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The lock-up funds of the Ethereum DeFi application maintain a leading position; in terms of the number of daily active unique addresses, the Binance Smart Chain has defeated Ethereum.
Original title: “Q1 DApp Industry Report in 2021: New trends in DeFi development, BSC has become the biggest dark horse, and NFT has recorded record growth. How will the future pattern evolve? 》
Written by: DappRadar
In Q1 of 2021, the total number of daily active unique addresses of all blockchain networks increased to 458,000, a year-on-year increase of 639% .
In the first quarter of this year, we saw a lot of exciting things from the NFT (Non-Homogeneous Token) market, which increased people’s interest in NFT technology, digital artwork and virtual worlds. At the same time, the DeFi (decentralized finance) ecosystem continues to lead the development of the industry. In the first three months of this year, the blockchain industry proved that it is not just DeFi that is blooming everywhere.
Since May 2020, the global Google search NFT and DeFi growth trend. Source: Google Trends
The high gas price of Ethereum continues to be a problem for the industry, and several DeFi, NFT, and game DApps have announced their expansion to Layer 2 or other blockchain networks (such as BSC). The dominant narrative in the blockchain field is still the presentation of the multi-chain paradigm .
Ethereum’s competitors are as active as ever . In the first quarter of 2021, Binance Smart Chain (BSC) proved to be Ethereum’s biggest competitor. Several top Ethereum DeFi applications have announced their expansion to the BSC chain. NFT and game DApps (decentralized applications) are more inclined to choose **Polygon** (Ethereum side chain expansion plan) or Flow (NFT public chain).
In the first quarter of 2021, sales in the NFT market hit a record high . Both new and existing NFT projects have achieved unprecedented sales: the highest transaction volume is NBA Top Shot, and the most memorable is a collection of artworks by Beeple, which sold for more than $69 million.
Finally, the Ethereum DeFi ecosystem is still the largest in terms of total lock-up value (TVL) . In Q1 of 2021, the TVL of Ethereum DeFi applications doubled. On the other hand, the DeFi TVL of the BSC ecosystem increased by 30 times in Q1.
- In Q1 of 2021, the total number of daily active unique addresses on all blockchain platforms reached 458,000, a year-on-year increase of 639%;
- During Q1, BSC has beaten Ethereum in terms of the number of unique daily active addresses: 105,000 and 75,000 respectively;
- The TVL of Ethereum’s DeFi application has maintained its leading position. In 2021, the TVL of Q1 reached 54 billion U.S. dollars.
- At the end of March 2021, the TVL of Venus, the BSC-based lending agreement, surpassed Uniswap and Compound.
- NFT ushered in record trading volume: In 2021, Q1 ushered in more than 1.5 billion US dollars in trading volume.
- NBA Top Shot has maintained its leading position and is the most popular application in the NFT field. Its Q1 transaction volume in 2021 is approximately US$500 million.
Scalability issues drive the multi-chain paradigm
Ethereum’s Gas price tends to increase volatility . Although we have seen a slight decline in Gas prices recently, they are still relatively high. Therefore, some DApp projects on Ethereum are exploring alternatives. More and more top DApps are beginning to expand to the Layer 2 network or other Ethereum rival networks.
Above: Since January 2020, the price of Ethereum Gas has shown volatility growth.
Recently, the Ethereum lending protocol Aave announced that it will launch a Layer 2 version based on the Ethereum sidechain expansion solution Polygon; in early March, the lending protocol bZx on Ethereum and the DEX aggregator 1inch also announced their debut on the Binance Smart Chain (BSC); Subsequently, the decentralized exchange protocol 0x and DEX aggregator Matcha also announced the launch of BSC.
SushiSwap, a decentralized exchange based on Ethereum, is another project to expand its footprint. Currently, SushiSwap has been launched on the Avalanche blockchain ecosystem.
The picture below is the latest trend of DeFi DApps based on Ethereum:
Above: Some Ethereum-based DApp projects are adopting Layer 2 solutions or expanding to other blockchain networks. Source: DAppRadar
Ethereum DeFi DApps are not the only category looking for scalability solutions. Some NFT DApps has announced plans to turn Flow (NFT type male chain) and Ronin (Ethernet Square side chains) solutions.
So far, the Ethereum sidechain solution Polygon has proven to be the preferred solution for these NFT platforms .
Above: Some Ethereum NFT DApps platforms have announced the adoption of Layer 2 solutions or switch to other blockchain networks. Source: DAppRadar
In summary, in the first quarter of 2021, the top Ethereum DApps (including DeFi and NFT platforms) announced plans to expand/switch their businesses to multiple Layer 2 networks or other blockchain platforms .
This may have some effects: first, it may greatly reduce some key indicators of Ethereum in the future; second, and most importantly, it may increase the use of DeFi and NFT DApps.
The fierce competition has changed the rankings
For the entire blockchain industry, Q1 2021 is an exciting quarter . In terms of key indicators, as mentioned above, the number of unique addresses that are active daily increased by 639% year-on-year , from 62,000 in Q1 in 2020 to 458,000 in Q1 in 2021.
In terms of the number of daily active unique addresses, BSC (Binance Smart Chain) is the largest contributor . The number of daily active unique addresses on the network reached 105,000. In March of this year, the number of unique active addresses of BSC increased by 50% from the previous month, the largest increase. In the first quarter, the Ethereum and Flow blockchains generated an average of approximately 75,000 and 53,000 daily active unique addresses, respectively.
The figure below shows the changes in the number of daily active unique addresses of major public chain networks since January 2020, unit: thousand.
Q1 in 2021 is an unforgettable quarter, as BSC defeated Ethereum in terms of daily active unique addresses . Considering that some top Ethereum DApps have announced plans for cross-chain transfer/expansion, in the next Q2 quarter we may see a bigger gap between BSC and Ethereum in this indicator.
Polygon, the Ethereum sidechain solution, ushered in record growth
Polygon (formerly Matic Network), one of the most prominent Ethereum Layer 2 solutions , has ushered in significant growth in Q1 of 2021. In the first quarter of this year, the number of daily active unique addresses on the Polygon network increased by 496% from the previous quarter , from 500 to 4800. Transaction volume also followed this trend, increasing by 288% in the first quarter to reach US$500 million.
The figure below shows the trend of changes in the number of daily active unique addresses (black line) and network transaction volume (yellow area) on the Ethereum L2 network Polygon since January 2020:
The reason behind Polygon’s growth is the DeFi exchange QuickSwap . QuickSwap is a decentralized exchange (DEX) based on Ethereum. In Q1 of 2021, QuickSwap generated 87% ($443 million) of Polygon network transaction volume.
In addition, as OpenSea (NFT trading platform), Aave (decentralized lending platform) and Aavegotchi (Ethereum-based NFT gaming platform) all hope to join the Polygon ecosystem , we can expect this blockchain solution to expand further . On the other hand, trading activities on Polygon are still far from the height of the Ethereum mainnet and BSC .
Compare DeFi TVL on Ethereum and BSC networks
BSC (Binance Smart Chain) proved to be a major contender of Ethereum in 2021. In more than 6 months, BSC surpassed Ethereum in several key indicators .
On the other hand, in Q1 of 2021, TVL (Total Value Locked) in Ethereum-based DeFi has maintained its leading position, and it remains the most important blockchain network in the DeFi ecosystem .
Below: Since the beginning of 2021, the growth trend of Ethereum-based DeFi TVL (blue line) and BSC-based TVL (red line).
Source: DAppRadar & Defistation.io
In Q1 of 2021, the TVL of Ethereum-based DeFi applications increased to 54 billion U.S. dollars from 21 billion U.S. dollars in the previous quarter. The largest contributors are MakerDao , Uniswap, and Compound . The lock-up volume of these three top Ethereum DeFi platforms accounted for 33% of the total value of the DeFi lock-up.
At the end of Q1 in 2021, the total TVL on BSC is approximately US$20 billion . Compared with the previous quarter, TVL has increased by more than 30 times , from US$600 million to US$20 billion. The largest contribution is Venus, a BSC-based lending and stable currency issuance platform, and PancakeSwap, a decentralized exchange.
Although the DeFi TVL on the BSC chain is still more than 2 times lower than that of Ethereum, according to data from defstation.io, the TVL of several DApps on BSC exceeds some top DApps on Ethereum .
For example, among the top DApps on the BSC chain at the end of March, Venue and PancakeSwap had approximately US$6.3 billion and US$5.7 billion in TVL, respectively. In the same period, MakerDAO, Uniswap, and Compound based on Ethereum were 6.6 billion U.S. dollars, 5.7 billion U.S. dollars, and 6.1 billion U.S. dollars on TVL, respectively. This means that at the end of March, Venus has surpassed Uniswap and Compound in TVL . See below:
Source: DAppRadar & Defistation.io
In summary, in the DeFi ecosystem, BSC delivers strong competition to Ethereum. Considering that some Ethereum DeFi DApps (such as 1inch, 0x and bZx) are expanding to BSC, BSC may soon become a leader in many key indicators.
The collision of DeFi and NFTs
The trend of NFT integrating financial concepts started in 2020.
For example, the NFT trading platform Rarible has launched the NFT insurance policy of the decentralized insurance service yinsure.finance, also known as yInsure NFTs . These yInsure NFTs allow users to buy and sell insurance for certain DeFi projects in the form of NFT. Although this type of insurance has limitations, this concept shows how to use NFTs to create a liquid market.
Aavegotchi is another game and digital collectible platform that tries to combine DeFi with NFT. Each Aavegotchi NFT token is not only a collectible item, but also an asset that can generate income. It is displayed as a ” pixel ghost ” in the game (see the picture below).
Recently, the number of daily active unique addresses on the Aavegotchi platform has soared to more than 3,000. Currently, Aavegotchi is one of the 10 most commonly used DApps in the NFT field . See below:
Above: The growth of the number of daily active unique addresses on the Aavegotchi platform. Source: DAppRadar
Finally, Uniswap recently gave a surprise for a non-functional test. Uniswap V3 will convert the LPtoken of liquidity providers (LPs) from the current ERC-20 to NFT.
The above measures are very important to the NFT industry, because they show the development path of the NFT industry , and may also change the concept of DeFi projects . We may begin to see DeFi and NFT more interconnected .
NFTs usher in record high transaction volume
So far, it can be said that the theme of Q1 in 2021 is NFT . In the first three months of this year alone, NFT transactions created more than $1.5 billion in transaction volume. Although this is only a small part compared with the DeFi ecosystem, the transaction volume of NFT in the first quarter of this year increased by 2627% compared to the previous quarter .
NFT transactions in the first quarter of this year, the largest contributors were NBA Top Shot , CryptoPunks and OpenSea , which accounted for 73% of the total NFT transaction volume. See below:
Above: Since October 2020, the monthly transaction volume comparison of major NFT applications, unit: million U.S. dollars. Source: DAppRadar
NBA Top Shots are NFTs launched by the founding team of CryptoKitties, DApper Labs, in cooperation with the NBA. These NFTs represent wonderful short videos of NBA players. In the first quarter of this year, NBA Top Shot was still the number one NFT product in the NFT field by transaction volume , attracting a large number of media and users’ attention. It generated nearly $500 million in revenue in the first quarter of 2021.
NBA Top Shots
Although the transaction volume of NBA Top Shots is impressive, its data in March was lower than in February: technical issues caused user retention and satisfaction issues. Although the NBA Top Shots NFT is still the leader in the field, but in the long run, user retention and satisfaction will be a key challenge.
In addition, in the first quarter of this year, the trading volume of the first batch of NFT collectibles CryptoPunks ( cryptopunk ) on Ethereum won the second place . CryptoPunks is a pixel avatar launched by the Larva Labs team in June 2017 (see the picture below), and each avatar represents an NFT token. In the past few months, people’s overall interest in this encrypted collectible has greatly increased .
CryptoPunks pixel avatar
Finally, the third place in NFT transaction volume is OpenSea . OpenSea is an NFT creation and trading market. The increase in NFT trading volume in this market is mainly driven by new features , such as NFT casting and airdrops. In addition, after OpenSea recently announced the successful completion of a round of financing, users’ interest in NFTs on the platform has greatly increased.
High prices make NFT more exciting
The prices of the top 5 NFTs are also increasing sharply . If you look at the top 5 NFTs sold in January this year, you will find that no NFT sells for more than $1 million. However, the highest NFT selling prices in February and March exceeded US$6.6 million and US$69 million, respectively, demonstrating the true potential of NFTs.
On March 11, the 5,000 art collection “Everydays: The First 5000 Days” created by artist Beeple was sold in the form of NFT tokens at Christie’s for a bid of more than $69 million.
In addition, the sales of CryptoPunks have also exploded, with several punk avatars being purchased for more than 7 million U.S. dollars.
The following chart lists the top five NFT tokens sold each month in the first three months of this year:
Source: DAppRadar NFTs page
New NFT projects in Q1 2021
A large number of new NFT projects will emerge in Q1 of 2021 .
The trend of NFT digital collectibles has been going on for a long time, but the release of the encrypted art collectibles project Hashmasks (Picasso Punk) has become the beginning of a new wave. Later, there were new NFT projects such as Picasso Punks , Polkamon , Chubbies , Bullrun Babes , NFT Boxes , and old projects such as Moon Cats Rescue and CryptoCats were rediscovered.
The launch of new projects has excited the NFT market . During this time, Hashmasks held their ground , and Moon Cats Rescue seemed to have declined.
Hashmask is literally translated as “Hash Mask”. The platform contains 16,384 unique portraits created by more than 70 artists around the world. Each portrait is sold in the form of NFT, as shown in the figure below:
Above: Some of the portraits on the Hashmask platform.
At the same time, Picasso Punks seems to continue to grow. PicassoPunks is an Ethereum-based NFT digital art project aimed at paying tribute to Picasso. The platform will only create a total of 1,000 unique Picasso punk avatars . Some of the avatars that have been created are currently being sold in the form of NFT. :
Above: Picasso Punks avatar for sale on the Picasso Punks platform
On the other hand, the vast majority of new NFT projects have a model, which is to usher in more transaction volume within 7 days after launch . After that, trading activities declined or even disappeared , and trading activities in the secondary market will only last for a short time. See below:
The reason behind this is that the creators of these NFT collections are mainly focused on initial dissemination. It can be said that the most important factor to keep NFT collections receiving people’s attention and interest is the uniqueness, investment value , and most importantly, the narrative that can keep users engaged.
Inspired by existing NFT collections, new NFT collections emerge
Another trend in the market is that the NFT market is being inspired by the existing collections of NFTs , trying to introduce new NFTs, such as creating alternatives to CryptoPunks . Since the cheapest NFT punk avatar in CryptoPunks also costs about $30,000, this is almost unreasonable for ordinary collectors.
And 3DPunks, Picasso Punks and Unofficial Punks these CryptoPunks inspired by the NFT project provides a cheaper alternative.
Although some Picasso Punks (Picasso punk avatars) are currently sold at a considerable price , for example, the current highest transaction price is Picasso Punk #0107, which has a transaction price of more than 92,000 US dollars.
Source: DAppRadar NFT Rankings
Currently, the lowest prices of NFT avatars on Picasso Punks and 3DPunks are currently around 1.9 ETH and 2.9 ETH. These investments are not cheap. However, they are still 8 to 10 times cheaper than CryptoPunks .
Above: Picasso Punks #0245 (left) and 3DPunks #054 (right) are not cheap. Source: OpenSea.io
“Everything can be NFT”, or a lesson to be learned?
Finally, we are seeing a trend that is to turn everything into NFT, thinking that “everything can be NFT” . Currently, turning a certain tweet (for example, Twitter CEO Jack Dorsey recently sold his first tweet for a high price of US$2.9 million in the form of NFT), brand or celebrity into NFT may bring User excitement, but there may also be unhealthy hype in the industry .
We can’t help asking, what will be left when the dust settles? The NFT industry needs to learn from the 2017 ICO (Initial Coin Offering) bubble . Buyers should be cautious before deciding to buy an NFT token driven only by hype.
The road to the future
Currently, several major trends are dominating the blockchain industry:
First, Ethereum’s scalability issues have caused it to lose its dominant position in several key indicators . In the first quarter of this year, BSC (Binance Smart Chain) surpassed the Ethereum blockchain in terms of the number of daily active unique addresses; although the Ethereum DeFi application maintained a leading position in TVL (total value of lock-up), with some The DeFi project of Fang Fang began to expand to other blockchain platforms, and the rapid growth of DeFi DApps in the BSC ecosystem may also change this situation.
Secondly, it is obvious that the blockchain industry is experiencing a wave of growth led by NFT . Sales of NFT digital collectibles and new NFT projects promote the influx of users and the growth of NFT trading activities. However, rapid growth has also brought negative effects. The concept of “NFT for everything” may trigger some hype in the early stages, but we need to be cautious about such hype.
In addition, NBA Top Shots has become the most popular NFT project on the market, but this also raises a question: Are DApps ready for mass adoption? Looking to the future, developers need to emphasize user retention and user experience , so that consumers, users, and enthusiasts can expect more on this basis.
The above is the DApps industry report for the first quarter of 2021 released by DAppRadar. How do you see the development of Q1 in 2021? Do you agree with DAppRadar’s analysis of the competition between Ethereum and BSC? Welcome to express your opinion in the comment area.