Blockchain Behavior Report – Crypto Adoption On the Rise: Reddit Showing the Way

This report analyzes the most significant behavioral trends that shaped the third quarter of 2022 in the blockchain industry.

Despite the uncertainty of the macroeconomic landscape, Web3 developers continue building.  Almost 36% of all smart contracts ever published and confirmed were executed this year.

Even amid the harsh bear market, the hype for the dapp industry remains. According to Visa, 94% of adults with discretion over household money are now aware of cryptocurrencies. Cryptocurrency is transitioning from a specialist asset class for a limited network of investors to a more accessible market for mainstream investors and new adopters, as Reddit has shown us.

What made the mass debut of Reddit NFTs collections so exceptional was the strategy used to conceal the fact that the 40,000 assets were, in fact, Polygon NFTs. Cryptocurrency and the blockchain were unavoidably addressed in the collection’s announcement, but only in the context of not being required for a purchase (as only fiat could be used). 

In addition, the phrase NFT was never mentioned, and when it came to arguably the most difficult Web3 aspect, the crypto wallet, Reddit avoided the potentially off-putting term by substituting it with ‘Vault’. The ease of onboarding new users to the world of NFTs by Reddit could be seen as one of the biggest events for Web3 this year.

DappRadar’s Blockchain Behavior Report describes the most relevant behavioral trends affecting blockchain users over the last quarter.

Key Takeaways 

• 52% of traditional gamers are unfamiliar with the term blockchain gaming while only 15% of Web3 users are interested in playing it in the future.
• The deployment of smart contracts climbed by 40% compared to the first quarter of the year, with each month of the third quarter reaching a new all-time record; almost 36% of all smart contracts ever published and confirmed on the blockchain were executed in 2022; 
• Cardano’s adoption keeps rising; in the last 30 days, its NFT trading volume hit $19 million, making it the third largest NFT protocol. Moreover, on October 19, network transactions reached 82,880 – the highest number since May.
• Reddit users have created three million crypto wallets on the Polygon network since July, surpassing OpenSea in terms of the number of active wallets. Four distinct Reddit Collectible Avatar collections hold slots on OpenSea’s Top 10 list for 7-day trading volume over the past seven days.
• Ukraine, Indonesia and Russia lead the list of countries with higher growth of crypto adoption. They have increased their adoption by 143.17%, 115.59% and 88.28% respectively, since July.  

Contents

• How did Reddit become a Web3 NFT top contender?
• Web3 games still far from reaching mainstream
• Blockchain developer activity peaks in 2022 
• The Web3 adoption is rising within Web 2.0 industry
• Cardano transactions spike amid the Vasil upgrade
• DappRadar Demographics perspective
• Increase in crypto regulation
• Conclusion

How did Reddit become a Web3 NFT top contender?

Reddit announced the debut of a new project, Collectible Avatars, on July 7, 2022. These limited-edition PFPs, designed by independent artists in collaboration with the company (in addition to prominent Reddit community creators), would grant its owners exclusive platform perks.

It was Reddit’s first large-scale effort into the NFT field, backed by the Polygon blockchain, and offered for purchase at a set price in fiat.

Three months after the business introduced its NFT initiative, four distinct Reddit Collectible Avatar collections hold slots on DappRadar’s Top 10 list for 7-day trading volume. In addition, it was recently revealed that Reddit users have created three million Vault crypto wallets on the Polygon network since July, surpassing OpenSea in terms of the number of active wallets on its platform.

Source: NFTgators

How did this happen? Reddit is familiar with its community. It is also conscious of the unpopularity of NFTs among those who are not Web3-savvy.

Prior to the debut of Collectible Avatars, the firm published a survey titled The ABCs of NFTs, in which they discovered that 70% of Reddit users were willing to purchase an NFT from their favorite brand, but 35% said that brands may “ruin the future of NFTs.” In other words, they realized they had to properly execute their approach to NFTs, avoiding negative perceptions associated with technology while making them easy to acquire.

The company hired independent artists and recognized talent within its own platform to create artistically unique digital avatars. These NFTs grant owners specific utility on Reddit and gave them  something akin to a CC0 license in terms of intellectual property usage -which, in turn, incentivized platform users to get a cool, new PFP in the process, available for purchase using fiat currency rather than cryptocurrency.

In addition, Reddit achieved this while avoiding the phrase “NFT.” The term did not appear at all in Reddit’s July release.

This technique was obviously not lost on the user population. At this point, though, no amount of the acerbic, smart, and occasionally venomous commentary that Reddit users have acquired notoriety for, can stop the meteoric rise of Collectible Avatars.

In an effort to expand the reach and visibility of its Collectible Avatar project, Reddit distributed free airdrops to a number of its top community builders and contributors in August. Reddit users who passed specific eligibility conditions were granted access to NFTs from the Aww Friends, Drip Squad, Meme Team, and The Singularity collections. However, these collections trade at significantly smaller volumes than those that individuals purchased from the marketplace.

Reddit’s accomplishments in this instance are impossible to overstate. Therefore,  its method of approaching NFTs without even using the term is one that many Web2 companies on the fence about NFTs would likely adopt in light of its success. 

Web3 games still far from reaching mainstream

Coda Labs, a producer of blockchain-based entertainment, recently surveyed the market opinion of Web3 games. Even though blockchain games are rapidly gaining popularity in the gaming world, the survey indicates that they are still a long way from being mainstream.

Blockchain and NFTs enable a new gaming model. In online games, it has introduced ownership rights, transparency, and decentralization. Web3-based games embrace the ability to create, own, and trade assets in the hands of the players, shifting the balance of power. Thus, providing a means for online gamers to monetize their experience.

Even though Web3 games bring numerous advantages, traditional gamers are still hesitant to try Web3 games, according to the report. People are still unfamiliar with crypto and NFTs. Moreover, the poll shows that lacking a crypto wallet is a major factor impacting the low adoption of Web3 games. 

The poll was done in five nations, including the United Kingdom, the United States, Brazil, South Africa, and Japan. Only 16% of poll respondents are crypto-gamers. These players utilize cryptocurrencies frequently, have crypto wallets, and trade crypto on DEXs and NFTs on marketplaces.

The Coda Labs report highlights that 52% of gamers are unfamiliar with the term Web3 gaming. Simultaneously, only 15% of Web3 users are interested in playing these games in the future, as they mainly see these projects as investment opportunities. A minority heard about play-to-earn, and in fact, it is the most familiar term for crypto gamers. 

Those who hadn’t played a Web3 game were asked whether they would be interested in playing play-to-earn games. Overall, 19% were interested. Furthermore, crypto earnings were the most perceived benefit from a Web3 game given in all groups’ engagement.  

Benefits from a Web3 game

The main obstacle to Web3 gaming is the lack of awareness among gamers regarding how it operates. The majority of non-crypto players surveyed are unaware of how to purchase and trade cryptocurrencies and NFTs.

Positively, the crypto non-gamer population is a new target demographic for Web3 gaming platforms. These are the individuals who routinely trade cryptocurrencies and NFTs and are market savvy. 

Blockchain developer activity peaks in 2022

Despite the crypto bear market, Web3 developers are building more than ever. Web3 development platform Alchemy stated in a new Q3 2022 study released on October 13 that 2022 may be the “biggest year ever” for Web3 developers.

According to the research, almost 36% of all smart contracts ever published and confirmed on the blockchain were executed in 2022. That’s a total of nearly 118,000 smart contracts compared to the over 323,700 contracts ever executed.

This is despite the fact that the price of ether has dropped by about 66% since the beginning of the year, and the total value locked (TVL) in decentralized finance (DeFi) protocols has dropped by around 70% year to date.

Alchemy reports that the deployment of smart contracts climbed by 40% compared to the first quarter of the year, with each month of the third quarter reaching a new all-time record, culminating in September with 17,376 contracts.

The data also indicates that deployments of smart contracts surged by 143% compared to the third quarter of 2021, reaching over 48,500 by the third quarter of 2022.

In the two weeks following Ethereum’s Merge, when the blockchain shifted from a Proof-of-Work to a Proof-of-Stake consensus, the deployment of smart contracts surged by 14%. This  indicates that some developers may have been waiting for the event to launch their projects.

Additionally, the company evaluated the usage of two Web3 script libraries, Ethers.js and Web3.js. These script libraries enable developers to access blockchain data and create Web3 products.

The researchers discovered that the average weekly number of developers installing either library has tripled since the third quarter of 2021, reaching over 1.5 million.

Although some have asserted that the present crypto bear market is an ideal moment to develop Web3 goods, this has not necessarily been the case in prior cycles.

As indicated by Alchemy’s data, the 2017 to 2020 bear market had a 45% fall in smart contract installations in the middle of the cycle from 2018 to 2019, but this indicator has increased by 50% from 2021 to 2022. 

The report showed that despite the difficult macroeconomic conditions, projects are focusing on building. In fact, this quarter, DappRadar integrated 1304 dapps, representing 10.29% of all dapps integrated.

Web3 adoption is rising within the Web 2.0 industry

Even though the interest in the metaverse appears to be cooling down, the notion of a decentralized blockchain or Web3-based metaverse is still popular. Up to this point in 2022, blockchain games and metaverse projects have raised about $7 billion, and even if the third quarter was the lowest in capital raises, we still managed to reach $1.2 billion.

Furthermore, a social analysis measuring Twitter mentions trends shows that the appetite for the Web3 metaverse is in a descending trend concurrent with the macroeconomic landscape. 

Even if some metrics are down, as seen in our Metaverse Report, this quarter we saw tremendous adoption of Web3 from governments, brands, and traditional gaming companies. 

In an effort to increase the interoperability of its metaverse, Meta enabled users to cross-post NFTs on Facebook and Instagram in August. Numerous wallets that support the Ethereum, Polygon, and Flow blockchains are already supported by the company.

Nasdaq unveiled a new digital assets company on September 20. Once approved by the NYDFS, the new project will initially focus on the development of advanced BTC and ETH custody solutions for institutional clients and may later offer additional solutions.

BNY Mellon, the oldest American bank, which manages more than 20% of the world’s investable assets, inaugurated a new digital assets custody platform on October 11. It enables chosen clients to directly retain BTC and ETH alongside traditional assets.

Cardano transactions spike amid the Vasil upgrade

Network activity on the Cardano blockchain has undergone a surge. On October 19, network transactions reached 82,880, the greatest number since May. With these numbers, the blockchain network registered a month-to-month increase of 75%.

The Vasil upgrade became activated on the Cardano mainnet on September 22, and full functionality was released on September 27. Cardano dapps are experiencing large increases in user engagement as a result of the Vasil upgrade.

The unique active wallets of Cardano DEX Minswap increased by 19.89% in the last 30 days, with an increase in trading volume of 15.11%, reaching $77 million. Furthermore, the Cardano marketplace JPG Store had a 13.66% growth in the number of unique active wallets in the last 30 days. Moreover, the NFT marketplace saw a 40% increase in trading volume, reaching $11.2 million.

Cardano is currently one of the top three blockchains by NFT trading volume. In the past 30 days, the network’s NFT volume reached $19 million, placing Cardano as the third-largest  NFT protocol behind Ethereum and Solana.

Cardano’s TVL, however, remains unaffected. This may be partially attributable to investors’ overall negative perception toward DeFi. Cardano’s TVL has decreased by approximately 20% in the previous thirty days to $83.77 million.

DappRadar demographics perspective

Using DappRadar’s traffic analytics, we can draw some conclusions about the behavior patterns of the general dapp markets. 

The United States remains the largest crypto market, and traffic has remained unchanged since July. India has continued its growth in the second position, increasing by 10.40% from July to September.

Similar to India, Indonesia has climbed the charts, moving from fifth to third place between July and September. Since July, its traffic has surged by 115.59%.

September saw an increase of 88.28% in the quantity of traffic originating from Russia but still slid from second to fourth place.

Following the same pattern as Indonesia, Ukraine climbed the rankings this month and reached fifth place with a 143.7% increase in traffic from July.

The United Kingdom has fallen to sixth place and has been trending downward over the past few months. It declined by 6.40% in September compared to July.

The most substantial decrease in traffic has come from Vietnam, which has seen a 49.30% decrease despite maintaining its position in the rankings. From July to August, the Philippines decreased by 9.78%, while Nigeria climbed by 12.52%.

Germany has ascended the chart from July and is currently in ninth place, despite a loss of 3.38%.

Lastly, Brazil climbed to the tenth position with a 16.60% rise from July.

Gender dominance 

Gender dominance remained mostly unchanged since the last quarter as men still maintain a roughly 75/25 split. This quarter, DappRadar’s female audience has grown by 6.16% percentage points.

Device usage

The device usage also remains constant. Slightly over half of the users prefer to access the website via Desktop Computer, while somewhat under half are mobile users. The rest are tablet users.

Age dominance

Since the previous quarter, the age disparity seems to have grown substantially. Since the preceding quarter, the younger generations have comprised a larger proportion of the audience. The Millennials, aged 25 to 44, account for nearly half of DappRadar’s visitors (48.13%), followed by the GenZ, aged 24 and younger, who now account for a third of website traffic, a 7% increase from Q2.

Generation X, or those aged 45 to 64, account for 14.49% of the overall traffic, a figure that remained unchanged from the previous quarter, just like the percentage of baby boomers (65+).

Increase in crypto regulation

In the third quarter, the White House released its first “Comprehensive framework for the responsible growth of crypto assets”. Despite its broad strokes, the paper balanced between investor safeguards and industry-friendly features.

Furthermore, the SEC once again openly emphasized its position as the leading crypto regulator and threatened enforcement proceedings against crypto trading venues (like Coinbase). Gary Gensler, chairman of the Securities and Exchange Commission, said in a speech that he deems most crypto assets to be securities and that crypto trading venues must register as broker-dealers.

On the same trend, multiple bipartisan proposals with significant pro-crypto elements are floating in Congress, which has emerged as a possible advocate for crypto. Many market observers feel that new legislation will be required to regulate cryptocurrencies effectively. . Congress has increasingly taken a progressive position toward this space.

In a tweet dated October 10, ECON member Stefan Berger acknowledged the committee’s approval of the MiCA law, which was the product of discussions between the EU Council, the European Commission, and the European Parliament.

The MiCA proposal, initially presented to the European Commission in September 2020, intends to establish a uniform regulatory framework for cryptocurrencies across the 27 member states of the European Union. The crypto regulations might go into effect in 2024 following legal and linguistic reviews, parliamentary approval of the newest version of the document, and publishing in the official journal of the EU.

Members of parliament in the United Kingdom voted in favor of recognizing crypto assets as regulated financial instruments and products on October 25.

The local crypto industry, which recently applauded the appointment of Rishi Sunak as the country’s new prime minister, is likely to embrace initiatives to give legal status to digital assets more broadly.

Conclusion

The state of the crypto industry remains strong and steady, with a few shifts in the top markets. The US still dominates the field, followed by India, Indonesia, Russia, and Ukraine. When broken down by gender, we see that the majority of users are still men, but the female audience has grown by 6.16% this quarter.

Altogether, it seems that the cryptocurrency industry is on an upward trend in terms of regulation. The development of new legislation and the enforcement of already existing regulations will most likely have a positive impact on the industry, as it will give more legitimacy to cryptocurrencies and foster their adoption.

As we enter the fourth quarter of 2022, investors are uncertain of what to anticipate. Will cryptocurrencies continue the slight rebound that began in the third quarter, or will negative macroeconomic news overpower fundamentals and push prices to all-time lows? What role, if any, will crypto play in the next U.S. midterm elections, given that it is becoming an increasingly discussed and passionately argued topic among regulators and lawmakers?