity on the marketplaces can be seen as the drivers for these numbers. .

In conclusion, despite the decrease in the industry’s overall dUAW, the on-chain metrics for NFT show increased activity. This is a bullish sign for the market. The next section will focus on DeFi’s Total Value Locked (TVL), exploring the reasons behind the growth of Solana DeFi dapps.

2. DeFi’s TVL increases by 26.8% showing signs of recovery

The DeFi market showed signs of recovery in January 2023 as the Total Value Locked (TVL) increased by 26.82% reaching $74.6 billion from the previous month. While this metric has been highly benefitted from the rally in crypto prices, other on-chain indicators signal a bull trend.

Looking at the top 10 blockchains by TVL, all of them showed an increase in their TVL. The top DeFi performer was Optimism, with a 57.44% increase in its TVL, reaching $808 million. Interestingly, transaction volumes on Optimism plummeted after the end of a “learn-to-earn” incentives program on 17 January. According to our data, Optimism had an average of 174,810 transactions per day until January 17th. However, after this date, the daily average transactions decreased to 41,026, representing a substantial decline of 76.53%.

Solana was another top DeFi performer, with a 57.33% increase in its TVL, reaching $548 million. This growth was driven by the performance of Marinade Finance, which had an 84.32% increase in TVL over the past 30 days, reaching $152 million. Marinade Finance has introduced a token incentive scheme to reward users who deposit Solana (SOL) tokens in return for mSOL, a liquid staking derivative. Orca and Raydium also showed an increase in their TVL, with 37% and 33% increases, respectively, reaching $46 million and $38 million.

Avalanche reached $2 billion again, with a 26.84% increase, driven by the announcement of a partnership with Amazon Web Services (AWS) to encourage development on the Avalanche blockchain.

Furthermore, the upcoming Shanghai upgrade scheduled for March 2023 is grabbing the market’s attention and is expected to significantly reduce the risk of staking ETH by enabling withdrawals from Ethereum staking contract.

The upgrade will also provide an opportunity for liquidity staking protocols to grow, and the governance tokens of some of these protocols have already jumped since the start of the year.

We analyze Lido, the most popular liquid staking on Ethereum, in the section below.
There is a possibility that the upgrade could push these tokens towards last year’s all-time highs. With the Ethereum staking space still in its early stages, there is a market opportunity for the growth of these protocols.

Lido becomes the largest DeFi protocol

In DeFi, or decentralized finance, the total value of all crypto coins locked in these financial services is also called, Total Value Locked (TVL). The more TVL there is, the more liquidity and trust a DeFi platform has. Interesting APY or APR and on-chain activities such as yield farming, need to seduce investors into putting their money into liquidity pools and supporting these DeFi platforms. 

Lido Finance has become the largest DeFi protocol by toppling Maker DAO this month. This has been largely driven by the growing popularity of liquid staking derivative (LSD) protocols, with ether up by a significant 33% over the past 30 days.

Ethereum’s shift to proof-of-stake (PoS) has been a catalyst for the growing interest in LSDs. Lido has been quick to capitalize on this, and its fee revenue has been directly proportional to Ethereum PoS earnings, as it sends received ether to the staking protocol.

What sets Lido apart from other DeFi protocols is its innovative staking solution, which allows users to access liquid Ether staking without committing to the traditional 32 ETH minimum. This has proven to be a major draw for users looking to maximize their returns from staking.

As a result of its strong performance, Lido’s TVL (Total Value Locked) has increased by 36.77% since the beginning of the month. The crypto community is now staking an impressive $8 billion through the Lido platform. This shows the significant impact that Lido’s innovative staking solution has on the DeFi space, and how it has become a major player in the market.

Along Lido, Coinbase WETH and Rocket Pool are among the most popular dapps to stake ETH liquid derivatives.

Uniswap’s community votes overwhelmingly in favor of BNB Chain move

A recent vote, called a “temperature check,” was conducted to gauge support among the Uniswap community for the decentralized exchange’s V3 protocol to move to BNB Chain. The results showed that 80% of UNI token holders voted in favor of the move, with around 20 million tokens cast for the proposal. 0xPlasma Labs, the company that floated the proposal, tweeted that this was the “biggest number for the whole Uniswap Governance History”.

Uniswap, like other decentralized exchanges (DEXs), operates through smart contracts to match trades and supply liquidity between traders. At the end of January, the platform had $2.7 billion in Total Value Locked (TVL), which was a 12.48% increase from January 1st. During the same period, it had an average of 3,310 daily Unique Active Wallets and a total of 592,184 transactions.

They consider the move to Binance’s BNB Chain due to its growing user base, high transaction speed and low fees. BNB Chain connects with the centralized cryptocurrency exchange Binance. Therefore, developers believe that deploying Uniswap V3 on BNB Chain could tap into the growing popularity of DeFi within the Binance ecosystem. The Binance blockchain also offers unique features such as staking and cross-chain support, which could enhance Uniswap’s functionality.

According to 0xPlasma Labs, moving to the Binance Chain could bring in at least $1 billion in additional liquidity from the Binance ecosystem and attract 1-2 million new users. This is just one of the many benefits of the potential move, and it will be interesting to see how the Uniswap community and the wider DeFi ecosystem react to this proposal in the future. Keep in mind, at the moment PancakeSwap still holds the throne as the leading DEX on BNB Chain. They attracted 1.29 million UAW in January.

3. NFT market spikes to $946 million and 9.5 million trades 

The NFT market seems to be recovering with the surge of NFT trading volumes and sales counts in January 2023. The NFT trading volume recorded a 38% increase from the previous month, reaching $946 million. This is the highest trading volume recorded since June 2022. The sales count of NFTs also increased by 42% from the previous month, reaching 9.2 million.

Leading NFT blockchain Ethereum holds a dominance of 78.5% in the NFT market. It recorded a 37.29% increase in its trading volume, reaching $659 million. The sales count of Ethereum NFTs also increased by 7.37% from the previous month, now hitting just over 2 million. 

Without a doubt, Yuga Labs’ NFT collections have once again significantly contributed to the ecosystem’s growth, as $324.8 million were the trading volume of all collections this month. This represents 34.3% of the whole NFT trading volume. Furthermore, their latest NFT collection, an access pass NFT called Sewer Pass giving the holders access to an online game, has created a buzz in the NFT world. 

Solana comes in second place, with a 23.7% increase in its trading volume, reaching $86 million. DeGods and Monkey Kingdom are the top NFT collections on Solana. Although the trading volume increased, the sales count decreased by 5.79% reaching 788,992. The volume increase comes mainly from the strong performance of the native cryptocurrency SOL. 

Polygon has recorded an astonishing 124% increase in its NFT trading volume, reaching $46 million. The sales count of Polygon NFTs also increased by 157.39% from the previous month, reaching 4.5 million. The popularity of Collect Donald Trump Cards and the recent launch of Mocaverse Realm Ticket Pass has driven this growth.

Immutable X recorded a 3.67% decrease in its NFT trading volume, and the blockchain network recorded $14.2 million in trading volume. However, the sales count increased by 2.39% and surpassed 564,000. Gods Unchained and Illuvium Land are the leading NFT collections on Immutable X, with trading volumes of $9.89 million and $1.46 million in the past 30 days.

In conclusion, after a six-month bear trend in the NFT market, January 2023 has been a positive month for the space, with a significant increase in trading volume and sales count. The next section will delve into a deeper analysis of the performance of the top NFT marketplaces.

4. Blur emerges as a major NFT market player with $187 Million trading volume

January 2023 saw a remarkable increase in the NFT trading volume for some of the top 10 NFT marketplaces. OpenSea is the most dominant player in the market with a trading volume of $495 million, representing 58% of the whole market.

OpenSea still remains the leading marketplace with a 66.58% increase in NFT trading volume, reaching a staggering $495 million. This is a clear indication of OpenSea’s unrelenting dominance in the NFT space, which represents 58% of the whole NFT trading volume in January 2023. Furthermore, based on the trading volume registered and the 2.5% fee that OpenSea charges per transaction, the platform made approximately $12.3 million in revenue.

Blur has made a strong showing as well, reaching second place with a trading volume of $187 million, which represents 20% of the market. Despite being a relatively new player, Blur has managed to scale up the ranks and has become one of the fastest-growing NFT marketplaces. However, Blur got blacklisted from trading the Sewer Pass NFT collection, along with LooksRare and other marketplaces, because Yuga Labs heated up the NFT marketplace royalty debate by blocking marketplaces that don’t support royalties.

Magic Eden has managed to secure third place, with a trading volume of $85 million, representing 9.7% of the market. The marketplace recently implemented a new fee structure called the Maker/Taker model, which is based on the user’s activity and Rewards Hub level. This change has created a lot of interest among users, making it an attractive option for trading.

X2Y2 and LooksRare have also seen a major increase in their organic volume, with 121% and 157% growth respectively. This is a testament to the growing popularity of these marketplaces among NFT buyers and sellers.

We didn’t only register growth on open marketplaces, but also tailored ones saw an uptick. In January the Axie Marketplace saw a significant increase in its trading volume, with a growth of 83.47%. This can be attributed to the alpha launch of farming game Axie Infinity Homeland, which created a lot of hype among users. In fact, the token of Axie Infinity AXS has increased by 77% since 1 January, reaching $10.81.

5. The gaming sector accounts for 48% of the industry’s usage

Blockchain gaming is one of the fastest-growing segments in the Web3 industry. In January 2023, the number of daily Unique Active Wallets reached 839,436. This marks a significant increase in the sector’s dominance, up from 45.2% in December to 48% in January. This is a bullish indicator of the long-term potential of blockchain gaming.

The game alphas and updates keep coming in the blockchain space, and there is a growing sense of excitement and anticipation for what the future holds. As the sector continues to mature, we can expect to see even more exciting developments in the months and years to come.

To learn more about blockchain gaming and its performance, we have just released our yearly gaming report 2022, providing an in-depth analysis of the trends, challenges, and opportunities in the sector. Don’t miss the chance to get an inside look into the world of blockchain gaming and its potential for the future.

6. January reports the lowest exploit losses compared to last year

According to the REKT database, January 2023 saw 11 blockchain exploits that resulted in a total loss of $14.6 million. The majority of these exploits occurred on BNB Chain, with four incidents recorded. Despite this, the amount lost in January 2023 was lower compared to previous years, marking a positive trend for the blockchain industry.

Source: REKT Database

The largest exploit of the month took place on the LendHub lending protocol on the Heco network, resulting in a loss of approximately $6 million. The vulnerability was in the lBSV contract duplication, allowing the attacker to deposit funds into the old version and borrow from the new market. By exploiting the flow of the minting and redemption process, the attacker made a profit worth $6 million before moving the stolen assets to other chains like Ethereum and Optimism.

The second-largest exploit of the month was on the GMX protocol on the Arbitrum network, resulting in a loss of $2.8 million. The wallet was either compromised or exploited through a phishing attack, with the victim calling the signalTransfer() function on the GMX: Reward Router, which funded the attacker with ETH. The malicious actor then transferred the pending assets of the victim from the GMX: Reward Router and unstaked them, swapping the stolen GMX tokens for ETH and moving them to another EOA on the Ethereum network.

While the blockchain industry faced a number of exploits in January 2023, the amount lost was significantly lower compared to previous years. This is a positive sign for the industry, indicating that the security measures put in place by blockchain networks and protocols are becoming more effective in preventing large-scale losses. Stay up-to-date on the latest blockchain news and trends by following the rekt database.

7. Conclusion 

In conclusion, 2023 has started on a high note, with bullish on-chain metrics in the DeFi and NFT markets. The decrease in money lost this month due to exploits, the lowest amount ever recorded in 2022, is a positive indication of the increase in blockchain security. 

The upward trend in the NFT market and the growth of DeFi platforms give us reason to be optimistic about the future of the crypto market. With these promising developments, we can expect a recovery and continued growth in the coming months.

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