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Dapp Industry Overview: May 2021

Posted by
Modesta Jurgeleviciene

Ethereum stayed strong, while Polygon became the biggest winner in May

The industry for decentralized applications, or dapps for short, faced exponential growth in the first five months of 2021. The key drivers behind the increase in users and transactions have been the growing ecosystems for decentralized finance (DeFi) and non-fungible tokens (NFTs). This growth brought new users, new dapps and existing dapps adopting the multichain paradigm. 

In May the cryptocurrencies crashed in value, affecting numerous participants within the industry. Both bitcoin and ether dipped by more than 40% in the middle of May, while many altcoins followed a similar trend. Even though the dapps industry is highly connected to the crypto ecosystem, the crash has not affected the blockchain dapp industry to the same extent. 

Furthermore, the crash was a big win for the DeFi ecosystem overall. For instance, the largest Ethereum dapps such as Uniswap, Compound, Aave or MakerDAO haven’t faced any issues. Even under the extreme stress of multiple cryptocurrencies dropping down in value, the dapps worked as designed. However, not all DeFi dapps handled the crash well, as for example Venus on Binance Smart Chain was left with a massive debt. 

On the other side of the spectrum, there has been plenty of positivism that came from the Polygon protocol. Not only did the sidechain deal with the crypto crash without any major issues, the native MATIC token kept its value very well. The recent news of American billionaire Mark Cuban investing in Polygon created an additional wave of interest. It led to an increase in both token price and total value locked within the DeFi ecosystem.

Finally, there were some contradictions within NFT space. The sales volume has dipped for the second month in a row. At the same time, wallet activity and the count of sales saw an upward trend. It indicates that NFT hype has calmed down, at least in terms of large sales, and wallets are trading cheaper NFTs. As a result, this situation might lead to a more sustained stage of market development instead of one that’s filled with hype and greed. 

Table of contents

  • From The Top
  • DeFi Ecosystem’s Value Flows
  • DeFi Maturity Manifest Bright Future
  • NFTs Growth Tendencies
  • NFTs about to go mainstream
  • May Summary

May 2021 – Key takeaways

  • In May, the blockchain industry generated around 1 million in unique active wallets. BSC and WAX protocols were responsible for 80% of it.
  • BSC was the leading blockchain with more than 417,000 unique active wallets at the end of the month. PancakeSwap was the leading dapp, fueling activity with around 350,000 daily unique active wallets.
  • 80% of total value locked generated across all blockchain belongs to Ethereum’s DeFi ecosystem ($65 billion). 
  • BSC total value locked decreased by 50%, the biggest trigger was Venus dapp.
  • Polygon saw 1,102% growth in total value locked and ended the month  around $5.7 billion TVL.
  • NFTs market dipped by 5% in sales volume reaching $350 million in May, driven by multiple dapps and NFT collections.
  • Despite the negative trend in NFTs market, Axie Infinity, Dark Country and R-Planet had the best month this year so far with the month-on-month growth of 201%, 659% and 141% respectively.

From the top

May 2021 was a busy month for the blockchain industry as more than 1,000,000 unique active wallets connected with a blockchain. During the month more than 480 new dapps launched, while the DeFi sector closed the month with more than $81 billion in value locked across 3 main protocols Ethereum, BSC and Polygon.

The largest blockchain by unique active wallets was Binance Smart Chain (BSC) with more than 417,000 daily wallets at the end of the month. The biggest driver was the DeFi platform PancakeSwap, which attracted more than 350,000 unique active wallets per day at the end of the month. During May, DeFi dapps dominated the BSC ecosystem, as they generated the most traffic. Furthermore, most new dapps belong to the DeFi category. 

Source: DappRadar Rankings

The Wax blockchain came in second place, even though there has been a decrease of 31% in activity compared with the month before. The blockchain generated an impressive amount of unique active wallets of more than 370,000. The biggest drivers were Alien Worlds (230,000), AtomicAssets (40,000) and AtomicMarket (31,000). While BSC has most of its activity in the DeFi sector, the Wax blockchain is tailored to the usage of NFTs. Digital collectibles, NFT-powered games, and NFT-powered gamified DeFi platforms dominate here. 

In May, Flow activity dropped, and now Ethereum has taken over third place again with 86,000 unique active wallets. The change in the leaderboard was triggered by a few dapps. First of all, Flow main dapp NBA Top Shots saw a downward trend in May. On the other hand, the release of Uniswap v3 increased the usage of the Ethereum blockchain activity. Uniswap has been responsible for approximately 90% of all on-chain activity for Ethereum. 

DappRadar

Last but not least was Polygon blockchain with more than 36,000 unique active wallets. Although the protocol was in fifth place, it recorded the biggest growth during May. Polygon grew more than 4 times from around 8,500 unique active wallets in April to 36,000 in May. The activity was fueled by QuickSwap (12,000), Polycat Finance (6,300) and Aave (6,000). Overall, Polygon’s growth was driven by DeFi dapps in two categories: migrating Ethereum dapps and new project launches.

DeFi Ecosystem’s Value Flows

As the trading activity surrounding Shibu Inu and other dog-themed tokens increased Ethereum gas prices, these fees went through the roof when the entire market dropped in value. High gas fees on the Ethereum blockchain are nothing new, but these developments are the catalyst for the newest trend in the DeFi ecosystem: Multichain expansion. Dapps adapt to the issues with gas fees, and expand their services to other blockchains. The  adoption of the multichain paradigm is the next blockchain development stage. Going forward the success of the dapps might be determined by their ability to function well across a variety of blockchains.

While Ethereum is still leading in terms of DeFi ecosystem TVL ($64 billion), Polygon protocol made the largest improvement during May 2021. Polygon TVL grew by 1102% month-on-month reaching $5.7 billion at the end of May. This past month has been  the best month so far for Polygon.

Source: DappRadar & Defillama.com

Contrary to Polygon, we see a negative trend on Binance Smart Chain.In May the position of BSC weakened as its TVL halved compared to the end of April. The biggest decrease was faced in one of the most popular lending protocols, Venus. The crypto crash affected Venus native token (XSC) negatively and resulted in a massive liquidation. As a result of this liquidation, the protocol ended up with over $100 million bad debt.

DeFi Maturity Manifest Bright Future

The crypto crash in May wasn’t the first time the market dropped in value. As a matter of fact, in March 2020 both bitcoin and ether lost 50% of their value within hours. MakerDAO and other lending protocols faced liquidation issues, which almost led to the downfall of MakerDAO. However, from these stressful times, the DeFi summer of 2020 was born.

The MakerDAO community made important decisions in order to mitigate the risks appearing from the industry turbulence. First of all, the protocol introduced stablecoins as collateral. Additionally, the risk parameters were adjusted too. The most recent test of cryptocurrencies crash ended up without any major issues for Ethereum users. Uniswap, Compound, Aave and MakerDAO dapps worked as designed.

Source: DappRadar

On the other hand, the crypturencies affected TVL across main protocols (sum of Ethereum, BSC and Polygon TVL). Before the crash in the middle of May,the cumulative TVL surpassed $115 billion , however at the end of May the TVL was just over $80 billion. The price decrease of the crypto market was the biggest trigger behind the drop in TVL, while the automatic liquidations within lending protocols made a big impact as well. If we compare this with January, TVL is still more than 3 times higher. Additionally, even after the crash, TVL continues to grow.

Source: DappRadar & Defillama.com

It’s safe to state that the crypto crash has affected the newest products in the industry the most, and dapps on BSC in particular. A reason for that can potentially be found in  the fact that lending protocols were eager to take higher risks in order to attract more users. On the other hand, Ethereum DeFi dapps proved more resilient to the crypto crash, providing evidence that the DeFi ecosystem is maturing. After all, the DeFi ecosystem on Ethereum has already faced at least one industry meltdown, yet didn’t fail their users and continued to work in a way it was meant to be.

NFTs Growth Tendencies

In May, the NFT market saw a decrease of 5% in its sales volume. This was the second month in a row that the volume kept dropping. The decrease was mainly driven by Flow and Wax. Flow generated only $35 million in sales volume, which is 50% less than in April. Activity surrounding NBA Top Shot is dropping as the platform is trying to improve the user experience around pack sales and user acquisition. Despite the numerous initiatives, NBA Top Shot struggles to get back to February heights and is facing a negative trend.

The decrease of sales on the Wax blockchain  was caused by Alien Worlds and a general decrease of trading activity for that dapp. Alien Worlds dipped 72% from $9.4 million in April to $2.6 million in May. On a more positive side, May was quite an exciting month for the Wax blockchain as a whole. Dark Country generated more than $500,000 through a public land sale, which means that the game almost doubled its volume compared with April. Secondly, R-Planet recorded a 170% increase in sales, generating more than $5 million in May. 


On the other hand, a few dapps had their best month so far in 2021. For instance, Axie Infinity generated more than $22 million in sales volume across Ethereum and Ronin networks.  The dapp activity was driven by its own Ronin sidechain solution that gives gamers a chance not to pay any gas fee to trade. It allows users to freely buy and sell way cheaper Axie Infinity NFTs. As a result, the platform is not only the number 1 collection within NFTs space.

Although CryptoPunks saw a 21% decrease in May, it was still the largest dapp on Ethereum with $69 million in trading volume. One of the biggest triggers for lots of trading activity was the Christie’s auction that took place at the beginning of May. Additionally, right before the auction, Larva Labs released its  Meebits collection. As all CryptoPunks and Autoglyph owners were entitled to mint Meebits, this also caused some trading activity among CryptoPunks owners.

Finally, there were a couple of memorable sales in May in terms of top sales. The piece Save Thousands of Life by NooraHealth was sold for $5.1 million. Furthermore, 6 out of 10 sales belonged to the newly launched 3rd Larva Labs collection called Meebits. 

To conclude, the overall trend of highly priced NFTs seems to be cooling off. Relatively cheaper sales, such as Axie Infinity, Dark Country or R-Planet are starting to fuel NFTs market activity. Such sales are extremely important for long term growth as it gives a chance to attract masses to the industry.

NFTs about to go mainstream

Despite the dip in NFTs sales, the market was filled with exciting new projects. It is not a surprise anymore to hear the news about well-known people releasing the NFTs. Starts, such as Paris Hilton, Eminem, Jack Dorsey and many others, proved the blockchain technology to be a beneficial sales tool. Most recently, one of the top-10 most streamed male artists (Ozuna) on Spotify teamed up with one of the biggest-selling contemporary French artists (Richard Orlinski) on an NFT collection. Rarible users have a chance to buy one of the pieces $250 per each.


Source: Rarible

Finally, news organizations started to test NFT waters too. For instance, the Associated Press is planning to auction off 10 unique NFTs to celebrate its iconic photojournalism. Before that, The New York Times Kevin Roose tokenized a picture of a column he wrote and sold it for $560,000. Quartz, the online news site, sold NFts of news articles for 1 Ether while CYBR magazine is planning an entire issue of NFTs which is planned to be listed on Rarible.

This recent trend gives an idea that the NFT concept is spreading quickly. Although most of these NFTs collections are still relatively small, we might expect the bigger launches sometime soon.

May summary

Overall, the blockchain industry continues to develop in two ways: via the DeFi ecosystem and the NFT market. The DeFi ecosystem is adopting a multichain paradigm. We see dapps expanding across multiple chains in order to be accessible by different audiences. It might be a key to long term success.

Furthermore, the DeFi ecosystem seems to be way more crash resistant than it was back in 2020. Although the crash influenced key metrics such as TVL and unique active wallets, the price drop also was a big win for DeFi. Even under the extreme stress of a crypto crash, decentralized applications on the blockchain worked as designed. Especially the DeFi ecosystem on Ethereum passed the test. 

Finally, there are contradictions within NFTs market. Sales volume dipped two months in a row. However, a couple of dapps, such as Axie Infinity, R-Planet and Dark Country, experienced their best month this year. Each of these dapps don’t rely on thousand-dollar sales, but instead function on NFT sales between $10 and $300. We can consider these cheaper NFTs. These sales are extremely important for long term growth as they create a bigger opportunity to attract the masses to the industry.

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