In May, the decentralized finance (DeFi) sector saw a significant milestone with the total value locked (TVL) in DeFi applications hitting $192 billion, marking the highest amount since February 2022, as reported by DappRadar, a blockchain analytics platform. Despite this surge in TVL, the number of unique active wallets (UAW) engaging with DeFi dropped by 21%.
The value of cryptocurrencies locked in DeFi applications surged by 17% in May, driven by the rising prices of Ether (ETH) and various 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 experienced a 14% increase from the previous month.
Despite the impressive growth in TVL, the DeFi sector witnessed a decline in the number of daily UAW, indicating a shrinking user base while existing users continued to deposit more or witnessed their portfolios appreciating in value. The number of UAW dropped by 21% to 1.75 million for the month, representing 17% of the UAW for all Web3 applications combined.
DappRadar credited the surge in TVL to short-term speculation surrounding the potential introduction of an Ethereum exchange-traded fund. The platform noted, “The DeFi UAW was down, meaning that most trading was speculative based on ETH ETF.”
According to DefiLlama, the 24-hour trade volumes of decentralized exchanges surged from $1.7 billion to $5.1 billion between October 1, 2023, and June 7, 2024. This increase may have 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 about Bitcoin (BTC) and Ether exchange-traded funds.
Despite the decrease in UAW within the DeFi sector, the report highlighted that other sectors of the Web3 market saw an uptick in users. The gaming sector attracted over 3 million active users, marking a 7.5% increase from the previous month. The number of users on nonfungible token (NFT) marketplaces increased by 11%, reaching 1.52 million UAW, while Web3 social media apps saw 1.92 million UAW, reflecting a 29% increase.
The total number of UAW in the Web3 space has now reached 10.4 million, as per the June 6 report. A previous report in April indicated that UAW had reached 7 million in Q1 2024, up from 4.3 million users in 2023, showcasing a consistent growth trend for Web3 applications. However, some experts have raised concerns about the difficulty of onboarding new users and warned that this could impede the industry’s future growth if not addressed.
In a separate development, developers left after Torque Drift 2 integrated crypto, posing a major challenge for MetaFighter in the Web3 gaming realm.