DappRadar User Data Trend Report: Why NFT Transactions Can Rise Against the Trend?
The behavior of NFTs operates independently of the crypto market and is influenced by their utility, maturity, use cases, etc., and the same goes for blockchain games. However, in DeFi, utility and value are closely linked.Written by: DappRadar
Compiled by: Heimi, Baize Research Institute
In this report, DappRadar utilizes data such as the correlation of demographics, macro indicators, and on-chain metrics to analyze user behavior patterns and predict significant trends in the crypto industry for 2022.
Report Highlights:
1) NFTs are almost unaffected by the downturn in the crypto market; trading volume continues to increase, and the number of unique active wallets (UAW) connected to NFT dapps on Ethereum has grown by 43% since Q3 2021.
2) On the other hand, the usage of DeFi is more clearly correlated with the prices of crypto assets: when the prices of ETH, SOL, AVAX, and LUNA hit all-time highs, over 1.25 million UAW connected to DeFi dapps, while during the recent slump in the crypto market, UAW dropped to as low as 800,000.
3) Despite the recent negative trends in the crypto market, blockchain games continue to see widespread usage. Games now account for 52% of the total dapp usage in the industry, widening the gap with DeFi dapp usage.
4) China is currently the leader in dapp traffic, with a 166% increase compared to November 2021. The United States dominated this aspect in 2021.
The footprint of Asia is becoming increasingly evident across the industry
By the end of 2021, dapps attracted over 2.5 million unique active wallets (UAW) daily. This level of usage has grown by 707% compared to the end of 2020. The rapid development of dapps is supported by various waves of interest, primarily driven by NFTs and blockchain games.
By analyzing the 1.4 million visits to DappRadar in December last year, we observed trends in current user sources that may differ from what we saw in mid-last year.
Firstly, China now has the most extensive user base, with 204,000 users using DappRadar in December, a 166% increase from November. The traffic from Indonesia and India is noteworthy, as metrics from both countries more than doubled in December. Asia continues to expand its footprint in the entire crypto industry. With a strong interest in blockchain games and the potential of NFTs, Asia is undoubtedly a region to watch closely.
The United States is no longer the primary source of traffic, now ranking just behind Asian countries. Nevertheless, traffic from the U.S. grew by 38% in December, with over 175,000 users, and it remains the most important market for collectible NFTs.
The UK, Russia, the Philippines, and Brazil follow India, but still have many users. The combined traffic from these four countries exceeds 168,000 users, averaging around a 30% increase, with Russia showing the most significant growth.
Millennials and Gen Z dominate the blockchain space
Continuing with demographic analysis, we will focus on age ranges to gain more details about users interested in blockchain.
The participation of Gen Z (1997-2012) in the industry continues to accelerate. In December, 30% of DappRadar's users came from this age group, while they hovered around 26% for most of 2021.
Millennials (1980-1994) also follow the same trend, accounting for 38% of the traffic. The future of both NFTs and gaming looks bright due to the strong interest shown by millennials in these areas.
On the other hand, the most noticeable decrease is in the 45 to 54 age group, whose traffic dropped from 11.5% in January 2021 to just 7% in December.
When analyzing the preferred devices used by users, another exciting metric emerges. While we launched the RADAR Token, attracting a large number of visitors, users still connect via mobile about 53% of the time. Although most users prefer to use desktop wallets for security reasons, desktop devices only accounted for 46% of the traffic. This could lead to an important behavioral trend, as blockchain gaming is set to become a focal point this year, and this trend may become more significant, as mobile wallets (like Ronin) and mobile blockchain games are expected to see a massive leap in 2022.
NFTs and gaming are more resilient to macro trends than DeFi
Despite the explosive growth of the three main categories of dapps (TVL in DeFi, NFT trading volume, and gaming usage) in 2021, recent macroeconomic factors (such as the latest surge in pandemic infections, the Federal Reserve's impending interest rate hikes, and Kazakhstan's gas issues) have impacted nearly one-fifth of Bitcoin mining activity. The crypto market has once again entered a cyclical bearish trend.
We analyzed some macro indicators of blockchain, such as the prices of mainstream crypto assets, Ethereum's gas fees, and Bitcoin's fear and greed index, to see how they might affect on-chain metrics. How significant are macro indicators to the behavior of blockchain users?
(1) Despite the crash in crypto assets, NFT metrics continue to soar
In Q3 2021, NFTs generated $10.7 billion in trading volume, and the $11.9 billion performance in Q4 kept NFTs strong. On the other hand, the price of ETH has been on a decline since reaching an all-time high of $4,878 in November. Despite the volatility in crypto asset prices, NFTs maintain a positive trend.
Not only has the number of NFT sales on Ethereum increased, but the number of UAW connected to NFT dapps (collectibles and marketplaces) has also risen. Since December, an average of 46,800 UAW have connected to Ethereum NFT dapps, which is 43% higher than in Q3.
Despite adverse macro indicators, the indispensable role of NFTs in the metaverse and gaming contributes to positive on-chain metrics. Additionally, established projects continue to meet their respective goals, enhancing the prospects of their communities in the process. Coupled with the influx of celebrities and major brands entering the space, NFTs appear to remain solid as ever.
Moreover, communities are coming together, as seen with the recent launch of the LooksRare marketplace, strengthening the NFT market. Given the undeniable strength of NFTs, investors may view the downturn in crypto assets as a buying opportunity, as the value of native assets (in this case, ETH) decreases the actual price of NFTs.
Finally, as collectibles, the U.S. remains the most active region for NFTs. The U.S. leads in NFT traffic on DappRadar, with Brazil and Mexico ranking in the top four in the Americas. Meanwhile, users in the Philippines are translating their immense interest in sports, fashion, and celebrities into interest in the NFT space.
(2) Strong correlation between DeFi and macro indicators
Although trailing behind blockchain games and NFTs, the total locked value (TVL) in the DeFi space reached an all-time high by the end of 2021. Driven by attractive schemes, including liquidity mining programs, the competitiveness of this sector has significantly rebounded.
However, no other area is more susceptible to the influence of the crypto market than DeFi, so macro indicators and DeFi on-chain metrics may provide us with clues about user behavior trend patterns.
While the native tokens of each have a significant impact on TVL, user usage does not. By comparing macro indicators like Bitcoin's fear and greed index (FGI) with user usage, we can see that DeFi heavily relies on the crypto market. [ Note: FGI is a widely used analytical tool in cryptocurrency trading that measures market sentiment, ranging from 0 to 100, from extreme fear (0) to extreme greed (100). ]
The following two charts illustrate the correlation between FGI, the number of UAW across the entire dapp industry, and the number of UAW connected solely to DeFi dapps. There is no significant correlation between these two variables compared to the entire dapp industry. As mentioned earlier, the behavior of NFTs operates independently of the crypto market and is influenced by their utility, maturity, use cases, etc., and the same applies to blockchain games. However, in DeFi, utility and value are closely linked.
A closer look at the correlation between FGI and DeFi users reveals that DeFi usage soared to a historic high of 1.25 million in November—related to the price surges of AVAX, SOL, and LUNA. As the crypto market cooled at the end of the year, usage dropped again to below 1 million UAW.
A similar situation occurs when analyzing the top three blockchains by TVL and their native assets.
Starting with Ethereum, the price of ETH shows no correlation with NFTs. However, by observing the price of ETH in relation to DeFi usage, we can conclude that DeFi exhibits a slight correlation with the price of its underlying native asset.
On BSC, the UAW connected to BSC's DeFi dapps follows a trajectory similar to the price of BNB, further illustrating the correlation between DeFi and its underlying native asset.
The final example is Solana, where comparing the usage of DeFi and NFTs on Solana again proves that user behavior in DeFi largely depends on the crypto market.
(3) Stable adoption rate of blockchain games
DeFi and NFTs follow two different paths. For DeFi, macroeconomic indicators play a significant role in user usage within the sector. In contrast, NFTs seem to operate more independently, and the same applies to blockchain games.
Last year, we witnessed rapid growth and widespread adoption of blockchain games, thanks to the concepts of P2E (Play-to-Earn) and the metaverse. Just as we observed in the NFT space, these trends influence user behavior from the outside. In this case, the positive sentiment surrounding these two concepts drives people to participate in blockchain games.
In the summer of 2021, we saw games surpass DeFi to become the most commonly used dapp category. For most of Q3 and until mid-Q4, both types of dapps dominated the industry, accounting for nearly 90% of industry usage. However, amid the negative trends in the crypto market, DeFi usage began to decline. Since November, the gap in usage between games and DeFi has widened, with games now accounting for 52.4% of industry activity, while DeFi usage has dropped to 34.7%.
There is no doubt that blockchain games are attracting more users each month, significantly increasing the player base. With the widely anticipated growth of P2E and GameFi in 2022, we can predict that gaming will continue to drive dapp usage in the crypto industry throughout 2022.
Conclusion
User behavior patterns are insightful and help predict potential trends in the entire industry in the coming months.
The demographic analysis reveals the growing interest in blockchain within the Asian market. Their interest in gaming and NFTs has noticeably increased. Age and device analysis also helps monitor potential demand in the short term.
Furthermore, combining macro indicators with on-chain metrics can provide clues about user behavior patterns. In this case, we can observe how NFTs and gaming operate independently of factors influencing the industry (such as crypto market trends and other related indicators).
Both NFTs and blockchain games performed strongly in 2021, and this trend seems likely to continue into 2022. While the prices of crypto assets are inherently volatile, the usage of blockchain games and NFTs continues to rise. Additionally, it remains to be seen whether the maturity of these two sectors will have sensitivity to the prices of their native tokens.
Meanwhile, DeFi will continue to develop behind the volatility of crypto assets. Undoubtedly, the DeFi sector is more complete and mature compared to a year ago, but it faces more significant challenges than other areas. In addition to the burden of macro indicators, compliance and challenges from traditional finance are also important obstacles.
