Dapp Industry Proves Resilient in Crypto Winter
What a year it has been! 2022 will always be mentioned as a milestone when looking back at the growth of Web3 and the dapp industry.
All the new and innovative business models being built around the idea of decentralization as well as the increasing adoption of blockchain technology by traditional industries and businesses, led to the development of a wider range of dapps. Many big companies from different industries are exploring how they can step into the Web3 world.
As a result; we have seen an incredible resilience of the dapp industry despite the harsh crypto winter.
In 2022, DappRadar reached 50 blockchain integrations tracking almost 13,000 dapps and more than 13,500 NFT collections. The high number of dapps reflects the state of the industry, where successful projects keep building despite the unfavorable conditions.
2023 will be even more exciting!
Yes, we have seen that unexpected incidents might change everything in a matter of days, even hours. But the dapp industry will continue to evolve and mature, with new and innovative applications being developed and adopted.
We know that bear markets are for building, so that’s what we’ll keep on doing.
Wishing you all a happy new year!
2022 has certainly been a series of highs and lows for the blockchain, dapp and crypto industry. Macro factors, such as the U.S. Federal Reserve’s interest rate hikes, high inflation, layoffs and generally slowing economic growth have led to much uncertainty. Rough market conditions largely became the standard for much of the year, but that didn’t stop the blockchain and dapp industry from many incredible technological achievements.
Improvements in the decentralized finance (DeFi) sector like the march of the zero-knowledge (ZK) ecosystem continued regardless. In the past year, ZK proofs demonstrated its applications beyond blockchains. They can play a crucial role in enabling a new type of authentication, and have the potential to create a new standard of accountability for centralized actors.
Institutional adoption of crypto has also occurred at a rapid pace, with Disney, Starbucks, Adidas, Nike and many other household brands embracing blockchain. Large banks have also shown increasing interest in the sector. For example, Fidelity launched a crypto service for investors, BlackRock partnered with Coinbase to give its institutional clients access to crypto and Goldman Sachs is creating a crypto data service.
One industry highlight this year was the Ethereum Merge in September, where the network transitioned from proof-of-work (PoW) to proof-of-stake (PoS), reducing Ethereum’s energy usage by an impressive 99.9%. Secondly, the devoted developers continued to build through this bear market, and several solid projects have recently come out of it. Another benefit for the dapp ecosystem , despite the rough season , were the lessons learned from each of the disastrous events that 2022 brought. Many projects – and even entire categories in crypto – have shown their resilience in light of these situations. If crypto has proven anything through its existence, it is that it can survive throughout unfavorable times. Because of this, the dapp industry will enter 2023 with a level of strength and durability that 2022 has given it.
- The dapp (decentralized application) industry experienced a 50% increase in unique active wallets (dUAW) in 2022, rising from an average of 1.58 million daily dUAW in 2021 to 2.37 million in 2022 on average. However, the industry has been on a downward trend due to various events, including the war in Ukraine, the collapse of Terra Luna and the FTX situation. Despite these challenges, the dapp industry has demonstrated its resilience and maturity, while adoption of blockchain technology by consumers and businesses suggests that the future of the industry is bright.
- In 2022, the DeFi industry faced challenges including the collapse of the Terra Luna platform and a decline in cryptocurrency prices, leading to a significant drop in the Total Value Locked (TVL) of 73.97% falling to $55 billion in December. Amidst these difficulties, the DeFi sector continued to expand and innovate, with smart contract financial apps and traditional financial institutions piloting or transacting using DeFi protocols.
- Ethereum remains the dominant DeFi protocol with $32.12 billion in TVL, a 74.56% reduction. BNB Chain has reclaimed its position as the second-largest DeFi ecosystem, with a 62.50% decrease, reaching $6.5 billion. Layer-2 solutions appeared to be the least affected by the crypto turbulence, with Arbitrum falling 12.07% to $1.74 billion. Optimism’s TVL increased by 127.60%, hitting $669 million.
- On-chain metrics for the NFT market this year seemed to be positive, as the NFT trading volume in 2022 increased by just 0.41% in comparison with 2021, with an average ETH price of $2,015. Looking further, the number of unique traders count increased by 876.89% compared to the previous year, reaching 10.6 million. The sales count is on the same upward trend, with an overall of 10.16% increase this year, reaching 68.35 million.
- The NFT blue-chip collections have remained the most traded collections this year, and continue focusing on their roadmap. Azuki became the first NFT brand to appear on an F1 racing car. VeeFriends closed a $50 million seed round in July, while PROOF’s Moonbirds raised another $50 million in August to scale the brand further.
- Yuga Labs continued to expand, acquiring CryptoPunks, Meebits and the NFT startup WENEW Labs. Its NFT collections dominated the NFT market cap in Q4, representing 55% of the top 100 most valuable NFT collections, which amount to $15 billion.
- This year saw the entry of new participants into the NFT marketplaces industry. X2Y2 climbed the charts, becoming in a year one of the top 10 NFT marketplace by trading volume, making more than $1.5 billion in trading volume. On the same trend, Blur, which was launched in October, reached in two months the last place in the top 10 NFT Marketplaces by trading volume, in 2022, with more than $205 million in trading volume. However, Opensea has not lost its dominance and, even if sales volumes have dropped in the past month, still accounted for 73.1% of the whole NFT organic trading volume.
- Blockchain games in 2022 account for 49% of all dapp activity, with on average 1.15 million daily unique active wallets, and 7.4 billion in transactions count. Splinterlands remains the most popular game with 217,914 monthly unique active wallets in 2022, an 85.78% growth. Alien Worlds was second with 178,118 monthly unique active wallets, down 3.67%.
- In 2022, there were 312 crypto attacks, resulting in losses of $48.74 billion, the highest for any year. The Terra Luna scandal was the most significant of these attacks, causing losses of $40 billion. Excluding this event, the median loss per hack was $283k and total losses per month were $728 million. Centralized platforms were the most commonly targeted, with losses totaling $44.71 billion. The BNB and ETH chains were the most hacked, with rug pulls being the most common type of attack.
- In 2022, there were significant developments in the regulatory landscape for cryptocurrencies and other digital assets, with the introduction of the first White House bill for crypto regulations and the MiCA regulation in Europe. These rules and laws aimed to establish a comprehensive framework for the regulation of cryptocurrencies and other digital assets, and demonstrated a recognition of the growing importance of blockchain technology.
- Dapp Industry Overview
– DeFi, Gambling, and Games: the most popular categories of dapps
– BNB Chain and WAX lead protocols in average daily Unique Active Wallets in 2022
– WAX and Solana lead protocols in transaction count in 2022
– Record number of dapps submitted to DappRadar in 2022
- DeFi Dapps Overview
– DeFi Layer-2 protocols see strong growth in TVL in 2022
– Interview with Blue Clarity, Marketing Lead at Trader Joe
- Rug pulls and access control breaches among most common hacks in exploits in 2022
– Top 10 crypto scams, hacks and exploits of 2022
- The State of the NFT Market: a review of on-chain metrics, blue chip collections, and leading NFT marketplaces
– 2022 on-chain metrics forecast a bullish future for NFTs
– Analysis of the top 100 NFT collections by market capitalization
– Exploring the top new NFT marketplaces of 2022
– The NFT marketplaces competition heats up in 2022
– Royalties dilemma
– Analysis of the top blue-chip collections
– Yuga Labs footprint expands further into the NFT market
– Exploring the potential of NFTs in 2023
- The gaming sector accounts for 49% of the industry’s usage in 2022
-Interview with Robby Young, CEO of Animoca Brands
- New regulations reflect growing importance of blockchain technology
Dapp Industry Overview
The dapp industry continued to grow and evolve in 2022, with a significant increase in the number of Unique Active Wallets. In 2021, the average daily number of unique active wallets (dUAW) was 1.58 million, but in 2022, this number increased by 50% to 2.37 million. The continuous adoption of blockchain by both consumers and businesses, along with the increasing support from investors, has helped the industry to consolidate. This context confirms the resilience and maturity of the industry.
While dapp activity opened the year at all-time highs, different events throughout the year created a downward trend for the industry Unique Active Wallets.
The war in Ukraine, which began on 24 February, had visible consequences on the dapp landscape. As tensions between Ukraine and Russia escalated, many Ukrainians turned to blockchain technology as a safe and secure way to store their assets. Also, different organizations utilized cryptocurrencies and even NFTs to help people in need. While this surge in demand for blockchain-based solutions led to an increase in the number of Unique Active Wallets in the region, the number of daily wallets connecting to dapps decreased over the following weeks as the macroeconomic situation turned bleak.
Despite the harsh economic conditions, the dapp industry started its recovery, regaining 3 million daily UAW early in May. However, it would once again feel the effects of the bear market. This time, coming from within the industry itself. On 7 May 2022, Terra, the then-second-largest DeFi protocol in the space, collapsed, causing significant losses for thousands of users, investors, and developers.
The collapse of Terra Luna all but confirmed the so-feared crypto winter, and the industry has failed to surpass 2 million dUAW ever since. Nonetheless, the resilient dapp industry once again showed signs of maturity and evolution, especially coming from the increasing of the adoption from web2 brands. However, another black swan event was looming around the corner.
In early November, rumors around FTX, the fifth largest centralized exchange at the time, being insolvent, started to circle the industry. The situation led to a bank-run scenario where FTX was forced to halt withdrawals leaving thousands of users with large losses. Days later, investigations involving Alameda Research and the platform itself confirmed the worst.
Despite the challenges and events that have impacted the blockchain industry in 2022, the technology has proven to be resilient. Plus, the undeniable adoption coming from institutions, individuals, and some of the largest traditional brands prove that the future of the dapp industry is bright. As more people and organizations begin to see the benefits of blockchain technology, it is likely that we will see once again a positive trend in the number of Unique Active Wallets in the coming years.
DeFi, Gambling, and Games: the most popular categories of dapps
On DappRadar we categorize dapps in seven categories, of which DeFi, Gambling and Games are the most popular. However, these aren’t the categories that have seen the most growth.
Starting with DeFi, or decentralized finance, which is a category of blockchain-based applications that includes a wide range of financial services, such as lending, borrowing, and trading. In 2021, DeFi applications saw impressive growth reaching an average of 641,510 dUAW. This year, this number only increased by 2% to 652,970 as a daily average. Despite the minimal growth, it remains an impressive achievement for the DeFi segment after the fall of Terra Luna, the plummeting crypto prices and the money hacks on blockchain bridges.
Gambling dapps constitute another popular category on the blockchain. These applications allow users to place bets and play games of chance using cryptocurrencies or tokens. In 2021, gambling dapps had an average of 53,364 dUAW. This number grew significantly in 2022, reaching 110,140 dUAW on average, a 106% increase.
Games remain the most popular category of blockchain-based applications, dominating the industry. In 2021, games had an average of 622,620 dUAW. This number grew by 85% in 2022, reaching 1,152,255 dUAW on average.
DappRadar also tracks dapps in the High Risk category, which shows dapps that are considered too risky due to their nature or potential consequences. In 2021, High Risk applications had an average of 37,269 dUAW. This number grew significantly in 2022, reaching 145,825 dUAW on average, a 291% increase. This sudden increase might prove that blockchain users are not risk-averse.
NFT, or non-fungible token dapps allow users to buy, sell, and trade unique digital assets such as collectibles, art, and in-game items. In 2021, NFT dapps had an average of 133,783 dUAW. This number increased by 33% in 2022, reaching 178,095 dUAW on average.
The final category we need to mention are the Social dapps. These focus on enabling communication and interaction between users, such as social networks and messaging platforms. In 2021, social dapps had an average of 15,054 dUAW. This number grew by 206% in 2022, reaching 46,410 dUAW on average.
BNB Chain and WAX lead protocols in average daily Unique Active Wallets in 2022
The blockchains with the highest average of daily Unique Active Wallets (dUAW) in 2022 were BNB Chain, WAX, and Solana, with averages of 599,766, 420,575, and 271,077 dUAW, respectively. These protocols also enjoyed year-over-year (YoY) growth, with BNB Chain and WAX experiencing 10.60% and 42.46% growth, respectively, while Solana experienced an impressive 755.87% growth.
Hive (96.02%), Polygon (94.78%), Ronin (128.69%), Harmony (1,251.30%), Avalanche (156.78%), and DEPchain (723.75%) also witnessed significant yearly growth in 2022. Some of these protocols, including Harmony, DEPchain, and Avalanche, had relatively low average dUAW in 2021, which contributed to their yearly growth rates.
Fuse, Optimism, and Near also witnessed large YoY growth in 2022, with Fuse and Optimism witnessing an impressive 7,250.66% and 2,186.11% growth, respectively.
On the other hand, Ethereum, Tron, and EOS suffered YoY reductions in their average dUAW, with Tron having the greatest decline of -35.36%.
Despite the yearly growth of some protocols, others seemed to be on a declining trend in the recent few months. However, new protocols increased their popularity in Q4 and quickly climbed to the top of the list in terms of average daily unique active wallets.
With 629,828 dUAW, BNB Chain led the way, with a 111.41% increase in activity compared to Q1. WAX and Hive were also active, with gains of 120.90% (361,349 dUAW) and 207.83% (162,829 dUAW), respectively. Polygon, Ethereum, and Solana all experienced significant growth in Q4, with increases of 141.86% (156,705 dUAW), 162.05% (81,585 dUAW), and 339.75% (74,926 dUAW), respectively.
Flow, Fuse, EOS, and Optimism rounded out the top ten protocols in terms of activity, albeit with more moderate increases than the top three. Optimism increased the least, by 4.90%, hitting an average of 34,308 daily unique active wallets.
Overall, the data suggests that in 2022, protocols with a strong focus on DeFi and and gaming experienced the most significant increases in average daily unique active wallets, while more established protocols saw a decline or slower growth.
WAX and Solana lead protocols in transaction count in 2022
The transaction count for the top 10 protocols in 2022 has seen a mix of growth and decline compared to the previous year. The WAX protocol has experienced the largest increase in transaction count with a 48.26% (6.32 billion) increase compared to 2021 and is the protocol with the most transactions. The Hive protocol has also seen significant growth with a 27.57% (730 millions) increase in transaction count. Both of these networks are driven by games.
On the same trend, Polygon and Theta have witnessed considerable growth in their transaction count, up 36.08% (230 million) and 38.78% (114 million) from the previous year. Finally, the Harmony protocol has expanded significantly, with a 57.66% (114 million) increase in transaction count over the previous year thanks to DeFi Kingdoms.
The Solana network has seen a very small increase in transaction count, with a 0.06% (942 million) increase compared to the previous year, but remains the second largest protocol by amount of transactions in 2022.
On the other hand, the BNB Chain saw a significant decline in transaction count, with a 45.32% (420 million) drop compared to the previous year despite attracting the highest number of dUAW. EOS and Ronin are the other protocols that have seen their transaction count plummet. In this case by 68.22% (132 million) and 57.25% (103 million) respectively.
Overall, the transaction count for each of the product categories has seen a mix of growth and decline this year. Games has grown to be the category that stands out, as it has seen a 94.17% (7.4 billion) increase in transaction count compared to the previous year.
Another category that has seen impressive growth is the High Risk category, which has seen the largest increase in transaction count of all categories with a 1,170.71% (169 million). On the same trend, the NFT category had a 207.45% (830 million) increase, and the Social category noted 378.29% (58 million) growth in transaction count compared to last year.
While various categories have shown considerable growth, there’s also a product segment that got hit hard. With falling crypto prices and various hacks, the DeFi category got dealt a bad card. DeFi has seen a 31.96% (791 million) decline in transaction count compared to the previous year.
It is worth noting that the overall transaction count for all categories has seen a significant increase, with a 72.90% increase compared to the previous year, reaching 9.98 billion. This means that dapp activity across all blockchains and product categories has seen significant growth in 2022.
Record number of dapps submitted to DappRadar in 2022
This year, developers submitted 8,255 dapps to DappRadar. Our team manually approved 5,604 of them and our machine-learning tools accepted 1,523. At the time of writing 72 dapps are still in the pending process, awaiting approval to appear in the Rankings. We also rejected 1,056 dapps because we have a responsibility to protect users from interacting with malicious dapps.
DappRadar rejects dapps if they are submitted incorrectly, meaning it contains empty token contracts, their email address is not verifiable, or when they have no website or social media presence. In addition we reject dapps when projects fail to follow our submission process, or when there are too many red flags.The 8,255 submitted dapps is a new record for our platform, up from 7,187 last year.
As you can see in the chart below, the majority of dapps submitted to DappRadar fall into the DeFi and Games category. Most of the approved dapps, 30.5% in total, fall in the DeFi category, while the Games category is in second place with 18.9%.
Currently, DappRadar tracks over 50 blockchain networks, 12,000+ dapps, and over 2.5 million smart contracts. In the past year, millions of users have come to DappRadar to get the most real-time and transparent dapp-related data.
We also have gathered the data regarding how users interact with DappRadar’s tracking tools and put it in a different article. It will provide insights for different industry stakeholders, such as which dapps attract users’ attention, and where the audience is from.
DeFi Dapps Overview
The year 2022 was a challenging one for the decentralized finance (DeFi) industry, as the total value locked (TVL) saw a significant decline. The TVL, which represents the overall value of funds locked into DeFi projects, fell from a high of $211.4 billion in January to $55 billion in December – a loss of 73.97%.
There were several factors that contributed to the drop in TVL. Firstly, the overall decline in cryptocurrency prices had an impact on the DeFi industry. As the prices of the underlying cryptocurrencies custodying DeFi ecosystems fell, the TVL naturally followed suit. In all, the crypto market lost a significant percentage of its value during the year, which had a direct impact on DeFi.
Another major factor was the collapse of the Terra Luna platform, which resulted in losses of around $50 billion. The collapse of Terra Luna, which was the second-largest DeFi ecosystem at the time, had a significant impact on the industry as a whole and damaged confidence in DeFi.
In addition to these two major events, the declining market conditions and lower cryptocurrency prices also played a role in the drop in TVL. As the value of collaterals provided in DeFi lending declined, there was less motivation for individuals to take out loans against them.
Despite the challenges of the year, the DeFi industry remained resilient and continued to grow and evolve. In 2022, we saw an increasing number of financial applications being developed on smart contracts, serving a variety of purposes such as providing basic banking services in areas where traditional banking was not accessible and facilitating transactions between traditional financial institutions and DeFi protocols.
Overall, 2022 can also be seen as a year of bridging the gap between DeFi and traditional finance, as institutions such as Huntington Valley Bank, Societe Generale, J.P. Morgan, and DBS conducted pilots or transactions with DeFi protocols. It was also a year of consolidation and improvement, as DeFi projects, such as UniSwap, worked to improve the user experience and make their platforms more accessible to a wider audience.
While the TVL saw a significant decline in 2022, the DeFi industry demonstrated its resilience and continued to innovate despite the challenges. It is likely that the industry will continue to grow and evolve in the coming years, building on the foundation that has been laid in 2022.
Top DeFi Layer-2 protocols see strong growth in TVL in 2022
Ethereum, the largest DeFi protocol in 2021, saw a 74.56% ($32 billion) decrease in Total Value Locked. This decline has likely been the result of the aforementioned market conditions coupled with the increased adoption of Layer-2 (L2) protocols. Despite this, Ethereum still holds more than 58% of the TVL dominance over the entire DeFi market.
Liquidity staking dapp LIDO has become the biggest DeFi application in terms of TVL on Ethereum. In 2022, its TVL has increased by 1.98% reaching $6.18 billion. The growth could’ve been much more, but LIDO has been deeply affected by the Terra Luna collapse as it lost almost $10 billion in one week.
As a reminder, DeFi’s TVL surged over 1,200% in 2021, with Ethereum taking up most of the staking value of the entire DeFi sector with a market dominance of 62%, as Finbold reported back in December 2021.
Following the collapse of Terra, BNB Chain regained its place as the second-largest DeFi ecosystem. Still, the Binance-branded network experienced a decline of 62.50% to $6.5 billion in the total value locked from 2021 to 2022. However, some things don’t change. PancakeSwap remains the most used dapp in the entire dapp industry with over 1.65 million monthly UAW on average. While the most popular dapp also saw its TVL decrease by 60% to $3.15 billion from the previous year, its popularity remained untouched.
DeFi lending platform Venus remains one of the most popular dapps on BNB chain. Yet, the platform saw its TVL decrease by 64.40% this year, reaching $725.32 million. Furthermore, BiSwap suffered a decrease in TVL too. From January till now the DeFi platform noted a decrease of 66% in TVL, now registering $235 million in its smart contracts.
The fall of Terra caused seismic shifts in the DeFi leaderboard. Still, Tron remained one of the most stable DeFi chains despite the ever lasting stories surrounding its founder Justin Sun. In 2022, Tron saw a slightly smaller decline of 13.52% ($5.7 billion) in its Total Value Locked. The Tron-powered coin market protocol JustLend has been on an ascending trend this year as it saw an increase of 61% in its TVL, reaching $2.93 billion.
On the other hand, Avalanche experienced a massive 92.54% decline in its TVL year over year, now having locked $1.27 billion in its DeFi smart contracts. Aave, an open-source and non-custodial protocol to earn interest on deposits and borrow assets, had a massive decrease in its TVL especially on the Avalanche chain. In January, there was $3.13 billion in TVL, which now sits on just $323 million. That’s a shocking 89.6% decrease. On the same trend, Benqi, a non-custodial liquidity market protocol suffered this year too. From $1.56 billion in TVL on 1 January to $169 million at the time of writing at the end of 2022. That’s a drop of 89% over the course of one year.
Following the massive hole left by Terra, scaling solutions appear to be the largest benefactors.
Arbitrum saw a smaller decline of only 12.07%, and now has $1.74 billion in TVL. Without a doubt, 2022 has been very important for Layer-2 solutions such as Arbitrum, Optimism and Immutable X.
The decentralized spot and perpetual exchange GMX has seen its TVL on Arbitrum ascend since the beginning of 2022. Currently, the total value of tokens locked into the platform reached $439.75 million, which is an increase of 307.15%.
Arbitrum isn’t the only Layer-2 that has seen growth, as Optimism saw a 127.60% increase of its TVL, currently sitting at $669 million. This success comes possibly from the ecosystem’s collaboration with various established DeFi protocols, and the success of its airdrop campaign.
However, not everything screams success on Optimism as Synthetix, the backbone for DeFi derivatives trading, suffered a decrease in its TVL on Optimism. Despite its strong position on Optimism, its TVL dropped 37.7% to $306.22 million. On the other hand, during the year various new DeFi dapps launched on Optimism, such as the automated market maker Velodrome. This DeFi dapps has been on an upward trend since its launch. In June Velodrome had $28.48 million in its TVL, but grew its position 162% to reach $74.67 million ast the time of writing.
The Polygon blockchain ecosystem had a massive decrease in its TVL too, dropping 79.60% to $1.69 billion. The leading DEX and lending protocol QuickSwap has been on a downward trend this year and it lost 79% of its TVL, reaching $178 million. In addition, DeFi liquidity platform Balancer sits on the same descending train as its TVL on Polygon dropped 45.3% to $113.22 million.
Fantom had a decrease in its TVL of 87.30% this year, and now has$575 million in its DeFi smart contracts. Within the ecosystem it’s the liquidity protocol Geist which noted a huge drop of 86% in its TVL, now sitting on $93.69 million in tokens locked in its DeFi platform. Leading the same trend, the automated market maker SpookySwap had a drastic decrease this year of 91.6% reaching $88.23 million. For both dapps the collapse of Terra Luna had a big effect.
Cronos is on the same trend as the previously mentioned DeFi ecosystems, as it suffered a decrease of 56% this year, now having $558 million in its TVL. Amidst this drop in Total Value Locked it’s VVS Finance that has seen the most value leave its platform. The DeFi dapp has seen its TVL drop more than $1.1 billion since January. However, cross-chain money market Tectonic only saw a decrease of 13.2% since the start of the year. In addition, automated market maker Ferro even increased its TVL with a jaw-dropping 5,915% since its launch month in May this year. The Cronos native AMM now has a TVL of $56.67 million.
Solana took the biggest hit this year and the TVL decreased by 94.95%. The chain’s TVL was on a descending trend since the beginning of the year, but the Terra Luna collapse and later , the FTX collapse had a huge impact on the protocol. Among the top DeFi projects on Solana, lending platform Solend lost 96.6% of its TVL this year and currently has roughly $20.2 million locked in the protocol. In January the dapp still has $600 million in its smart contracts. Furthermore, Marinade Finance lost 93% of its TVL and currently has $93.17 million, making it the top DeFi project on Solana. The decentralized exchanges Raydium, Serum and Orca have lost 97%, 99.67% and 93.6% of their TVL over the past year, respectively.
Overall, the decline in Total Value Locked in DeFi protocols in 2022 can be addressed to a variety of factors, including market volatility, changes in investor sentiment, and the overall state of the cryptocurrency market. Despite these negative market conditions, there are good reasons to be optimistic about the future of a still-nascent DeFi industry that continues to attract a staggering amount of venture capital. HashKey’s report reveals that in the first half of 2022 alone, VCs invested more than $14 billion into a total of 725 crypto projects, including numerous DeFi protocols.
Interview with Blue Clarity, Marketing Lead at Trader Joe
Could you explain the key differences between Decentralized Finance (DeFi) and Traditional Finance (TradFi) to our readers?
DeFi is a disruptive technology that aims to create a new financial system. It is open, permissionless, transparent, and does not require centralized intermediaries. DeFi is powered by smart contracts and applications that were first introduced by the Ethereum blockchain, but have since been adopted by other blockchains. DeFi is a resilient and immutable space that has the potential to disrupt the traditional financial system.
In contrast, TradFi is typically closed, requires permission to access, is not transparent, and relies on centralized intermediaries. It also tends to charge higher fees than DeFi protocols.
Despite its potential, DeFi has struggled to gain widespread adoption, especially among retail investors. What do you think are the main obstacles to DeFi adoption, particularly for retail investors?
One obstacle to DeFi adoption is the high barrier of entry for retail investors. DeFi is still in a relatively early stage and requires a certain level of technical knowledge and familiarity with cryptocurrency wallets to access and use it. This may be intimidating or confusing for those who are not tech-savvy. In addition, the lack of regulation and security in the DeFi space can be a concern for retail investors.
Many institutional investors have remained on the sidelines when it comes to DeFi investments. Do you believe that DeFi projects must build on traditional finance primitives in order to increase participation from these investors? What needs to happen for more parties to adopt DeFi protocols?
Institutional investors may be hesitant to enter the DeFi space due to a lack of regulation and security. In order to increase participation from these investors, DeFi projects should focus on addressing these concerns. This may involve working with regulators to establish clear guidelines for compliance, as well as implementing strong security measures to protect against hacks and exploits. Additionally, DeFi projects should consider building on traditional finance primitives, such as stablecoins and collateralized lending, in order to make the space more accessible and familiar to traditional investors.
Rug pulls and access control breaches among most common hacks in exploits in 2022
Blockchain is one of the most secure technology frameworks ever created, thanks to its cryptographic encryption mechanism and decentralized infrastructure. Nonetheless, flaws in smart contract code, wrongful actors, or poor security practices may result in undesirable outcomes. The sheer volume of crypto attacks each year emphasizes the importance of learning more about them and developing safety measures.
One of the biggest incidents to date is the Terra Luna scandal, which resulted in $40 billion lost in crypto tokens. This is significantly more than the combined losses from all scams in 2022.
Excluding the Terra Luna scandal, the volume of scams is relatively low, with a median loss of $283,000 per hack, and losses totaling $345 million per month, according to data from Rekt. On average, there have been 25 hacks per month.
Centralized platforms have been the source of the most damaging hacks, totaling $44.71 billion in losses. The LUNC+CEX platform has been the most damaging of these.
A centralized exchange (CEX) is a type of cryptocurrency exchange that allows users to buy and sell digital assets through a central authority. On the other hand, a decentralized exchange (DEX) is a type of cryptocurrency exchange that allows users to trade digital assets directly with one another, without the need for a central authority to hold and manage user funds.
The concept of “not your keys, not your coins” is a widely-used slogan in the cryptocurrency community that emphasizes the importance of self-custody and the risks of entrusting your funds to a third-party. By using a DEX or other DeFi platform, users keep control over their own funds and transactions, potentially reducing the risks associated with centralized exchanges.
However, it’s important to note that decentralized exchanges and DeFi platforms are not without their own risks and challenges. While they may offer greater security and control for users, they also require a higher level of technical knowledge and can be more complex to use than centralized exchanges.
Although most chains have only experienced one hack this year, there is an inverse relationship between the frequency of hacks and their magnitude. This means that fewer hacks tend to result in larger payouts. The BNB Chain and Ethereum have been the most hacked protocols, with BNB experiencing more hacks and larger losses than Ethereum.
However, the average amount of funds stolen per hack on the Ethereum chain is 30% higher than the average amount of funds stolen per hack on the BNB chain. For example, if the average value of stolen assets per hack on BNB Chain was $100,000, the average amount of stolen funds on Ethereum would be $130,000.
In total more than $1.578 billion were stolen on BNB Chain, while $1.02 billion got stolen from the Ethereum chain. This means that BNB Chain experienced more hacks and had larger overall losses, but the average value of stolen assets per hack on Ethereum was higher.
An analysis of cybercrime within Web3 reveals that rug pulls were the most common type of attack, accounting for 119 incidents and $200 million in stolen funds. A rug pull is a type of exit scam in which the project creators suddenly withdraw the liquidity from a platform, causing the value of the platform’s tokens or assets to plummet.
“Other” types include unique cases which are difficult to quantify, and they accounted for 73 incidents and $46.85 billion in losses. Access control breaches were the next most common, with 30 incidents resulting in a loss of $1.02. Access control breaches involve the unauthorized access and control of a blockchain network.
Flash loan attacks, in which an attacker borrows large amounts of assets from a DeFi platform and uses them for malicious purposes before quickly repaying the loan, accounted for 20 incidents and $240 million in losses. Exit scams, in which the creators of a project abscond with investors’ funds, accounted for 20 incidents and $50 million in losses. Exploits, in which attackers take advantage of vulnerabilities in a blockchain network, accounted for 19 incidents and $220 million in losses.
Phishing attacks, in which attackers trick individuals into revealing their private keys or other sensitive information, accounted for 9 incidents and $0.01 billion in losses. Oracle issues, in which a blockchain’s oracle system is compromised, accounted for 7 incidents and $0.05 billion in losses.
Top 10 crypto scams, hacks and exploits of 2022
According to Rekt database,the biggest exploit in 2022 was from the Terra Luna Network, which occurred in May 2022 and resulted in a loss of $40 billion. The network focused on its two native coins, LUNC and UST, with USTC serving as an algorithmic stablecoin and LUNC functioning as a satellite asset to absorb USTC’s volatility. However, the migration of USTC from the Curve3pool on the Ethereum network, combined with large withdrawals from Anchor Protocol, led to an imbalance between USTC and other stablecoins in the pool and a devaluation of USTC on exchanges. This caused a rapid fall in the valuation of both LUNC and USTC and resulted in liquidations of collateral within Anchor Protocol.
Following, Genesis was the second largest loss of funds, which took place on 21 November, 2022 and resulted in a loss of $2.8 billion. The exploit seemed as if it was heavily affected by the FTX collapse, as Genesis was a crypto trading platform with $2.8 billion in outstanding loans on its balance sheet. The company revealed that it had 175 million dollars in its FTX account, but was forced to halt withdrawals due to market conditions.
Furthermore, on the third place is the Celsius Network which suffered a major lost, leading to a loss of over $1.2 billion on 13 June, 2022. Celsius, a centralized exchange and borrowing and earning protocol, filed for Chapter 11 bankruptcy and listed a $1.19 billion deficit on its balance sheet. The company’s liabilities reached $5.5 billion, while its assets were valued at $4.3 billion. Operations on the platform were halted a month prior to the announcement, citing “extreme market conditions.”
On the fourth place, the Voyager crypto platform also experienced an exploit on 7 May, 2022, filing for Chapter 11 bankruptcy with liabilities estimated to be between 1 billion and 10 billion dollars. The platform’s operations were halted after revealing that it had 661 million dollars in exposure to Three Arrows Capital, a crypto hedge fund that also filed for bankruptcy.
In fifth place was BlockFi, a crypto lending platform that halted withdrawals on November 11, citing significant exposure to the FTX exchange and Alameda Research hedge fund. The company filed for Chapter 11 and sued Emergent Fidelity Technologies for the collateral it claims is owed. BlockFi estimates that it has $1 billion to $10 billion in liabilities, with the largest creditor being Ankura Trust, which is owed approximately $729 million.
Following, in November 2022, Sam Bankman-Fried, the CEO of FTX and Alameda Research, announced the bankruptcy of both companies after it was revealed that Alameda’s collateral was dominated by FTX’s native token $FTT. This caused a panic among FTX customers, leading to billions of dollars being withdrawn from the exchange. The value of the $FTT token plummeted by more than 95% in just 24 hours, and other projects that relied on FTX also reported significant losses.
In October 2022, Brazilian authorities uncovered a Ponzi scheme run by Francisco Valdevino da Silva, also known as the “Bitcoin Sheikh,” who had defrauded thousands of people out of 766 million USD with promises of 20% returns. Celebrities and soccer players were among the investors who lost money in the scheme, and this Ponzi scheme is on the seventh place of the top 10 biggest scam in 2022.
On 29 March, 2022, the Ronin Network, which hosts the popular play-to-earn game Axie Infinity, was hacked, resulting in 173,600 Ethereum and 25.5 million USDC being drained from the network. The attacker used hacked private keys to forge fake withdrawals and was able to bypass security measures through a gas-free RPC node. Binance was able to recover some of the stolen funds, and a funding round led by the exchange raised 150 million USD to partially repay users and sustain operations.
On the ninth and tenth place, there are the Wormhole and Nomad bridges where both were exploited, resulting in the theft of 120,000 WETH and approximately 190 million USD, respectively. The Wormhole hack was the result of an attacker bypassing the verification process, while the Nomad hack was made possible by an operational error that had been noted in an audit report but not properly addressed.
In conclusion, the prevalence of scams and other nefarious activities on the internet is a major concern. While the volume of these attacks is relatively low, the damage they can cause is significant. Individuals and organizations must be aware of these threats and take steps to protect themselves.
The State of the NFT Market: a review of on-chain metrics, blue chip collections, and leading NFT marketplaces
The NFT market continued to grow and evolve in 2022, with significant developments and trends throughout the year. In this section of the Yearly Dapp Report, we will take a comprehensive look at the key data and statistics that defined the NFT market in 2022, including the trading volume, sales count, and unique traders count. We will also delve into the top 10 NFT marketplaces and their trading volumes, as well as the increasing competition among marketplaces.
In addition, we will explore the ongoing debate over royalties in the NFT market and analyze the performance of the floor price blue-chip collection throughout the year. We will also take a closer look at the top 100 NFT Ethereum market cap and compare it to the ETH price, as well as the growing adoption of NFTs by various industries. Through this analysis, we will gain a better understanding of the state of the NFT market in 2022 and its potential for the future.
2022 on-chain metrics forecast a bullish future for NFTs
One key trend that has emerged is the volatile nature of the NFT trading volume, with significant increases and decreases throughout the year. In the first quarter of 2022, the NFT market generated $12.46 billion in trading volume, making it the best quarter in NFT history. However, after the harsh macro conditions that sent crypto prices down, and the uncertainty surrounding the collapse of Terra, the second quarter saw a dip in volumes generating $8.4 billion.
For the first time in one year, the NFT market failed to surpass one billion in monthly trades in June 2022, a trend that still has to be reversed. The second half of this year saw a different trajectory than the last part of 2021, with combined Q3 and Q4 trading volumes netting only $4.4 billion, compared to the $23.2 billion of 2021.
Despite this volatility, the NFT market has continued to grow and evolve, with new technology and platforms being developed to support the growing demand for NFTs. In terms of sales, 2022 has been a breakout year for NFTs, with the sales count seeing a significant increase compared to the previous year. In the first quarter of 2022, the sales count reached 28.44 million, a significant increase of 483.14% from the 4.88 million in the same quarter of 2021. The second quarter of 2022 also saw an increase in the sales count, with a total of 20.23 million sold NFTs. This was a 73.87% increase from the 11.64 million in the same quarter of 2021.
However, the third and fourth quarters of 2022 saw a decrease in the sales count, with 8.78 million and 10.91 million respectively. This is a decrease of 54.89% and 58.15% compared to the third and fourth quarters of 2021.
Another key trend that has emerged in 2022 is the explosive growth of NFT unique traders, with the traders count seeing significant increases throughout the year. In the first quarter of 2022, the traders count reached 3.18 million, a significant increase of 675.88% from 409,298 in the same quarter of 2021. The second quarter of 2022 also saw an increase in the traders count, with a total of 2.26 million, which was a 130.42% increase year over year.
The third quarter of 2022 saw a slight increase in the traders count, with a total of 3.2 million, a 96.12% increase from the 1.6 million in the same quarter of 2021. The fourth quarter of 2022 saw a decrease in the traders count, with a total of 1.99 million, a decrease of 25.53% compared to the 2.7 million in the same quarter of 2021.
There are several reasons why new people decided to enter the NFT market in 2022. One of the main reasons is the decrease in the prices of cryptocurrencies, which made it more attractive for people to enter the NFT market. Additionally, the increasing adoption of NFTs in mainstream industries, such as the art world and gaming, has also helped to drive interest in the market. The development of new technology and platforms for NFTs has also made it easier for people to access and trade these assets, which could also have contributed to the increase in unique traders.
Overall, the NFT market has seen significant growth and development in 2022, with a range of trends and developments emerging over the course of the year. It remains to be seen how the market will evolve in the coming years, but it is clear that NFTs are an exciting and rapidly growing market with a lot of potential for further growth and development.
Analysis of the top 100 NFT collections by market capitalization
The market capitalization of the top 100 NFT collections has seen significant fluctuations over the past year, with a strong correlation to the price of ETH in USD. In this section, we will analyze the market cap in both USD and ETH, as well as the price of ETH in USD, to better understand the trends in the NFT market.
After the pronounced growth in 2021, the top 100 NFT collections started 2022 with a market cap of $14.84 billion in USD and 5.68 million in ETH. Back in January the ETH price sat at $2,610. This market cap decreased slightly by 0.1% to $14.82 billion in USD and 5.64 million in ETH in February, with an ETH price of $2,629. However, March saw a significant increase in the market cap of 27.4%, reaching $18.87 billion in USD and 5.78 in ETH, with an ETH price of $3,384.
In the second quarter, the market cap of the top 100 NFT collections was heavily impacted by the Terra Luna collapse and saw a significant drop in value. From April until June the combined value of the top 100 NFT collections dropped 64.09% in USD and 7.93% in ETH, from $17.8 billion to $6.3 billion. During the same time frame the value of ETH plummeted from $2,817 to $1,099.
In the third quarter of 2022, the NFT industry saw a shift towards affordability and accessibility, resulting in a decrease in the market cap. Major players across all industries, including video games, finance, entertainment, fashion, and sports, launched their own NFT projects with lower mint prices, making them more accessible to retail investors and increasing adoption. Even though July saw a slight increase of 13.8%, the remaining two months of the quarter took the market cap of the top 100 NFT collections further down. The market cap went from $7.57 billion and 4.4 million in ETH to $5.44 billion and 3.94 million in ETH, in September. While the price of ETH dropped from $1,697 to $1,380.
The final quarter of 2022 saw relatively stable market conditions. The market cap remained relatively stable in October at $5.37 billion or 3.87 million ETH, and an ETH price of $1,389. November and December saw drops in market cap to $4.7 billion at the time of writing, which is 3.87 million ETH at a price of $1,274.
Overall, the market capitalization of the top 100 NFT collections has seen significant fluctuations over the past year. While no one can accurately predict the future of non-fungible tokens, it is expected that NFT markets will continue to be expanded by the many market players.
The forecast for NFT markets, which generated about $25 billion in sales in 2022, seems favorable. Even though all markets are experiencing heightened volatility in times when interest rates and inflationary factors are uncertain, wars and global conflict continue, and other factors influence the markets, NFTs collections are exhibiting strong indications of enduring regardless of the ebbs and flows that occur.
Exploring the top new NFT marketplaces of 2022
A growing number of marketplaces were launched over the past months, to facilitate the trade of NFTs. These marketplaces offer a range of features and focus on different areas, including gaming, community building, and decentralization, providing options for NFT buyers and sellers. In this section, we will take a look at some of the most important NFT marketplaces that were launched in 2022 and how the overall landscape of the NFT market has changed.
- LooksRare is a decentralized, community-first NFT marketplace that actively rewards traders, token stakers, creators, and collectors for participating on the platform. The marketplace was launched in January of 2022 and was created by two anonymous co-founders known as Zodd and Guts. LooksRare claims to be made “by NFT people, for NFT people” and aims to offer a marketplace that benefits the community rather than focusing on IPO and business interests. Users who buy or sell NFTs from eligible collections can earn its native utility LOOKS tokens, and OpenSea users who traded 3 ETH or more between 16 June and 16 December, 2021 were eligible for the LOOKS airdrop.
- X2Y2 is a next-generation NFT marketplace that was launched as well, in January of 2022 with the mission of challenging the market’s big players, like OpenSea, in building a “truly decentralized” platform and empowering NFT creators. The platform’s main goal is to provide fully decentralized, secure, and industry-proven services to community members and boasts 100% profit to token stakers. X2Y2 is specifically designed to boost the convenience and functionality of NFT marketplaces and puts creators and their interests first, providing each member with a set of tools to help them manage the NFT minting process.
- GameStop Marketplace launched in July 2022 with a focus on gaming-related NFTs. Gamestop, previously known for its chain of video game retail stores.. The company has reinvented itself and is now leading the pack by branching into gaming NFTs. The initial launch of GameStop Marketplace saw trading volume rise as much as $2 million, with a total of 41,000 sales occurring on the launch day. The platform aims to use the marketplace as an extension of its gaming business and was met with much enthusiasm on social media.
- Nickelodeon launched its NFT marketplace also in July, featuring Rugrats and Hey Arnold! characters. The collection sold out in less than ten minutes during the presale. The Nickelodeon NFT marketplace filters by a variety of characteristics associated with the Rugrats and Hey Arnold! characters, including NFT type, character name, origin, series, slime score, costume, and more. Each NFT has a slime score indicating its relative rarity, and holders can acquire rare, one-of-a-kind mashup NFTs by exchanging Nickelodeon NFTs.
- SudoSwap is an NFT marketplace focused on providing a decentralized, secure platform for users. The platform, which was launched in August 2022, introduces the concept of an Automated Market Maker (AMM) to NFT trading. AMMs enable the trading of assets using crypto liquidity pools as counterparties rather than the traditional system of buyers and sellers. SudoSwap allows users to trade and swap NFTs over a bidirectional liquidity pool, with the option to offer NFTs for sale in addition to ETH. The platform also allows users to swap into customizable bonding curves supplied by liquidity providers. SudoSwap is pioneering the way for nontraditional financial offerings and is disrupting the decentralized nature of the NFT market, giving consumers more control.
- Blur aims to differentiate itself from other NFT marketplaces by offering zero trading fees and a focus on professional traders which was launched in October 2022. The platform includes features such as floor sweeping across multiple marketplaces, sniping, and portfolio analytics tools. In addition, Blur plans to airdrop its native BLUR token to anyone who has traded Ethereum-based NFTs in the past six months. The platform received over $14 million in support from venture capital firm Paradigm, NFT-focused investment fund 6529, and digital art collector Cozomo de’ Medici.
Over the past months, there has been a surge in the number of NFT marketplaces entering the market. This has led to a transformation of the market from a “monopoly,” where there is only one dominant player, to an “oligopoly,” where there are a few dominant players. The emergence of these new marketplaces has added more competition and options for NFT buyers and sellers, and has given rise to a diverse range of NFTs and features on these platforms. It will be interesting to see how the market evolves as more players enter the space and how the existing marketplaces adapt to the increased competition.
The NFT marketplaces competition heats up in 2022
NFT marketplaces have experienced significant growth in recent years, with the total trading volume of the top 10 marketplaces reaching over $22.71 billion in 2022. This represents a slight decrease from the previous year, with the total trading volume in 2021 reaching $24.16 billion.
One of the most notable marketplaces in terms of trading volume is OpenSea, which saw a 26.22% ($18.6 billion) increase in total trading volume in 2022 compared to the previous year. This is followed by Magic Eden, which grew 268.13% to $1.54 billion in trading volume, and BloctoBay reached $428 million thanks to an impressive 983.99% in trading volume growth. Another eye catcher is Immutable X Market, which has seen an increase in the NFT trading volume of 185.19%, reaching $246 million.
X2Y2 and LooksRare are two marketplaces that launched in 2022, but they’ve managed to move up the charts seeing $1.54 billion and $594 million in trading volume respectively. Both marketplaces have also seen lots of wash trading, which DappRadar has filtered out from these yearly trading volume numbers.
On the last place, there’s Blur. This 3 month old marketplace managed to attract $205 million in NFT trading volume, climbing up the charts in a record time.
On the other hand, some marketplaces saw a decrease in trading volume in 2022 compared to the previous year. CryptoPunks saw a 75.99% decrease to $576 million, while NBA Top Shot noted a 74.37% decrease to $198 million. We’ve seen the biggest drop in trading volume on Axie Marketplace, which saw a significant decrease of91.78% to $323 million.
It is worth noting that the total trading volume of the top 10 marketplaces in 2022 represents 96.52% of the total trading volume across all NFT marketplaces, which reached over $25 billion in 2022.
Furthermore, in 2021, the NFT marketplaces by trading volume were dominated by OpenSea, with a 58.6% share of the market. Axie Marketplace came in second with a 15.64% share, followed by CryptoPunks at 9.6% and NBA Top Shot at 3.1%. Solanart, Mobox, Magic Eden, AtomicMarket, Rarible, and SuperRare.finished up the top 10.
Fast forward to 2022, and we see a significant shift in the dominance of the top NFT marketplaces. OpenSea grew its dominance and remains the leader with 73.1% of the trading volume, there are a number of new entrants in the top 10. X2Y2 has taken the second spot with 6.1% of the trading volume in its first year, followed by Magic Eden at 5.9% and LooksRare at 2.4%. CryptoPunks, which was the fourth largest marketplace in 2021, has fallen to fifth place with 2.3% of the trading volume.
The rest of the top 10 includes BloctoBay at 1.7%, Axie Marketplace at 1.34%, Immutable X Market at 1.02%, ThetaDrop at 0.87%, and NBA Top Shot at 0.82%.
There are a number of reasons for the changes in the dominance of the top NFT marketplaces from 2021 to 2022. One key factor is the overall growth of the NFT market, which has attracted new entrants and increased competition as seen in the paragraph above. Additionally, the rise of decentralized finance (DeFi) and the use of non-fungible tokens as collateral for loans has likely played a role in the shift.
In conclusion, the dominance of the top NFT marketplaces has changed significantly from 2021 to 2022, with new entrants and increased competition leading to a shift in the rankings. While OpenSea remains the leader by a significant margin, there are now a number of other marketplaces that are vying for a share of the trading volume. As the NFT market continues to grow and evolve, it will be interesting to see how these rankings change in the coming years.
The debate over NFT royalties has been a hot topic in the crypto community recently, with some arguing that royalties are essential for creators to generate additional income from the success of their work, while others believe that royalties are unfair and extractive. The DeGods ecosystem recently removed royalties from all their affiliated NFT collections, prompting a wave of changes across dominant players in the NFT ecosystem.
A brief history of NFT royalties reveals that they are a relatively new concept, with the first NFT marketplaces implementing them in 2020. These royalties are typically enforced by the marketplaces themselves, not hard-coded into the issuing smart contracts. This decentralized nature of the crypto space has led to a variety of NFT marketplace structures, with some positing royalty-free NFT trading as a core value proposition.
The use of royalties in the non-fungible token (NFT) market has increased over the past few years. Initially, many NFT projects, such as CryptoPunks, did not institute royalties on their collections. However, the success of collections like Bored Ape Yacht Club, which earned its creators $54 million in secondary sales revenue through its 2.5% royalty fee, led to an industry standard . This trend continued with some collections implementing 5% royalties, such as Otherdeeds and Meebits.
Recently, some NFT projects have begun to experiment with higher royalty fees, such as Goblintown, which implemented a 7.5% royalty on secondary sales. NFT Worlds has one of the highest royalties at 9.5%, which has earned the team $15 million despite poor collection performance and weak user growth.
As the broader bear market has made users more price-sensitive, there has been a pushback against collections that continue to earn revenue through royalties without delivering on their promises. This has led to an increase in activity on royalty-free NFT marketplaces.
The introduction of zero-royalty NFT marketplaces, such as SudoSwap, has amplified the debate about the role of royalties in the NFT market. SudoSwap, which uses an automated market maker (AMM) model similar to Uniswap, offers lower fees and does not support the enforcement of royalties for collections. This value proposition has proven popular with sellers looking to maximize their margins. In response, other NFT marketplaces, such as X2Y2 and Yawww, have made it optional for buyers and sellers to pay royalties.
The Solana NFT ecosystem has been more sensitive to this debate than the Ethereum NFT ecosystem. Magic Eden, which previously commanded 90% of the Solana NFT marketplace volume, saw its market share drop to as low as 60% after the launch of royalty-free alternatives. Magic Eden responded by making royalties optional on its platform, resulting in a return to its previous market share of 90%.
The different reactions to the zero-royalty movement in the Solana and Ethereum NFT ecosystems may be due to the different types of users on each platform. Solana NFT traders are more likely to be flippers focused on maximizing their margins, while Ethereum NFT users are more often high-net-worth individuals interested in signaling status and storing value in rare collectibles. This may make Ethereum users less sensitive to the fees associated with royalties.
Despite the potential benefits of NFT royalties for creators, there are also valid concerns about their enforceability and fairness. As mentioned, royalties are not hard-coded into the issuing smart contracts, leaving them vulnerable to marketplaces altering or removing them. This has already happened with DeGods and Magic Eden, leading to the potential loss of revenue streams for creators. Additionally, some argue that royalties are unnecessary and extractive, taking profits away from NFT buyers and reducing the overall value of an NFT.
One potential solution to this issue is the implementation of smart contract-based royalties. By hard-coding royalties into the issuing smart contracts, they would be enforceable and transparent, allowing creators to receive ongoing income from the success of their work. This would also provide NFT buyers with the assurance that their purchases would support the creators and maintain the value of the NFT.
In conclusion, the debate over NFT royalties is a complex and contentious one, with valid arguments on both sides. While royalties have proven to be a lucrative revenue stream for collection owners, their enforceability and fairness remain a concern. Implementing smart contract-based royalties could provide a solution to this issue, allowing creators to receive ongoing income from their work while also providing transparency and assurance for NFT buyers.
Analysis of the top blue-chip collections
In this analysis, we examined the floor prices of five different NFT collections in both ETH and USD over the course of three months.
Azuki NFT collection increased its ETH floor price by 32.62% (10.53 ETH) but decreased its USD floor price by 37.69% ($13,289) from January to December. The collection was introduced to the NFT market in January 2022 and quickly gained attention from NFT enthusiasts. It was viewed as a potential leader in the NFT market due to its high mint price and complex roadmap, and it was also considered a hot commodity by influencers. The creators of Azuki have a goal of creating the largest decentralized metaverse brand that is owned by its community of holders.
Additionally, this year Oracle Red Bull Racing, a F1 racing team, has partnered with Bybit and Chiru Labs, the creator of Azuki. For the 2022 season finale in Abu Dhabi, the team’s cars featured an Azuki NFT, marking the first time a blue-chip NFT has ever appeared on a F1 race car. In preparation for the Abu Dhabi race, the Azuki team also provided F1 race jackets to holders.
CLONE X – X TAKASHI MURAKAMI saw an increase in its ETH floor price this year, by 13.14% (10.33 ETH) but a decrease in its USD floor price by 46.84% ($13,036). Clone X is a collaboration between design studio RTFKT and Japanese contemporary artist Takashi Murakami. It offers fans of Murakami’s art style the opportunity to own one of his digital pieces in the form of an NFT. The Clone X collection also stands out for its diversity, with Clones available in a variety of skin tones and races, including some with the rare skin condition vitiligo.
In addition to being a collectible, owning a Clone X NFT also grants access to the RTFKT ecosystem, which focuses on metaverse products such as digital wearables. This includes special benefits, like access to real-world events and early opportunities to purchase NFTs from new collections. The Clone X roadmap aims to make the metaverse more accessible and engaging for users, with the ability to customize and personalize 3D files that can be used on various platforms.
Clone X has gained a strong following on social media and was widely popular among NFT collectors upon its launch. On 13 December, 2022, Nike announced that it had acquired RTFKT to tap into the company’s expertise in augmented reality, blockchain, and digital assets.
Moonbirds saw a decrease in its ETH floor price of 16% and 33.61% in its USD floor price from June to December. Moonbirds is a collection launched on 16 April, 2022. The collection quickly gained attention and generated significant buzz, with 7,875 of the 10,000 NFTs available at launch (through a raffle) selling out within two days. Moonbirds raised a total of 19,687 ETH, which was valued at around $60 million at the time, and has continued to generate millions for holders in the NFT secondary market.
Part of the reason for Moonbirds’ success is its association with the PROOF Collective. When PROOF Collective NFTs first hit the market, they sold for 1 ETH each. However, their value gradually increased to double digits and even reached over 100 ETH before the Moonbirds launch. The combination of fear of missing out (FOMO) and the notoriety associated with Moonbirds contributed to the project’s rapid rise in value.
Following, VeeFriends saw a 17.22% decrease in its ETH floor price, and a 61.11% in its USD price. Gary Vee’s VeeFriends has continued to thrive as one of the most successful NFT memberships in the world. The brand includes Mini Drops, Book Games, and an upcoming “Series 2” collection, with a total of 10,255 VeeFriends tokens. In July, VeeFriends also closed a $50 million seed round led by Andreessen Horowitz, which they will use to support the development of the 283 VeeFriends characters and scale the brand’s creative, technical, and experiential operations.
In October 2022, VeeFriends released physical products featuring the characters from the collection, including Willful Wizard, Adventurous Astronaut, Practical Peacock, and more. These products come with QR codes that lead to 3D animated films and character songs. The physical VeeFriends collection is available for purchase on Macy’s Toys”R”Us website, mobile app, and in-store nationwide for prices ranging from $9.99 to $29.99.
Last, but not least, World of Women has decreased its ETH floor price by 31.03% and its USD floor price by 67.59%. In January 2022, talent manager Guy Oseary announced that he would be representing WoW in order to explore opportunities in film, television, music, gaming, and consumer products. A month later, Reese Witherspoon’s production company, Hello Sunshine, announced a partnership with WoW to expand their universe into various forms of intellectual property, including feature films and a TV series.
WoW’s co-founder and artist, Yam Karkai, was also commissioned to create one-of-a-kind magazine covers featuring Madonna, Mariah Carey, and Christina Aguilera for the 2022 Billboard Women in Music event and summit. In February 2022, one of the project’s NFTs sold for 260 ETH (approximately £567,000) at a Christie’s London Evening Sale.
In March 2022, WoW launched the World of Women Galaxy, a new collection of 22,222 NFTs created using NFTs from the original collection and evolved and multiplied as they traveled through a portal to the Galaxy.
Following, WoW has declared that it is “heavily investing in the metaverse” and announced a partnership with The Sandbox to establish the WoW Foundation, which will receive $25 million over five years to support women’s representation in decentralized spaces. The initiative will focus on four principles: charitable giving, supporting artists and funding projects, increasing visibility for women-centric causes and educating newcomers. Ten percent of all sales from the WoW Galaxy collection will also be donated to the foundation.
Overall, the values of these NFT blue-chip collections have fluctuated over the given time period, with some seeing increases and others seeing decreases. It is important to note that the values of NFTs can be affected by various factors, such as market demand and the popularity of the particular collection or artist. It is also worth noting that the values in ETH and USD are not directly comparable, as the value of ETH can fluctuate separately from the value of the NFT collections.
Yuga Labs footprint expands further into the NFT market
Yuga Labs had an eventful year in the world of NFTs. The brand’s NFTs saw a range of price fluctuations over the course of the year, with some collections experiencing decreases while others saw slight increases. Overall, the ETH price floor have been relatively stable, with major decreases only in USD floor price, due to the the USD decrease of Ether.
The Bored Ape Chemistry Club, Mutant Ape Yacht Club and Meebits collections saw slight increases over the course of the year, with the Bored Ape Chemistry Club have an increase of 3.78%, Mutant Ape Yacht Club collection increasing by 0.56% and the Meebits collection increasing by 2.18% in their ETH price.
The CryptoPunks collection, for which Yuga Labs acquired the property rights back in March, also saw a decrease in its floor price, dropping from 68.33 ETH in January to 62.69 ETH in December, a change of -8.26%.The Otherdeeds collection saw the largest change, with its floor price decreasing by 54.29% from 2.80 ETH in June to 1.28 ETH in December.
In May, the Otherside metaverse project saw great success with the sale of its Otherdeeds land NFTs. These metaverse land NFTs sold out within three hours of the public sale, bringing in a total of 16.7 million ApeCoin ($317 million at that time) and making it a record-setting NFT mint. The NFTs give buyers rights to claim land in the Otherside metaverse, a virtual world being developed by Yuga Labs and Improbable. In 2022, the project continued to thrive, with Eminem and Snoop Dog performing in the Otherside metaverse for the annual MTV Video Music Awards and taking along their Bored Ape Yacht Club NFTs. In July, the Yuga Labs game project also gathered 4,300 “Voyagers” for a first look tech demonstration and tour of the immersive internet environment developed by Improbable.
The Mutant Ape Yacht Club and Meebits collections both saw slight increases over the course of the year, with the Mutant Ape Yacht Club collection increasing by 0.56% and the Meebits collection increasing by 2.18% in its ETH price.
Furthermore, on 14 November, Yuga Labs announced the acquisition of the NFT startup WENEW Labs and their 10KTF Web3 fashion brand, co-founded by famed artist Mike “Beeple” Winkelmann. Michael Figge, co-founder and CEO of WENEW Labs, will serve as the new Chief Content Officer. Beeple, best known for selling a single piece of NFT artwork at auction in March 2021 for $69.3 million, will serve as an advisor to Yuga Labs.
This year, there has been a significant concentration of trading in the blue-chip NFT collections, particularly in those from the Yuga Labs stable. In fact, more than 55% of the top 100 NFTs by market cap in USD are from the Yuga Labs collection. Beside this, of the top 12 biggest NFT sales of 2022, Yuga Labs NFTs dominate the chart.
Overall, it is clear that Yuga Labs has had a successful year in the NFT market, with various innovative projects and collaborations. While the floor prices of its NFT collections showed a mixed trend over the course of the year, the company has continued to find success and push the boundaries of what is possible with NFTs.
Exploring the potential of NFTs in 2023
NFTs have gained significant attention in recent years for their ability to represent unique digital assets on the blockchain. These assets can be anything from art to collectibles, and from entrance tickets to virtual real estate. Above all, they are gaining popularity in a variety of industries. According to Yahoo, the NFT market could reach $82.43 billion by the end of 2026 at a CAGR of 40.2%.
Utility NFTs, such as in-game NFTs, identity tokens, and token-gated communities, software, and events, are expected to see significant growth in 2023. These types of NFTs have the potential to disrupt a variety of industries by granting specific privileges to holders. For example, PROOF Collective allows NFT holders to access future product drops and participate in community initiatives like in-person events and private Discord groups.
Ethereum co-founder Vitalik Buterin also released a paper on soulbound tokens (SBTs), which are NFTs that hold on-chain information, can’t be traded and have already been adopted by some projects. In addition, the gaming industry has seen a significant increase in NFT transactions, and NFTs are starting to be explored in the entertainment industry for fan engagement.
Traditional companies have also been exploring the adoption of NFTs. Tiffany’s released a collection of pendants for CryptoPunks NFT holders, Instagram announced that it will incorporate NFTs into its platform, and Nike acquired metaverse fashion company RTFKT. Furthermore, Starbucks launched a loyalty program using blockchain technology, while Samsung integrated NFT display options in its newest televisions. In the music industry, Royal has allowed fans to invest directly into songs, and sports players like Cristiano Ronaldo have released NFT collections to increase fan engagement and potentially offer other perks.
In 2023, we can expect to see further development and experimentation with utility NFTs in both the crypto and traditional sectors. Companies will likely begin using NFTs to provide value and unique experiences to their owners. Overall, the potential for industry disruption and innovative use of NFTs is exciting and will be worth keeping an eye on in the coming year.
The gaming sector accounts for 49% of the industry’s usage in 2022
The blockchain gaming industry has faced its fair share of challenges in recent years, but in 2022 the market has started to recover and showed an increase in adoption. The number of unique active wallets (UAWs) in the blockchain gaming sector has increased this year around 1.15 million dUAW on average, representing 49% of all daily blockchain activity. Additionally, the transactions count have increased by 94.17% this year, reaching 7.44 billion.
Ethereum has maintained its dominance in the market, holding around 60% of market share based on secondary market trading of in-game NFTs. However, other platforms such as Solana, Polygon, and Immutable X actively compete and try to position themselves as the go-to choice for blockchain game developers.
The play-to-earn (P2E) gaming sector has seen a significant downturn with most major projects losing over 90% of their market capitalization in 2022. Virtual land NFTs, which represent assets in games that have yet to launch, have also seen a similar downtrend. However, the industry is shifting towards the third era of blockchain gaming, which will build upon the lessons of the past and prioritize fun while addressing scalability and economic design issues.
The top games of 2022 have shown resilience, and they managed to increase their activity. Splinterlands, remains the most popular game with 217,914 monthly unique active wallets in 2022, translating into a 85.78% increase. In second place we find Alien Worlds, which saw a slight decrease in its activity in 2022. With a 3.67% drop Alien Worlds now reached an average of 178,118 monthly Unique Active Wallets.
Funding for the blockchain gaming industry has also been mixed in recent months. In the third quarter of 2022, the industry saw negative year-over-year growth, with a decrease in total deal value and a continuation of the market correction that began earlier in the year. The number of deals did increase 2.6 times year-over-year, but the total deal value was down 19%. The quarter-over-quarter growth metrics were also down, indicating that the correction is ongoing.
Whether the market corrects, or moves towards a next stage of development, many companies pivot towards new business models. Stepping away from play-to-earn, and preaching free-to-own or play-and-earn. With this new perspective on blockchain game development comes also a new focus, which includes building strong communities, providing investment management services, developing technology products, offering value-add services, and creating engaging content. The companies that are receiving the most funding are those that are able to produce high-quality content that utilizes blockchain gaming infrastructure.
One area that will be crucial in unlocking mass adoption of blockchain gaming is wallet solutions. Wallets are the main point of interaction for players, and having user-friendly and reliable options will become key in attracting and retaining a large user base. Companies such as Sequence by Horizon and Stardust Vault by Stardust will be worth keeping an eye on as they look to provide innovative solutions in this space.
Major platforms are also beginning to embrace blockchain games, with the Epic Games Store hosting Blankos Block Party and products from Gala Games, while Apple will allow the sale of NFTs, albeit in a limited capacity. This is a promising sign for the industry, as it will increase the presence of NFTs and Web3 technologies among a bigger audience. Enabling the distribution of blockchain games will be a major catalyst for mass adoption.
The migration of traditional game developers to the blockchain gaming industry has also begun, bringing their expertise and potentially disrupting the traditional gaming market. The potential for true digital ownership and scarcity through the use of NFTs adds appeal and new mechanics, which will pave the way for innovative game design.
Overall, the future of blockchain gaming looks bright, with the market maturing and a shift towards more engaging and fun content. While there are still plenty of challenges to overcome, such as scalability and economic design, the industry is well-positioned for future growth and mass adoption.
“Over the past two years, a significant amount of investment has been poured into the GameFi space, and we can expect to see the fruits of this investment in 2023. While earlier blockchain games often prioritized cryptocurrency over the actual gameplay experience, the trend is shifting towards traditional games that seamlessly integrate cryptocurrency and NFTs. As awareness grows about the potential for centralization in NFTs, we can also expect to see increased demand for fully on-chain NFTs. In the coming year, Chromia will be focused on building out our testnet, expanding our ecosystem, and introducing a new dapp platform that offers scalability, on-chain data storage, customizable fee structures, and enhanced NFT capabilities.”According to Anastasia Plane, Senior Marketing Lead at Chromia & ChromaWay
To find more about the stats of the blockchain gaming sector in 2022, stay tuned about our new yearly gaming report that will be out by the end of January 2023.
Interview with Robby Young, CEO of Animoca Brands
What distinguishes blockchain gaming from traditional gaming? What is the advantage of blockchain gaming over traditional gaming?
The key difference is ownership. In tokenized games, players have true digital ownership, which changes the business model for developers and the value proposition for players. This shifts the way in which players engage with the product.
Scalability has been a major issue with blockchain technology. Can blockchain games scale without sacrificing other features as the number of users increases?
Yes, I believe they can. Smart people will always find solutions to these challenges, just as we figured out how to make AAA games fun on mobile and we figured out how to reduce the price of gas on Ethereum (layer 2’s).
Users often complain about the lack of variety and realistic graphics in blockchain games. What needs to be done to bring blockchain games up to the standards of AAA games?
This is a simple problem of time. There are so few blockchain games, so the choice is limited. I don’t have the official numbers, but I wouldn’t be surprised if the number of blockchain games is still doubling every quarter.
Do you think the next wave of adoption will be brought by blockchain gaming?
If adoption of blockchain is to happen, then yes, it will be brought by gaming.
New regulations reflect growing importance of blockchain technology
In 2022, the major regulations in the blockchain industry focused on improving the transparency and accountability of blockchain-based systems. This included measures to combat money laundering, fraud, and other illegal activities, as well as efforts to establish clear rules and guidelines for the use of blockchain technology.
One notable regulation was the Financial Action Task Force’s (FATF) Travel Rule, which required financial institutions to collect and exchange information about the sender and recipient of virtual assets. This aimed to improve the traceability of virtual assets and prevent their use for illegal purposes.
Another significant regulation was the SEC’s guidance on the use of blockchain technology in the securities industry. This provided clarity on the regulatory requirements for companies using blockchain to issue and trade securities, and aimed to protect investors and promote fair and orderly markets.
Following, this year the first White House bill for crypto regulations was introduced, which aimed to establish a comprehensive framework for the regulation of cryptocurrencies and other digital assets. The bill proposed measures to combat money laundering, fraud, and other illegal activities, as well as guidelines for the registration and oversight of crypto exchanges and other market participants.
In Europe, the Markets in Crypto-Assets (MiCA) regulation was introduced, which aimed to establish a harmonized framework for the regulation of crypto assets across the European Union. The regulation covered a wide range of issues, including licensing and registration requirements for crypto asset service providers, investor protections, and the supervision of market participants.
In terms of where regulations are headed, it is likely that there will continue to be a focus on improving the transparency and accountability of blockchain-based systems. This may involve further measures to combat money laundering and other illegal activities, as well as increased coordination and cooperation among regulators at the national and international levels.
Additionally, as the use of blockchain technology continues to evolve and expand, there may be a need for new regulations to address emerging challenges and opportunities. This could include regulations related to the use of blockchain for new applications, such as decentralized finance and non-fungible tokens, as well as regulations to support the growth of the blockchain industry and enable innovation.
Overall, the regulatory landscape in the blockchain industry is complex and constantly evolving. The major regulations in 2022 aimed to improve the transparency and accountability of blockchain-based systems, and it is likely that this will continue to be a key focus in the future.
After a breakout year in 2021 that saw the dapp industry reach unprecedented heights, 2022 was a year where dapps showed resiliency and evolution. Even amid the catastrophic events that saw the second-largest DeFi ecosystem and the fifth-most popular centralized exchange vanish in hours, the space held its ground showing its resiliency and true potential.
In 2022, DappRadar reached 49 blockchain integrations tracking almost 13,000 dapps and more than 13,500 NFT collections. The high number of integrated dapps reflects the state of the industry, where successful projects keep building despite the harsh conditions.
Likewise, the increasing adoption by renowned brands never truly ceased. From Twitter launching NFT integrations in January to the latest integration between MetaMask and PayPal, we are glimpsing an assertive path to onboard the new wave of Web3 users. Instagram and Reddit fully embrace digital collectibles stored via blockchain. At the same time, Ticketmaster partnered with Flow in what promises to be one of the most enticing use cases for NFTs with ticketing services. Meanwhile, the list of top-notch brands rolling out their metaverse strategies through blockchain technologies is already challenging to quantify.
Without question, blockchain games and NFTs were the driving force behind dapps in 2022. While 2021 was the year of NFTs, digital assets experienced their most critical period over the last 12 months. As previously mentioned, the unceasing adoption from institutions and businesses is a bullish sign per se. Yet the increased involvement of retail investors is the latest proof of the rising adoption of blockchain-based assets.
The number of NFT trades increased 10% from 2021, while the number of traders jumped a staggering 870% in the same period. While some people could argue that trading volumes stalled, it is necessary to consider that the market generated the same amount as one year ago, when the price of most cryptos was 70% higher at its peak.
Even though the bubble for avatar NFTs popped a while ago, we still witnessed groundbreaking NFT collections launched and succeeded amid the crypto winter. Moonbirds, Digidaigaku, GoblinTown, QQL, RENGA, and others proved that there is still room for relevant projects to leave their footprint if launched with an innovative concept behind.
What is more, the proven success of NFTs was unrestricted to Ethereum and Flow like in previous years. Solana, Polygon, Immutable, and Cardano became all essential players in assessing the NFT market.
Similarly, the consolidation of different NFT dapps to challenge OpenSea as the dominant marketplace should be seen as a step in the right direction. And while there are still challenges to solve, like the royalties dilemma and the high wash trading still occurring in some of these marketplaces, open competition should bring the best from everyone. Magic Eden, X2Y2, Blur, BenDAO, LooksRare, GameStop, and others will look to increase their market share in 2023, while NFT aggregators like Gem and Genie have changed the way we trade NFTs.
The Web3 gaming space also took a significant step forward. Despite ups and downs, Alien Worlds, Splinterlands, Axie Infinity, Upland, and The Sandbox, have been a measure of consistency. These blockchain games have remained atop the gaming charts surfing several challenges for over two years.
In the same way, a few networks were confirmed as potent gaming ecosystems. Starting with Immutable X, Ethereum’s Layer-2 solution is home to the popular trading card game Gods Unchained and the fantasy RPG Guild of Guardians. In addition, Illuvium, one of the most anticipated games, successfully finished its closed alpha season and is currently undergoing a beta test. Last June, Immutable X also welcomed the online role playing game Ember Sword officially, as the game ended the assets’ migration.
Apart from Immutable X, Polygon proved itself as a household for Web3 games. Game dapps like Aavegotchi, Arc8, Crazy Defense Heroes, Doctor. Who: World’s Apart, The Sandbox, give the blockchain another reason to remain bullish. Similarly, Gala Games remain a force to be reckoned with. The blockchain gaming company has 18 games in its portfolio, including two on Steam and 1 in the Epic Games Store. Gala Games even has more aces up its sleeve with Mirandus, The Walking Dead: Empires and Legacy, while still having an unconfirmed number of projects unannounced.
The commitment from venture capitalists and private investors in gaming and metaverse projects in 2022 can be seen as the icing on the cake. Web3 metaverse projects raised almost $8 billion this year, almost tripling what they raised in 2021.
“The 2022 wave of web3 games was not what the intersection of crypto and gaming should be. Imposing crypto dynamics such as farming hyper inflated tokens through poorly designed gameplays or gatekeeping players with expensive NFTs was never a good idea. We expect these trends to fade away in 2023. However, we expect these trends to fade away in 2023, as we see the emergence of quality and fun games that appeal to traditional gamers. Additionally, there will be an increase in infrastructure offerings to enable game developers to easily integrate crypto into their games, and we will see more projects choosing to build on protocols like Algorand. While the number of game developers building web3 games will increase, we still need a web3 game with numbers similar to traditional AAA games to fully capture the attention of the game developers community, which we don’t expect to happen in 2023.”According to Piergiacomo Palmisani, the Head of Gaming at Algorand
And while games and NFTs had a breakout year, DeFi suffered the consequences from Terra and FTX collapses. The industry’s TVL fell 73.97% as the price of crypto plummeted. Terra lost $30 billion, and Solana couldn’t deflect the FTX pressure. However, there are silver linings for DeFi enthusiasts.
In one of the most critical events in the dapp calendar, Ethereum finally completed its transition into a proof-of-stake network with The Merge. As a result, Layer-2 and scaling solutions eventually flourished, filling part of the void left by Terra. Popular DeFi platforms like PancakeSwap and Uniswap remained among the most popular dapps across all blockchains thanks to their optimized user journeys and unique propositions.
However, there is still a rough lesson to be learned in DeFi, as 2022 was the year with the most funds stolen in crypto history. Bridges remain a prime target for hackers, especially the infamous Lazarous group. Interoperability is one of the most important characteristics of the space, but there is a need to improve security when performing cross-platform transactions.
Overall, 2022 has been a challenging year for everyone involved in the fascinating web3 environment, but we have strived and remained strong through it all. As the year ends, we are grateful for all the positive developments, but at the same time, conscious of all those adverse situations that should be used as lessons learned to help us become resilient and determined to come back stronger.
As we look ahead to the new year, we do so with hope and optimism. We know the future holds many unknowns, but we are ready to face them with courage and determination. We are grateful for the support and love of our DappRadar community, and we are excited to see what the bright future holds.