DeFi to Rebound After Crypto Winter, Says Web3 Report

Web3 development platform Alchemy released a report Tuesday that found that decentralized exchanges (DEXs) saw a boost after Silicon Valley Bank crumbled on March 10.

Daily transaction volumes on DEXs nearly reached 25 billion on March 11, only to come back down to normal levels by around April, according to the report. Uniswap, the largest DEX on Ethereum, hit a record volume of $11.8 billion. Uniswap liquidity providers also earned $77 million in fees in March, up from approximately $41 million in January and about $72 million in February, Alchemy told Blockworks.

While overall DEX trading volumes decreased 38% yearly, it rebounded 43% in the first quarter of 2023.

Jason Shah, Alchemy’s head of growth, told Blockworks what he thought was behind the brief Silicon Valley Bank-related spike in DEX activity.

“The general sense here is that with…moving funds into decentralized finance, you may very well have primarily needed [DEXs] once or twice or three times when the crisis is occurring,” Shah said. “But a user may not need to constantly be re-trading those tokens over time if they’ve already moved them into more of a self custodial capacity.”

Trading volume for NFTs also bounced back, up 126% year over year after a cold 2022, according to the report. This was helped in part by surging token prices for bitcoin, ether and solana throughout this year. 

Gökçe Güven, co-founder and CEO of Web3 brand loyalty firm Kalder, told Blockworks that the practicality of NFTs is starting to become more known, which she said is partly driving the recent increase in adoption.

“There’s an incredibly wide variety of use cases for NFTs on the market right now, from collectibles to event tickets and loyalty programs, so it isn’t surprising that such a large portion of the crypto community has entered the space,” Güven said. 

She continued, “While there is certainly a sentiment among some that NFTs lack utility and are primarily used for Twitter profile pictures, this is far from the truth.”

Additionally, layer-2 scaling solutions may be winning the most, the report found. Ethereum virtual machine smart contracts deployed on Ethereum, Arbitrum, Optimism and Polygon saw a 160% yearly increase. 

Layer-2 bridge transactions also skyrocketed 518% year on year, despite three major crypto bridge hacks in 2022 that totaled over $1.1 billion.

The report also indicated that Web3 developer activity has been on the rise throughout the last year. Ethereum weekly SDK installs, including Ethers.js, Web3.js and Hardhat climbed 47% year on year to a total of 1.9 million. 

Wallet SDK installs, on the other hand, snagged an all time high of nearly 439,000, surging 451% from last year. 

“We’re continuing to see new milestones for Web3 builders. That goes counter to most of the narrative and most of what you might expect with the way that things have unfolded in the last year,” Shah said. 

“The fact that builder momentum is still very strong and reached some new all time highs…that to us was the most salient and most important finding from the report,” he added.

Updated April 19, 2023 at 3:06 pm ET: Jason Shah is Alchemy’s head of growth. A previous version of this article listed his title as head of growth and product management.

The analysis misreported DEX daily transaction volumes. Daily transaction volumes on DEXs reached nearly 25 billion on March 11, not 25 million.

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