The Web 3 Boom
The world of Web 3 is growing at a rapid rate and it is filled with excitement as user engagement has reached an unprecedented peak in the second quarter of 2024.According to a July 4 report by blockchain analytics platform DappRadar approximately 10 million daily unique active wallets (dUAW) were recorded marking a 40% increase from the first quarter of the year.
The surge in Web 3 users spans various sectors of the decentralized application (DApp) industry indicating a bullish trend across the board. The social sector witnessed the highest increase with a 66% rise in dUAW which has been driven by applications like Fantasy.top and UXLINK. Blockchain gaming also saw an uptick in users despite a slight decline in its market share.
Decentralized exchanges (DEXs) such as Uniswap and Raydium registered substantial increases in user activity with Uniswap's dUAW up by 80% and Raydium's by an astounding 134%. This is largely due to the influx of meme coin traders. Non-fungible tokens (NFT) marketplaces experienced their highest usage since Q1 2023, boasting USD 4 billion in trading volume across over 14.9 million trades. Magic Eden's market share grew from 17% to 22%, while Blur's dominance dropped to 31%.
Despite the impressive user growth the total value of crypto locked in Decentralized Finance (DeFi) applications fell by USD 7 billion, a 4% decline from the previous quarter. Tron and Arbitrum experienced major losses in total value locked (TVL) by dropping by 17% and 9%, respectively. Ethereum layer 2 Linea and Base bucked the trend with Linea's TVL surging by 420% and Base's by 44%.
Airdrop Chasing Concerns
DappRadar cautioned that the dramatic growth in dUAW might not be sustainable by attributing part of the increase to "airdrop farming," where users engage in activities to earn airdropped tokens. The Blast and zkSync airdrops in June significantly contributed to this spike. For continued growth. The report focused on the need for superior user experiences, solid development roadmaps and strong teams.
Security remains a major concern for the Web 3 industry. Q2 2024 saw USD 430 million in losses due to security breaches a 5% increase from the previous quarter. Ethereum and BNB Chain were the most affected with each accounting for about 28% of the incidents, while Solana was involved in 8% of the cases. Although access control issues represented only 23% of incidents they accounted for 75% of the total funds lost. Other incident types including flash loan attacks and rug pulls, each constituted about 13% of the incidents but caused only about 1% of the total losses.
Here Come's the Boom
Amid the Web 3 user surge, Grayscale a leading crypto currency asset manager remains optimistic about the recovery of the crypto currency market despite recent turmoil. In a new market update Grayscale's research team predicted that the market would recover "in the coming months," citing a "broadly supportive" macro backdrop. They mentioned the possibility of U.S. Federal Reserve rate cuts and the thriving U.S. stock market as positive indicators.
The price of Bitcoin which had crashed to USD 53,350 which is its lowest point in nearly half a year has since rebounded. Grayscale's analysts pointed to several factors behind the extreme selling pressure including the start of Mt. Gox repayments, liquidation of Bitcoin holdings by the U.S. and German governments and net outflows from U.S.-based exchange-traded funds. Despite these headwinds Grayscale believes Bitcoin's fundamentals remain unchanged.
The firm also highlighted the expected approval of U.S. based spot Ethereum exchange traded funds, which they believe will attract significant net inflows. However, they noted the weakness in the memecoin-heavy Consumer & Culture sector which was the biggest underperformer of July.
Calls to Stop pursuing CBDC's and Stick to Bitcoin
In Europe the debate over digital currencies is intensifying. German lawmaker Joana Cotar has voiced strong opposition to the European Central Bank's (ECB) push for a digital Euro by advocating instead for Bitcoin as an anti-CBDC solution. In a recent speech Cotar questioned the necessity of the digital Euro and expressed concerns about the financial risks and privacy issues associated with Central Bank Digital Currencies (CBDCs).
Cotar emphasized that the demand for a digital Euro seems limited to the ECB and a select group of politicians. She criticized the ECB's assurances on privacy arguing that the ultimate responsibility for balancing privacy and policy objectives would fall on European lawmakers. "We know your trick," she said, accusing authorities of gradually increasing surveillance and control under the guise of harmless initiatives. Cotar concluded her speech with a call to "Study Bitcoin."
The German government has been active in the crypto market, holding 39,826 Bitcoin valued at approximately USD 2.30 billion. Recent liquidations of their Bitcoin holdings have raised concerns about further dips in Bitcoin's price. Despite this, Cotar continues to advocate for Bitcoin by highlighting its potential benefits for investors looking to diversify their assets and mitigate risks associated with traditional investments.
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