Article Rewrite:
Title: Web3 Ecosystem Flourishes with Increased User Activity in Q1 2024
Introduction:
The Web3 ecosystem experienced significant growth in the first quarter of 2024, driven by factors such as the approval and listing of Bitcoin ETFs, the Bitcoin halving in April, the outflow of inflation-ridden fiat currencies, and the resurgence of DeFi. Stablecoin user activity increased by 42%, signaling a renewed interest in stablecoins. DeFi saw a staggering 291% increase in user activity, fueling hopes for a “DeFi summer.” Web3 games witnessed a 155% growth in active addresses, demonstrating their ability to attract and retain a growing player base. Additionally, Layer 2 solutions expanded rapidly, marking a crucial step forward in Web3 scalability.
Stablecoins:
Stablecoins remained the most active category of addresses for the fifth consecutive quarter, accounting for over 41% of all daily active addresses (DAA). USDT continued to dominate the stablecoin market, representing around 75% of the total stablecoin market capitalization. In the first quarter of 2024, the market capitalization of USDT exceeded $100 billion for the first time. Despite processing over ten times the number of transactions as USDC, USDT lagged behind USDC in transaction volume and average transaction size.
DeFi:
DeFi experienced a staggering 291% increase in daily active addresses in the first quarter. This growth represents a revival of capital inflows and the emergence of new yield-generating protocols that have fueled user activity. The first quarter of 2024 marked a new era for DeFi, with significant increases in developer and user activity, particularly on the Solana and Base networks. Catalysts for the explosive growth of DeFi include staking, liquidity provision, restaking, and liquidity restaking. While stablecoins still dominate in terms of address activity, DeFi surpassed stablecoins in transaction volume, with an average of nearly 7 million daily transactions by the end of the quarter. The total value locked (TVL) in yield-generating protocols steadily climbed from $26.5 billion in Q3 2023 to $59.7 billion in Q1 2024, indicating a return of confidence and liquidity to the DeFi market.
Web3 Games:
Web3 games experienced significant growth, surpassing stablecoins in transaction volume and emerging as the fastest-growing category in the Web3 ecosystem. Compared to Q4 2023, Web3 games saw a 155% increase in daily active addresses, reaching a peak of 747,000. The number of transactions in the Web3 games category grew by 370%.
Decentralized Social Platforms:
Decentralized social networks witnessed rapid growth in user activity, with a 425% increase in the first quarter of 2024. This indicates a growing interest in blockchain-based social platforms in the market. Mainstream platforms such as Farcaster, Lens, friend.tech, and Tomo have gained traction. The gradual increase in active user numbers after the Q1 peak suggests that user engagement will become more stable over time, potentially signaling an increased acceptance of these platforms.
NFT Market:
Ethereum continued to dominate the NFT market in terms of trading volume in 2023. However, in Q1 2024, the Solana NFT market experienced a surge in trading volume and activity. While OpenSea and Magic Eden historically dominated daily NFT active addresses and NFT transaction volume, Tensor surpassed them 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, addressing key challenges such as congestion and high transaction fees on the main networks. The Layer 2 market continued to expand, with new chains launching each quarter.
Arbitrum:
Despite fierce competition, Arbitrum maintained a 44% share of the TVL among all Ethereum Layer 2 solutions, cementing its position as a leader in the L2 space. In Q1 2024, Arbitrum experienced two significant events within a few days. The first event was the Ethereum network’s Dencun upgrade on March 13, which reduced L2 transaction fees by 98%. Average daily transaction volume almost doubled, increasing by 96.2%, while average transaction fees decreased by 93.5% (Arbitrum’s average transaction fee dropped from $0.3 to $0.01 overnight). However, revenue only decreased by 62.6%. In summary, the Ethereum upgrade made Arbitrum more adaptable to mass market applications. The second event was the massive token unlock on March 16, where 1.1 billion ARB tokens worth $2.32 billion were released. Some whales sold their unlocked ARB tokens, resulting in increased daily active addresses and transaction volume while maintaining Arbitrum’s TVL.
Base:
Coinbase’s new L2 network, Base, reached a significant milestone in Q1 2024 with a TVL exceeding $1 billion. Following the Ethereum upgrade, the DEX daily trading volume on Base’s ecosystem reached an all-time high, soaring by 487% and 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. Aerodrome, in particular, emerged as the second-largest DEX in terms of trading volume and TVL. Base also witnessed significant growth in decentralized social applications, with Farcaster achieving notable success in Q1. Additionally, Memecoin gradually gained recognition as a way to attract new users and community attention.
Polygon:
Polygon introduced AggLayer v1 Mainnet on February 23, introducing an aggregation layer (AggLayer) that aims to unify fragmented blockchains into a network consisting of zk-protected L1 and L2 chains, creating a seamless experience akin to a single chain. Furthermore, Polygon is using its Chain Development Kit (CDK) to validate configurations for transitioning from sidechains to L2 networks. Despite a decline in the number of active developers, Polygon maintains its second position.
Solana:
In Q1 2024, the Solana Foundation launched token extensions, providing configurable features for stablecoin issuers such as GMO Trust and Paxos. Solana gradually became a paradise for retail investors, DeFi innovators, NFT creators, airdrop opportunists, and Memecoin traders. The influx of new address activity led to a 180% increase in average daily DEX trading volume, reaching $1.2 billion. Solana’s revenue (in USD) skyrocketed by 597%, rising from $7.1 million in Q4 2023 to $49.5 million in Q1 2024. The stablecoin market capitalization in Solana’s ecosystem also grew by 49.4%, from $1.9 billion to $2.9 billion.
Funding Review:
Web3’s total funding increased by 55% compared to Q4 2023, with a 36% increase in the number of funding deals. Seed rounds saw the most significant growth, increasing by 53%. The funding amounts for both Series A and seed rounds significantly increased, nearly doubling from the previous quarter. The AI sector emerged as the most popular category for funding, indicating a strong interest in exploring how AI can drive value in the Web3 ecosystem. Conversely, funding and quantities in developer tools and trading sectors only slightly increased, suggesting cautious investor attitudes, possibly due to uncertainty in these areas or lower short-term returns.
Conclusion:
Overall, the Web3 venture capital market has shown signs of recovery, highlighting strategic shifts in the industry that venture capitalists believe will have a significant impact and drive the evolution of the blockchain landscape.
