NFT Sector’s Daily Unique Active Wallets Increased by 109% in Q3 2023
As we navigate through 2023, the third quarter has unfolded with a subdued tempo, a trend often mirrored in economic cycles, particularly as many participants take seasonal breaks. Yet, even in these quieter times, there are glimmers suggesting that the current market downturn could be reaching its final stretch. In this report, we’ll traverse the intricate pathways of the Web3 landscape, highlighting the key sectors, their challenges, and the potential harbored within them.
- The average number of daily Unique Active Wallets (dUAW) interacting with decentralized applications surged 15% from Q2 2023, reaching an average of 2.2 million dUAW.
- Gaming’s market dominance dipped slightly from the previous quarter, while the NFT sector made its presence felt, growing at 12% of total industry activity.
- DeFi’s Total Value Locked (TVL) witnessed a 7% decline, standing at $71.9 billion. Ethereum, though down by 11% in TVL, retained its leading position.
- The DeFi landscape saw Base emerge as a significant player, quickly amassing a TVL of $378 million.
- NFT market indicators, such as trading volume and sales count, hit an all-time low since Q1 2022, hinting at market shifts and changing interests.
- Exploits and hacks within the dapp sector rose sharply, with a disconcerting 204% increase from Q2, resulting in losses amounting to $701 million. The Multichain breach alone accounted for $231 million in lost funds.
Table of Contents
- Dapp Industry Overview
- DeFi’s Total Value Locked Status
- NFT Market Overview
- Top 5 NFT collections by quarterly trading volume
- Top 5 NFT collections by quarterly sales count
- Exploits and Hacks Overview
1. Dapp Industry Overview
In Q3 2023 the dapp industry observed notable growth in daily Unique Active Wallets (dUAW), recording a 15% increase from the previous quarter. This culminated in an average engagement of 2.2 million dUAW. The primary drivers behind this uptick were the increased interactions with NFT dapps and a rise in the number of dapps that were listed and monitored by DappRadar.
Blockchain gaming continues to hold the largest portion of the industry’s activities. However, its dominance has witnessed a marginal decline since the start of the year. On the other hand, DeFi seems to have regained its typical dominant stance, reinforcing the cyclical nature of interest in this sector.
An unexpected development this quarter was the 12% industry activity coming from the NFT sector. This is particularly intriguing given the current financial metrics and widespread discussions suggesting a downturn in NFT popularity. The subsequent sections will delve deeper into these observations and offer more insights into the state of the NFT market.
2. DeFi’s Total Value Locked Status
In the third quarter of 2023 the Total Value Locked (TVL) in DeFi observed a 7% drop, settling at $71.9 billion. A significant portion of this decline can be attributed to the dip in token prices. Taking Ethereum, the predominant force in the DeFi blockchain landscape, as a reference, its price shrunk 13% this quarter, leveling off around $1600.
Upon evaluating the TVL across major blockchains, Ethereum’s dominance in the DeFi realm stands out, even with an 11% reduction from Q2. A glance at our tracked blockchains reveals a general downtrend in terms of TVL.
However, Tron is bucking this trend. It marked a robust 21% growth from the last quarter. Coinciding with its 5th anniversary this quarter, those interested in diving deeper into its top-performing dapps can explore our dedicated Tron Rankings.
It’s also of note that the spectrum of DeFi blockchains expanded this quarter. One newcomer, Base, has quickly garnered attention. Since its inception, Base’s TVL has skyrocketed to $378 million. For an in-depth look into this development, our detailed report is available for further reading.
3. NFT Market Overview
This quarter marked a significant trough for the NFT market, registering its lowest point in trading volume since Q1 2022. The prevailing negative narrative in the media does find confirmation in this data. Yet, is it fair to judge the entire landscape solely on these financial metrics?
While the broader trend may seem discouraging, Q3 had its share of silver linings. We witnessed traditional Web2 sectors making their presence felt in the Web3 realm via NFTs. Notably, generative art sales have soared. A prime example is the 99-year-old pioneering algorithm artist, Vera Molnár. Her maiden venture into NFTs resulted in a staggering trading volume of 992 ETH within a mere week of its introduction.
Hence, while the NFT sector may not be clocking the monumental trading volumes of yesteryears, there’s a discernible shift in its utility and perception. The days of hyper-collectibles and profile pictures may be waning, but in their place, we see a growing appetite for tangible utility. Consumers are gravitating towards NFTs that offer genuine value like membership passes or other functional benefits.
4. Top 5 NFT collections by quarterly trading volume
Upon examining the top 5 NFT collections this quarter, Yuga Labs stands out, reaffirming its dominance in the industry. A fascinating observation is that despite overarching trends, sales counts have actually surged for three out of these five collections. This could be attributed to a notable drop in the Floor Price, which has decreased by over 40% for a majority of these NFT collections. Such a reduction has facilitated a more approachable price point for newcomers, potentially widening the user base. Collections like Azuki and Yuga Labs have been particularly proactive this quarter, underscoring their dedication to Web3 and to nurturing their communities.
The standout collection this quarter undoubtedly has been Pudgy Penguins. With the launch of Pudgy Toys and the Pudgy World in September 2023, they have redefined innovation within the NFT sector. Pudgy Toys, as the inaugural mass-market NFT product, sourced its licensing directly from the community. The intention behind these toys is commendable – to demystify the often intricate blockchain world and present it in a familiar context, acting as a bridge or a “Trojan Horse” into conventional toy markets.
And the real cherry on top? These toys made their way to mainstream markets in the United States, finding shelf space in colossal retail giants like Amazon, and more recently, Walmart.
Such endeavors not only elevate Pudgy Penguins but also serve as a testament to the potential and adaptability of the NFT industry, indicating a promising trajectory toward broader consumer acceptance.
5. Top 5 NFT collections by quarterly sales count
When assessing the top 5 NFT collections based on their quarterly sales count, a clear pattern emerges: all these frontrunners belong to the gaming realm. This alignment reinforces the notion that NFT gaming remains a major draw in the NFT sector for Q3 2023.
Evidently, the synergy between gaming and NFTs continues to captivate audiences, highlighting the sustained momentum and potential of this unique intersection within the digital landscape.
6. Exploits and Hacks Overview
The dapp sector experienced an alarming rise in vulnerabilities this quarter, resulting in hacks, exploits and of course stolen funds. The cumulative loss for this quarter alone totaled $701 million, which is a staggering 204% increase from the previous quarter.
The Multichain incident stands out as one of the most severe breaches this period, resulting in the loss of $231 million. On 10 July 2023, Multichain fell prey to a significant exploit, revealing that unauthorized actors had penetrated their system. This intrusion led to extensive fund drains across different blockchain chains, underscoring the urgent need for robust security measures within the dapp industry.
As Q3 2023 draws to a close, the dapp industry continues to evolve and present a mixed bag of developments. We’ve witnessed steady growth in daily Unique Active Wallets (dUAW), largely driven by increased interactions with NFT dapps and a rise in the number of new dapps joining the ecosystem. Ethereum maintains its stronghold in the DeFi sector, while other blockchains like Tron are making notable strides.
The NFT market, though faced with some headwinds, has showcased resilience and adaptability. The increasing merger of traditional industries with the Web3 domain, especially in the gaming sector, underscores the inherent value and vast potential that NFTs promise.
However, it’s essential not to overlook the challenges. The sharp uptick in funds lost to exploits and hacks, most notably the Multichain incident, signals the pressing need for enhanced security and vigilance across platforms.
In summary, Q3 2023 has been a period of challenges, resilience, and potential. The learnings from this quarter will undoubtedly shape the strategies and approaches for the forthcoming periods.