2023: Closing with 4.2 Million Daily UAW – A Bullish Signal for 2024
In 2023, the dapp industry surpassed all expectations, and reinforced the notion that it’s an enduring and evolving part of the global financial and technological landscape. As one of the longest bear markets in history finally ended, it left behind soaring inflation, rising interest rates, geopolitical conflicts, while facing numerous challenges on every front. With this Dapp Industry Report 2023 we invite you to explore the data for all verticals of the dapp industry, and glimpse into what 2024 and the future beyond will bring.
Key takeaways
- The Dapp Industry witnessed a 124% YoY increase in its Unique Active Wallets (UAW), closing 2023 with 4.2 million daily UAW.
- NFT collections have gained increased interest, as the number of new wallets trading and using these assets increased 166%.
- Blockchain-powered games continue to lead the charge in terms of dapp activity, recording a yearly dominance of 34% with an average of 1.1 million UAW by year’s end.
- Near, Klaytn, and Arbitrum stood out as the chains with the highest growth in new user wallet creation, each seeing increases exceeding 600% year-over-year. On the other hand, Harmony, Solana, and Hive experienced a notable dip in user interest.
- DappRadar approved 2,985 new dapps this year; Alien Worlds emerged as the most viewed dapp on our website.
- The Total Value Locked (TVL) in DeFi surged by 77% this year, reaching $103 billion, with Ethereum commanding a dominant 57% share. Solana, Arbitrum, and Optimism were the top gainers by TVL growth; 503%, 136%, and 68%, respectively.
- PancakeSwap led the way in the DeFi space, becoming the most used dapp in 2023 with over 860,000 monthly UAW.
- NFTs have become a lot cheaper throughout 2023, and therefore the trading volume dropped 49% to $12.6 billion. However, the number of NFTs sold increased 445% to 60 million.
- Blur leads in NFT trading volume with a 56% yearly dominance, while OpenSea maintains the highest trader count, with an average of 280,000 traders per month.
- The year saw a significant drop in financial losses due to hacks and exploits, decreasing by 96% to $1.9 billion. However, the frequency of these incidents rose by 17.3%.
Table of Contents
- Dapp industry overview
- DeFi’s strong finish: $103 billion in total value locked
- The shift in NFT market: lower prices, $12.6 billion in trading volume
- The rise of blockchain gaming: commanding 34% of the industry
- Security challenges: $1.9 billion lost to exploits and hacks
- Closing words
1. Dapp industry overview
The dapp industry experienced remarkable growth in 2023, with Unique Active Wallets (UAW) increasing by 124%, culminating in an average of 4.2 million daily UAW by year-end.
In sector-wise performance, the NFT space emerged as the leader in UAW growth, boasting a 166% increase to reach 671,103 daily UAW. The DeFi sector followed closely with a 112% rise, reaching 934,298 daily UAW. The Social sector, a topic of much discussion this year, saw a 29% increase, achieving 250,764 daily UAW. Compared to 2022, there was a 518% increase, highlighting the category’s success and the growing significance of decentralized social media. Leading platforms like Friend.tech, Lens Protocol, and Galxe are just a few examples. For more insights and to discover additional dapps, check our Social rankings.
Focusing on transaction counts, the DeFi sector led with a 537% increase, closely followed by the Social sector, which grew by 305%. These statistics underscore the year’s trending topics and popular dapps. Notably, High-Risk dapps (those with a greater chance of scams or losses) saw a 91% decrease in interactions, reflecting a growing caution among dapp users.
In terms of chain performance, Near, Klaytn, and Arbitrum were the top gainers in UAW percentage increase. They had also a good performance looking with their token, as Near had an increase of 200% since the beginning of the year, Klaytn a 20% and Arbitrum a 32% increase since its launch in March 2023.
On the flip side, Harmony, Solana, and Hive faced challenges. Harmony struggled to recover from a June exploit involving over $100 million in stolen funds, while Solana experienced a rough start of the year, influenced by its association with the FTX fallout. However, the Solana ecosystem saw an impressive recovery during the last months of 2023. Hive, primarily hosting the trading card game Splinterlands, also had a difficult year, missing financial targets and reporting significant losses.
DappRadar itself had a productive year, approving 2,985 dapps. The majority were NFT collections (25%) and blockchain games (21%).
Finally, a glance at our own metrics reveals the top 5 dapps based on DappRadar pageviews in 2023. Notably, four of these are established gaming dapps, consistently featured in our games rankings throughout the year.
2. DeFi’s strong finish: $103 billion in total value locked
In 2023, the DeFi sector exhibited a remarkable evolution, characterized by significant growth and strategic shifts. The year saw a 77% increase in Total Value Locked (TVL) across the entire industry, reaching $103 billion.
A key trend in 2023 was the reduced demand for “general purpose” alternative layer-1s (L1s) due to a moderation in on-chain activity over the last couple of years. Various ecosystems opted for a restart as a sidechain or Layer-2 network on top of Ethereum. For example, NEAR built an EVM-bridge, and is now working with Polygon to create more cross-chain activity. At the same time, Celo and Lisk are looking to revamp themselves as an Ethereum Layer-2.
Ethereum solidified its dominance in the smart contract platform space, with about 57% of the total crypto ecosystem’s TVL. Ethereum’s market cap, second only to Bitcoin, highlights its continued relevance and strength in the crypto market. The narrowing space for direct competition among alt L1s has led to a strategic pivot, as we’ve seen a rise of Layer-2 networks.
These L2 networks focus on niche sectors like gaming, NFTs (e.g., Beam, Blast, Immutable X), DeFi (e.g., dYdX, Osmosis), and institutional applications (e.g., Avalanche’s Evergreen subnet, Kinto).
Layer-2 scaling solutions witnessed rapid growth, facilitated by emerging development kits like OP Stack, Polygon CDK, and Arbitrum Orbit. These innovations streamline the development of customized rollups, and significantly enhance scalability. Notably, these L2 solutions have predominantly absorbed activities from alternative L1s rather than diverting them from the Ethereum mainnet. The proportion of ETH locked on bridges linking to L2s dramatically increased from 25% at the start of 2022 to 85% by end-November 2023.
Transaction counts on Ethereum have remained stable, averaging around 1 million per day, while L2s like Arbitrum, Base, Optimism, and zkSync collectively process over 2 million transactions daily. This indicates a growing preference for L2 solutions among DeFi users, seeking efficiency and lower transaction costs.
The upcoming Cancun (Dencun) Fork, slated for early 2024, is expected to further reduce transaction fees for L2s, potentially enhancing their attractiveness. Additionally, the trend of airdrop hunting has emerged as a significant catalyst for the growth of new chains, especially those based on zk-rollups. This trend is poised to be a major narrative driver in the Dapp space for 2024.
3. The shift in NFT market: lower prices, $12.6 billion in trading volume
The year 2023 has been unique for the NFT sector, mirroring the broader shifts observed in the decentralized application industry. The year was characterized by a notable decline in trading volume, which fell by 49% compared to the previous year. However, the true narrative of 2023 for NFTs was one of widespread adoption.
Major players from diverse sectors, including fashion brands, traditional Web2 companies, political parties, and gaming studios, embraced NFTs. This led to a surge in sales, albeit at lower prices. The number of sales skyrocketed by 445%, with the average sale price settling at around $210 – a significant drop from the 2022 average of $2254, indicating a 91% year-over-year decrease.
The number of unique NFT traders remained relatively stable throughout the year, averaging 870,761 per month, a slight 0.5% decrease from the previous year. This steadiness suggests a consistent level of interest in NFTs. One factor driving this could be the emerging trend of using NFTs for airdrops, as seen with entities like 9GAG and Mocaverse.
In terms of trading volume, the familiar ‘blue chip’ NFT collections continued to dominate. Yuga Labs maintained a 50% hold over this segment, though the floor prices (FP) of these collections saw significant reductions. A notable standout was Pudgy Penguins, which effectively bridged the gap between Web3 and Web2, drawing a growing audience to the NFT space.
Shifting focus to collections by sales count and number of traders reveals other intriguing patterns. The most expensive NFTs tend to be profile pictures (PFPs), but the most traded and those with the most traders are predominantly from gaming-related collections.
Exploring the platforms used for these trades, Blur continued to lead in trading volume. OpenSea maintained a high rank throughout the year and was the marketplace with the most traders, averaging over 280,000 per month. Notably, Unisat’s surge in Q2, tied to the rise of Bitcoin Ordinals, and OKX’s ascent to the second spot in Q4 are significant trends.
4. The rise of blockchain gaming: commanding 34% of the industry
Throughout 2023, as consistently highlighted in our monthly reports, blockchain gaming emerged as the most prominent segment in the dapp industry. This sector not only attracted the highest number of UAW but also maintained an average dominance of 34% over the total industry for the year.
A key indicator of the sector’s popularity was witnessed in the fourth quarter, where we observed an average of 1.1 million UAW per day. This figure emphasizes the growing enthusiasm and engagement within the blockchain gaming community.
While we won’t delve deeply into the specifics of the blockchain gaming industry’s journey in 2023 in this report, we’re excited to announce the upcoming release of a comprehensive yearly blockchain gaming report. This detailed analysis will be available on our reports page after 25 January 2024.
For those eager to get a head start on 2024, our gaming rankings provide real-time insights into the emerging trends and potential frontrunners for the coming year. Stay tuned to our platform to discover who’s gaining momentum and who might emerge as the winners in 2024’s blockchain gaming landscape.
5. Security challenges: $1.9 billion lost to exploits and hacks
The year 2023 marked a notable shift in terms of hacks and exploits within the dapp industry. Compared to 2022, where the industry witnessed a loss of $48 billion due to such incidents, 2023 saw a significant reduction, with losses amounting to $1.9 billion. This represents a decrease of 96%. However, it’s important to delve deeper into these figures.
While the total value impacted by hacks and exploits diminished considerably, the frequency of these incidents in 2023 actually rose by 17.3%. This increase in the number of hacks suggests that, despite the lower financial impact, security vulnerabilities remain a persistent challenge in the dapp ecosystem. The absence of major incidents like the 2022 Terra Luna collapse possibly contributed to the lower financial losses in 2023, but the increased number of smaller-scale exploits indicates an ongoing need for heightened security measures and vigilance in asset protection.
Furthermore, an in-depth analysis of the 2023 hack incidents reveals that 46% occurred on the BNB Chain, while Ethereum was the second most affected, accounting for 36% of the exploits.
Regrettably, the most common type of exploit was ‘rug pulls’, a deceptive practice that continues to cast a shadow of skepticism over the Web3 space. This trend highlights the need for increased awareness and due diligence within the community.
In reviewing the most significant exploits of the year, the Multichain incident stands out. This and other major events serve as stark reminders of the importance of prioritizing personal financial security and exercising caution in the Web3 space.
6. Closing words
As we close the chapter on 2023, a key lesson stands out: the power of resilience. This year, like the last, has been a rollercoaster for the dapp industry and the broader Web3 ecosystem. Yet, through the highs and lows, we’ve remained steadfast, continuing to build and innovate. This resilience isn’t just about surviving; it’s about thriving in the face of challenges, a trait that many Web3 projects have admirably displayed.
We’ve witnessed the emergence of new trends that directly address our needs and aim to solve pressing issues. The rise of SocialFi, for instance, is revolutionizing how we think about ownership of social media data and online identity. Similarly, the advent of technologies like zk-rollups is poised to significantly impact every vertical within our industry, offering new avenues for efficiency and scalability.
Looking ahead to 2024, the initial months may present some challenges, as the global economic landscape continues to navigate uncertainty. However, the latter part of the year holds promise for a new wave of adoption and potentially another bull run. As Web3 companies, our task is twofold: to prepare for this influx of new users and to devise strategies for their retention and education. After all, our shared goal is the widespread adoption of Web3 technologies.
