Report: Forget Crypto Winter, Web3 Is Ready to Heat Up Again

The bear market is over for the web3 ecosystem. This was one of the conclusions of DappRadar’s latest Yearly Industry Report, which identified several bullish signals for this new year. Among these, DappRadar found that 2023 closed with over 4.2 million daily Unique Active Wallets (UAW), representing a 124% YoY increase.

Last year saw the end of one of the longest winters in the short history of the crypto ecosystem despite the multiple controversies and challenges. Fallen idols, regulatory crackdowns, and hundred-million-dollar hacks all made for a turbulent year in which investors were kept on the edge of their chairs.

Web3, however, grew in more ways than just market capitalization, an indication of its growing relevance on the global stage.

A Year of Growth for NFTs

DappRadar’s report found that in addition to the 124% growth in UAW, 2023 also brought 166% more users to the NFT community. Despite becoming substantially cheaper through 2023, NFTs still managed to move over $12.6B in trading volume. While this represents a drop of 49% in value, it is also the result of an increase of 445% in trading activity as 60 million NFTs were sold.

This year also saw the NFT space crown a new king as OpenSea passed from being the dominant NFT marketplace to being second to Blur. With a 56% dominance, Blur gained the first spot in terms of trading volume. Opensea, however, continues to be first when it comes to trader count for the year, with OKX displacing it during the last quarter of the year.

These statistics suggest that speculation around NFTs has cooled down after years of NFT craze. This has allowed new players to emerge in the ecosystem both at the marketplace and collection level, leading to increased adoption and interest by the community. The increasing adoption of NFTs by major brands has also played an important role, one that is likely to continue over the next year.

Blockchain Gaming Remains King

Gaming has long been seen as one of the applications of blockchain technology with the most potential for mass adoption. Blockchain advocates have also much to celebrate in this area as it has emerged as the most prominent segment in the dapp space. The report found that blockchain gaming brought “an average of 1.1 million UAW per day”, which represents a dominance of 34% in the industry.

While no blockchain report is yet available for the entirety of the year, the Q3 “State of Blockchain Gaming” report found an increase of 12% over the second quarter of 2023. This surge in activity is likely to have continued during the fourth quarter of the year given historical data.

Not everything seems to have been good news for the blockchain gaming space, tho. The Q3 report found that investments in web3 gaming projects dropped significantly, almost halving for the third quarter of 2023 compared to that of 2022. DappRadar analysts attributed this change to “distinct market dynamics” while highlighting moves by firms like A16Z that indicate growing institutional interest.

DeFi Was Also a Winner

Despite not being in the spotlight as much as in previous years due to the high number of regulatory enforcement actions and emerging trends, DeFi also had a great year. The report found that there was a 77% increase in Total Value Locked (TVL), taking it all the way to $103 billion. This surge was led by Ethereum, which saw immense growth thanks to its multiple upgrades and reached a 52-week high in late December.

While the surge in TVL in Ethereum seems to be independent of transaction counts, this was not the case for L2 networks like Arbitrum, Base, Optimism, and zkSync. The growing adoption of these networks suggests a flip in preference as developers and users look for alternatives that provide additional efficiency and reduced transaction costs.