Overview of DApp Development in the First Quarter: Binance Smart Chain Emerges as the Dark Horse, NFT Growth Accelerates

Original Title: "2021 Q1 DApp Industry Report: New Trends in DeFi Development, BSC Becomes the Dark Horse, NFT Records Growth, How Will the Future Landscape Evolve?", Author: DappRadar, Translation: Unitimes Unicorn Era.

In Q1 2021, the total number of daily active unique addresses across all blockchain networks grew to 458,000, an increase of 639% year-on-year.

In the first quarter of this year, we saw many exciting developments in the NFT (Non-Fungible Token) market, which increased interest in NFT technology, digital artworks, and virtual worlds. Meanwhile, the DeFi (Decentralized Finance) ecosystem continues to lead industry development. In the first three months of this year, the blockchain industry proved that the flourishing is not limited to DeFi.

Growth trends of global Google searches for NFT and DeFi since May 2020. Source: Google Trends

The high Gas prices on Ethereum continue to be a problem for the industry, with several DeFi, NFT, and gaming DApps announcing expansions to Layer 2 or other blockchain networks (such as BSC). The dominant narrative in the blockchain space remains the multi-chain paradigm.

Ethereum's competitors remain active as ever. In Q1 2021, Binance Smart Chain (BSC) proved to be Ethereum's biggest competitor. Several top Ethereum DeFi applications have announced expansions to the BSC chain. NFT and gaming DApps are more inclined to choose Polygon (an Ethereum sidechain scaling solution) or Flow (an NFT-focused public chain).

In Q1 2021, the NFT market sales reached a historic high. Both new and existing NFT projects achieved unprecedented sales: the highest trading volume was from NBA Top Shot, and the most memorable was a piece of artwork by Beeple, which sold for over $69 million.

Finally, the Ethereum DeFi ecosystem remains the largest in terms of Total Value Locked (TVL). In Q1 2021, the TVL of Ethereum DeFi applications doubled. On the other hand, the DeFi TVL of the BSC ecosystem grew 30 times in Q1.

Key Information

• In Q1 2021, the total number of daily active unique addresses across all blockchain platforms reached 458,000, a year-on-year increase of 639%;

• During Q1, in terms of daily active unique addresses, BSC surpassed Ethereum: 105,000 vs. 75,000;

• The TVL of Ethereum DeFi applications remains in the lead, reaching $54 billion in Q1 2021.

• By the end of March 2021, the TVL of the BSC-based lending protocol Venus surpassed that of Uniswap and Compound.

• NFTs saw record trading volume: over $1.5 billion in trading volume in Q1 2021.

• NBA Top Shot maintained its leadership, being the most popular application in the NFT space, with a trading volume of about $500 million in Q1 2021.

Scalability Issues Drive the Multi-Chain Paradigm

Ethereum's Gas prices tend to fluctuate significantly. Although we have seen a slight decrease in Gas prices recently, they remain relatively high. As a result, some DApp projects on Ethereum are exploring alternatives. An increasing number of top DApps are beginning to expand to Layer 2 networks or other competing networks to Ethereum.

The chart shows the fluctuating growth of Ethereum Gas prices since January 2020.

Recently, the Ethereum lending protocol Aave announced it will launch a Layer 2 version based on the Ethereum sidechain scaling solution Polygon; at the beginning of March, the Ethereum-based lending protocol bZx and DEX aggregator 1inch also announced their debut on Binance Smart Chain (BSC); subsequently, the decentralized exchange protocol 0x and DEX aggregator Matcha also announced their launch on BSC.

The Ethereum-based decentralized exchange SushiSwap is another project expanding its footprint, currently live on the Avalanche blockchain ecosystem.

The following chart shows the latest trends of Ethereum-based DeFi DApps:

The chart shows that 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 seeking scalability solutions. Some NFT DApps have announced plans to transition to Flow (an NFT-focused public chain) and Ronin (an Ethereum sidechain) solutions.

So far, the Ethereum sidechain solution Polygon has proven to be the preferred solution for these NFT platforms.

The chart shows that some Ethereum NFT DApp platforms have announced the adoption of Layer 2 solutions or transitions to other blockchain networks. Source: DAppRadar

In summary, in Q1 2021, several top Ethereum DApps (including DeFi and NFT platforms) announced plans to expand or transition to multiple Layer 2 networks or other blockchain platforms.

This could have several implications: first, it may significantly reduce some key metrics for Ethereum in the future; second, and most importantly, it may increase the usage of DeFi and NFT DApps.

Intense Competition Changes the Rankings

For the entire blockchain industry, Q1 2021 was an exciting quarter. From key metrics, as mentioned earlier, the number of daily active unique addresses grew by 639% year-on-year, from 62,000 in Q1 2020 to 458,000 in Q1 2021.

In terms of daily active unique addresses, BSC (Binance Smart Chain) was the largest contributor, with 105,000 daily active unique addresses. In March of this year, the number of unique active addresses on BSC grew by 50% compared to the previous month, the largest increase. In Q1, Ethereum and Flow blockchains averaged about 75,000 and 53,000 daily active unique addresses, respectively.

The following chart shows the changes in daily active unique addresses across major public chains since January 2020, measured in thousands.

Source: DAppRadar

Q1 2021 was a memorable quarter because BSC surpassed Ethereum in daily active unique addresses. Considering that some top Ethereum DApps have announced plans for cross-chain transfers/expansions, we may see an even larger gap between BSC and Ethereum in this metric in the upcoming Q2.

Ethereum Sidechain Solution Polygon Sees Record Growth

One of the most prominent Ethereum Layer 2 solutions, Polygon (formerly Matic Network), experienced significant growth in Q1 2021. In the first quarter of this year, the number of daily active unique addresses on the Polygon network grew by 496% compared to the previous quarter, from 500 to 4,800. Trading volume also followed this trend, growing by 288% in Q1, reaching $500 million.

The following chart shows the trend of daily active unique addresses (black line) and network trading volume (yellow area) on the Ethereum L2 network Polygon since January 2020:

Source: DAppRadar

The growth of Polygon is driven by the DeFi exchange QuickSwap. QuickSwap is a decentralized exchange (DEX) based on Ethereum, and in Q1 2021, QuickSwap accounted for 87% ($443 million) of the trading volume on the Polygon network.

Additionally, with OpenSea (an NFT trading platform), Aave (a decentralized lending platform), and Aavegotchi (an Ethereum-based NFT gaming platform) looking to join the Polygon ecosystem, we can expect this blockchain solution to expand further. On the other hand, the trading activity on Polygon is still far from the heights of Ethereum mainnet and BSC.

Comparing DeFi TVL on Ethereum and BSC Networks

BSC (Binance Smart Chain) has proven to be a significant competitor to Ethereum in 2021. Over the past six months, BSC has surpassed Ethereum in several key metrics.

On the other hand, in Q1 2021, the TVL (Total Value Locked) in Ethereum-based DeFi remained in the lead, as it is still the most important blockchain network in the DeFi ecosystem.

The following chart shows the growth trends of Ethereum-based DeFi TVL (blue line) and BSC-based TVL (red line) since the beginning of 2021.

Source: DAppRadar & Defistation.io

In Q1 2021, the TVL of Ethereum-based DeFi applications grew from $21 billion in the previous quarter to $54 billion. The biggest contributors were MakerDao, Uniswap, and Compound, which together accounted for 33% of the total value locked in DeFi.

By the end of Q1 2021, the total TVL on BSC was approximately $20 billion. Compared to the previous quarter, the TVL grew more than 30 times, from $600 million to $20 billion. The largest contributors were the BSC-based lending and stablecoin issuance platform Venus and the decentralized exchange PancakeSwap.

Although the DeFi TVL on BSC is still more than twice lower than that on Ethereum, according to defstation.io, the TVL of several DApps on BSC has surpassed that of some top DApps on Ethereum.

For example, by the end of March, the top DApps on the BSC chain, Venus and PancakeSwap, had TVLs of approximately $6.3 billion and $5.7 billion, respectively. In the same period, the TVLs of Ethereum-based MakerDAO, Uniswap, and Compound were $6.6 billion, $5.7 billion, and $6.1 billion, respectively. This means that by the end of March, Venus had already surpassed Uniswap and Compound in terms of TVL. See the chart below:

Source: DAppRadar & Defistation.io

In summary, in the DeFi ecosystem, BSC poses a strong competition to Ethereum. Considering that some Ethereum DeFi DApps (such as 1inch, 0x, and bZx) are expanding extensively to BSC, BSC may soon become a leader in many key metrics.

The Collision of DeFi and NFTs

The trend of NFTs integrating financial concepts began in 2020.

For example, the NFT trading platform Rarible has launched NFT policies for decentralized insurance service yinsure.finance, known as yInsure NFTs. These yInsure NFTs allow users to buy and sell insurance for certain DeFi projects in the form of NFTs. Although this insurance has limitations, the concept demonstrates how to leverage NFTs to create a liquidity market.

Aavegotchi is another platform attempting to combine DeFi with NFTs, serving as a game and digital collectibles platform. Each Aavegotchi NFT token is both a collectible and an income-generating asset, represented in the game as a "pixel ghost" (see the image below).

Recently, the number of daily active unique addresses on the Aavegotchi platform surged, exceeding 3,000. Currently, Aavegotchi is one of the top 10 most used DApps in the NFT space. See the chart below:

The chart shows the growth of daily active unique addresses on the Aavegotchi platform. Source: DAppRadar

Finally, Uniswap recently surprised with a non-functional test, as Uniswap V3 will transform liquidity providers' (LPs) LP tokens from the current ERC-20 to NFTs.

These initiatives are significant for the NFT industry because they demonstrate the developmental path of the NFT industry, and they may also change the concept of DeFi projects, as we may begin to see DeFi and NFTs become more interconnected.

NFTs Experience Record High Trading Volume

So far, it can be said that the theme of Q1 2021 is NFTs. In just the first three months of this year, NFT trading generated over $1.5 billion in trading volume. Although this is a small portion compared to the DeFi ecosystem, the trading volume of NFTs in Q1 grew by 2627% compared to the previous quarter.

The largest contributors to NFT trading volume in Q1 were NBA Top Shot, CryptoPunks, and OpenSea, which accounted for 73% of the total NFT trading volume. See the chart below:

The chart compares the monthly trading volume of major NFT applications since October 2020, measured in millions of dollars. Source: DAppRadar

NBA Top Shots are NFTs launched in collaboration with the NBA by the team behind CryptoKitties (Crypto Cats), representing exciting short videos of NBA players. In Q1 2021, NBA Top Shot remained the top NFT product by trading volume, attracting significant media and user attention. It generated nearly $500 million in revenue in Q1 2021.

NBA Top Shots

Despite the impressive trading volume of NBA Top Shots, its data in March showed a decline compared to February: technical issues led to user retention and satisfaction problems. While NBA Top Shots remains the leader in the NFT space, user retention and satisfaction will be a key challenge in the long run.

Additionally, in Q1 2021, the trading volume of the first NFT collectibles on Ethereum, CryptoPunks, ranked second. CryptoPunks, launched by the Larva Labs team in June 2017, are pixel avatars (see the image below), with each avatar representing an NFT token. In recent months, there has been a significant increase in overall interest in this crypto collectible.

CryptoPunks pixel avatars

Finally, the third highest trading volume NFT is OpenSea. OpenSea is a market for creating and trading NFTs, and the increase in trading volume on this market is primarily driven by new features, such as NFT minting and airdrops. Additionally, after OpenSea recently announced the successful completion of a funding round, user interest in NFTs on the platform surged.

High Prices Make NFTs More Exciting

The prices of the top 5 NFTs are also skyrocketing. Looking at the top 5 NFTs sold in January, you would find that none sold for over $1 million. However, the highest prices for NFTs in February and March exceeded $6.6 million and $69 million, respectively, showcasing the true potential of NFTs.

On March 11, the artist Beeple's collection of 5,000 artworks titled "Everydays: The First 5000 Days" was sold as an NFT token at Christie's auction house for over $69 million.

Additionally, CryptoPunks sales have also seen explosive growth, with several punk avatars being purchased for over $7 million.

The following chart lists the top five NFTs sold each month in the first three months of this year:

Source: DAppRadar NFTs page

New NFT Projects in Q1 2021

Q1 2021 saw a surge of new NFT projects.

The trend of NFT digital collectibles has been ongoing for a long time, but the launch of the crypto art collectible project Hashmasks marked the beginning of a new wave. Following that, new NFT projects such as Picasso Punks, Polkamon, Chubbies, Bullrun Babes, NFT Boxes, and rediscoveries of older projects like Moon Cats Rescue and CryptoCats emerged.

The launch of new projects has excited the NFT market. During this period, Hashmasks held its ground, while Moon Cats Rescue seems to have faded.

Hashmask translates to "Hash Masks," and the platform features 16,384 unique portraits created by over 70 artists worldwide, with each portrait sold as an NFT, as shown in the image below:

The image shows some of the portraits on the Hashmask platform.

Meanwhile, Picasso Punks seems to be growing steadily. PicassoPunks is an Ethereum-based NFT digital art project that pays homage to Picasso, with a total of only 1,000 unique Picasso Punk avatars to be created, and some of the created avatars are currently being sold as NFTs, as shown in the image below:

The image shows Picasso Punk avatars for sale on the Picasso Punks platform.

On the other hand, the vast majority of new NFT projects tend to follow a pattern of seeing more trading volume within the first 7 days after launch. After that, trading activity declines or even disappears, and secondary market trading activity lasts only a short time. See the chart below:

Source: Opensea.io

The reason behind this is that the creators of these NFT collectibles primarily focus on initial dissemination. It can be said that the most important factors in keeping NFT collectibles in the spotlight and maintaining interest are their uniqueness, investment value, and most importantly, the continued narrative that keeps users engaged.

Inspired by Existing NFT Collectibles, New NFT Collectibles Emerge

Another trend in the market is that the NFT market is being inspired by existing NFT collectibles, attempting to introduce new NFTs, such as creating alternatives to CryptoPunks. Since the cheapest NFT punk avatar in CryptoPunks costs around $30,000, this is nearly unreasonable for ordinary collectors.

Projects like 3DPunks, Picasso Punks, and Unofficial Punks, inspired by CryptoPunks, offer a more affordable option.

Although some Picasso Punks (Picasso Punk avatars) have also sold for considerable prices, for example, the highest transaction price currently is for Picasso Punk #0107, which sold for over $92,000.

Source: DAppRadar NFT Rankings

Currently, the minimum prices for NFT avatars on Picasso Punks and 3DPunks are around 1.9 ETH and 2.9 ETH, respectively, which are not cheap investments. However, they are still 8 to 10 times cheaper than CryptoPunks.

The image shows that the prices of Picasso Punks #0245 (left) and 3DPunks #054 (right) are not low. Source: OpenSea.io

"Everything is NFT," or Lessons to Be Learned?

Finally, we are seeing a trend of turning everything into NFTs, believing that "everything can be NFT." Currently, turning a tweet (for example, Twitter CEO Jack Dorsey sold his first tweet as an NFT for $2.9 million), brand, or celebrity into an NFT may excite users, but it may also lead to unhealthy speculation within the industry.

We can't help but ask, what will remain when the dust settles? The NFT industry needs to learn from the lessons of the 2017 ICO (Initial Coin Offering) bubble, and buyers should be cautious before deciding to purchase an NFT token driven solely by speculation.

The Road Ahead

Currently, several major trends are dominating the blockchain industry:

First, Ethereum's scalability issues have led to its loss of dominance in several key metrics. In Q1 this year, BSC (Binance Smart Chain) surpassed Ethereum blockchain in daily active unique addresses; although Ethereum DeFi applications maintain a lead in TVL (Total Value Locked), the rapid growth of DeFi DApps in the BSC ecosystem, as some Ethereum DeFi projects begin to expand to other blockchain platforms, may change this situation.

Second, it is clear that the blockchain industry is experiencing a growth wave led by NFTs. The sales of NFT digital collectibles and new NFT projects are driving user influx and increasing NFT trading activity. However, rapid growth also brings negative impacts. The concept of "everything can be NFT" may initially trigger some speculation, but we need to remain cautious about such speculation.

Additionally, NBA Top Shots has become the most popular NFT project in the market, but this also raises the question: Are DApps ready for mass adoption? Looking ahead, developers need to emphasize user retention and user experience, allowing consumers, users, and enthusiasts to expect more based on this foundation.

This is the Q1 2021 DApp industry report released by DAppRadar. What are your thoughts on the developments in Q1 2021? Do you agree with DAppRadar's analysis of the competition between Ethereum and BSC? Feel free to share your insights in the comments section.