In May, the total value locked (TVL) in decentralized finance (DeFi) applications surged to $192 billion, marking the highest amount since February 2022, as per a report by DappRadar, a blockchain analytics platform. Despite this increase in TVL, the number of unique active wallets (UAW) utilizing DeFi saw a decline of 21%.
The value of cryptocurrencies locked in DeFi applications in USD experienced a 17% growth in May, driven by the rising prices of Ether (ETH) and other tokens. Among all networks, Ethereum stood out as the dominant player in the DeFi market, accounting for $130 billion, which is 68% of the total TVL. Solana followed in second place with $10.9 billion, making up 5.7% of the total TVL. Solana’s DeFi TVL saw a 14% increase from the previous month.
Despite the robust growth in TVL, the DeFi sector witnessed a decrease in the daily number of UAW, indicating a shrinking user base while the existing users deposited more funds or saw a rise in portfolio values. The UAW dropped by 21% to 1.75 million for the month, constituting 17% of the UAW for all Web3 applications combined.
DappRadar attributed the increase in TVL to short-term speculation surrounding the potential launch of an Ethereum exchange-traded fund. It mentioned, “The DeFi UAW was down, suggesting that most trading activities were speculative in nature based on ETH ETF.”
According to DefiLlama, the 24-hour trading volumes of decentralized exchanges surged from $1.7 billion to $5.1 billion between October 1, 2023, and June 7, 2024. This potentially led to higher yields for liquidity providers and lenders, prompting them to deposit more crypto into DeFi applications. This period also coincided with widespread discussions on Bitcoin (BTC) and Ether exchange-traded funds.
Despite the decline in UAW within the DeFi sector, the report highlighted that other segments of the Web3 market witnessed an increase in users. The gaming sector saw over 3 million active users, up by 7.5% from the previous month. The number of users on nonfungible token (NFT) marketplaces rose by 11%, reaching 1.52 million UAW, while Web3 social media apps attracted 1.92 million UAW, marking a 29% increase.
As of the June 6 report, the total number of Web3 UAW has reached 10.4 million. An earlier report from April indicated that UAW had reached 7 million in Q1 2024, up from 4.3 million users in 2023. This data showcases a trend of steadily increasing users for Web3 applications. Nonetheless, some experts have raised concerns regarding the difficulty of onboarding new users, warning that this might impede the future growth of the industry if not addressed.
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