Q1 On-chain Report: Layer 2s Rapidly Expand, Significant Growth in Game User Base
The number of daily active addresses in DeFi increased by 291% month-on-month, while the daily active addresses in Web3 games grew by 155%, reaching a peak of 747,000.Original Title: The OnChain Report: 2024 Q1
Original Author: QuickNode & Artemis
Original Compiler: Felix, PANews
Key Points:
Surge in Stablecoin Activity: The combined effects of the approval and listing of spot Bitcoin ETFs, the Bitcoin halving in April, the outflow of fiat currency due to hyperinflation, and the recovery of DeFi have led to a 42% quarter-over-quarter increase in stablecoin user activity.
Reigniting the "DeFi Summer": In Q1 2024, DeFi entered a new era characterized by optimism, risk awareness, and refined innovation. DeFi user activity increased by 291% quarter-over-quarter, rekindling hopes for a "DeFi Summer."
Web3 Gaming Heats Up: The number of active addresses grew by 155% quarter-over-quarter, showcasing Web3's ability to attract and retain a growing player base.
Rapid Expansion of Layer 2s: The rapid expansion of Layer 2s marks a significant step forward in Web3 scalability over the past six months. Notably, the substantial growth in TVL on platforms like Base indicates ongoing interest in expanding on-chain liquidity.
User Activity
Stablecoins
For five consecutive quarters, stablecoins have had the highest number of active addresses, accounting for over 41% of all daily active addresses (DAA). USDT continues to dominate the stablecoin market, comprising about 75% of the total stablecoin market cap. In Q1 2024, USDT's market cap surpassed $100 billion for the first time.
Despite USDT processing over ten times the number of transactions compared to USDC in Q1 2024, USDC leads in trading volume and average transaction size.
DeFi
DeFi saw a 291% quarter-over-quarter increase in daily active addresses in Q1. This growth represents a resurgence of capital inflow and the emergence of new yield-generating protocols that have driven user activity.
DeFi truly entered a new era in Q1 2024, with significant increases in developer and user activity, particularly on the Solana and Base networks. Staking, liquid staking, re-staking, and liquidity re-staking have all been catalysts for DeFi's recent explosive growth, explaining why staking now constitutes a large portion of DeFi's TVL.
While stablecoins still dominate address activity, DeFi surpassed stablecoins in transaction volume, with daily average transactions nearing 7 million by the end of the quarter. The TVL of yield-generating protocols has steadily climbed from $26.5 billion in Q3 2023 to $59.7 billion in Q1 2024. This rebound indicates a return of confidence and liquidity in the DeFi market.
Web3 Gaming
The Web3 gaming sector experienced significant growth, surpassing stablecoins in transaction volume and becoming the fastest-growing Web3 category year-over-year. Compared to Q4 2023, Web3 gaming saw a 155% increase in daily active addresses in Q1 2024, peaking at 747,000. The number of transactions in the Web3 gaming sector grew by 370% year-over-year.
Decentralized Social Platforms
Decentralized social networks experienced rapid growth in Q1 2024, with user activity increasing by 425%, indicating a growing market interest in blockchain-based social platforms, including mainstream platforms like Farcaster, Lens, friend.tech, and Tomo.
Historically, initial user engagement in decentralized social networks tends to decline as the novelty of "unique and new" wears off. However, the gradual increase in active users following the peak in Q1 suggests that user engagement may stabilize over time, potentially signaling an increase in user acceptance.
NFT Market
In 2023, Ethereum far surpassed other chains in NFT market trading volume, but in Q1 2024, the Solana NFT market saw a surge in trading volume and activity. While OpenSea and Magic Eden historically dominated daily NFT active addresses and NFT transaction counts, this trend was surpassed by Tensor in Q1 2024, indicating a shift in user preferences and platform performance.
Public Chains
Layer 2 and Sidechains
Layer 2 solutions significantly improved blockchain scalability in Q1 2024, offering faster transaction speeds and lower costs, helping to address key challenges such as congestion and high transaction fees on major networks. The Layer 2 market continues to expand, with new chains launching each quarter.
Arbitrum
Despite fierce competition, Arbitrum holds 44% of the TVL among all Ethereum Layer 2s and has long been a leader in the L2 space.
In Q1 2024, Arbitrum experienced two significant events within days. The first was the Ethereum network's Dencun upgrade on March 13, which reduced L2 transaction fees by 98%. Artemis data shows that average daily transaction volume nearly doubled, increasing by 96.2%, while average transaction fees dropped by 93.5% (i.e., average Arbitrum transaction fees fell overnight from $0.30 to $0.01), but revenue only decreased by 62.6%. In short, the Ethereum upgrade made Arbitrum more suitable for mainstream market applications.
The second event was the large-scale token unlock on March 16, where 1.1 billion ARB tokens worth $2.32 billion were unlocked, nearly doubling the circulating supply of ARB tokens. Following the unlock, some whales sold off their ARB (Note: According to Lookonchain monitoring, after the large unlock, 11 whales collectively deposited 34 million ARB into exchanges, approximately $58 million), leading to significant sell-offs, although Arbitrum's TVL remained relatively stable while daily active addresses and transaction volumes surged.
Base
Coinbase's new L2 network, Base, reached a significant milestone in Q1 2024, with TVL exceeding $1 billion. Following the Ethereum upgrade, the daily trading volume of DEXs in the Base ecosystem reached an all-time high in March, soaring by 487%, with daily trading volume surpassing $1 billion for the first time.
While Uniswap remains the largest DEX trading platform on Base, it has become a fertile ground for emerging DEXs. Notably, Aerodrome has become the second-ranked DEX in terms of trading volume and TVL on the Base network. Base has also achieved significant growth in areas such as decentralized social applications, with Farcaster achieving considerable success in Q1, and Memecoins gradually being seen as a way to attract new users and gain community attention.
Polygon
On February 23, Polygon launched AggLayer v1 Mainnet, introducing the Aggregation Layer (AggLayer). This cross-stack communication tool aims to unify fragmented blockchains into a network composed of zk-protected L1 and L2 chains, feeling like a single chain.
Additionally, Polygon is validating configurations for transitioning from sidechains to L2 networks using its Chain Development Kit (CDK). Although the number of active developers on Polygon has been steadily declining, it still maintains the second position.
Solana
In Q1 2024, the Solana Foundation launched a token expansion, providing a range of configurable features for stablecoin issuers like GMO Trust and Paxos. Solana gradually became a haven for retail investors, DeFi innovators, NFT minters, airdrop opportunists, and Memecoin traders in Q1 2024. The influx of new address activity led to a 180% quarter-over-quarter increase in Solana's average daily DEX trading volume, reaching $1.2 billion.
Solana's revenue (in USD) surged by 597% quarter-over-quarter, rising from $7.1 million in Q4 2023 to $49.5 million in Q1 2024. The market cap of stablecoins in the Solana ecosystem also grew by 49.4% quarter-over-quarter, increasing from $1.9 billion to $2.9 billion.
Funding Overview
In addition to a 36% quarter-over-quarter increase in the number of funding rounds, the total funding for Web3 grew by 55% compared to Q4 2023. Seed round financing saw the most significant growth, increasing by 53% quarter-over-quarter. Series A and seed round financing amounts significantly increased, nearly doubling from the previous quarter. Among the funding categories, the AI sector was the most popular, indicating strong market interest in exploring how AI can become a key value driver for Web3.
In contrast, funding and numbers in areas like developer tools and trading saw only slight increases, suggesting a more cautious attitude from investors, possibly due to uncertainty or lower short-term returns in these sectors.
Overall, the growth trend of the Web3 venture capital market has been restored, highlighting a strategic shift in industries that venture capitalists believe will have a significant impact and drive the evolution of the blockchain landscape.
