In the first quarter, the number of unique active blockchain wallets dropped 9.7% compared to the previous fourth quarter, according to a quarterly report by measurement firm DappRadar.

Blockchain gaming continues to dominate the Web3 industry, with an average of 791,474 daily Unique Active Wallets (dUAW) in Q1, representing a decrease of 8.58% from the previous quarter, DappRadar said. Gaming holds a 45.6% share of the entire industry.

Non-fungible tokens (NFTs) had a strong Q1 2023, with a 137.04% increase in trading volume to $4.7 billion, the highest since Q2 2022. However, March saw a 15.65% decrease in monthly trading volume to $1.7 billion and a 4.63% decrease in monthly sales to 2.7 million.

The dentralized app (dapp) industry in Q1 experienced both highs and lows, with fluctuations in on-chain metrics and market trends. However, overall sentiment remains optimistic, as the crypto space continues to demonstrate resilience and adaptability, DappRadar said.

The Silicon Valley Bank disaster

In the first quarter, one of the major factors driving hype around decentralized finance (DeFi) was the much expected Arbitrum airdrop, which attracted a lot of attention from traders. However, on March 11, following the Silicon Valley Bank crash and the subsequent USDC (USD Coin) depegging, the DeFi market experienced a big drop in its total value locked in a smart contract (TVL), falling by 9.6% from $79.28 billion to $71.61 billion. This created panic among investors, leading to a considerable sell-off.

Fortunately, on March 13, the feds stepped in and USDC reserve deposits held at Silicon Valley Bank were fully available to the public, which helped stabilize the market. This announcement led to a 13% spike in DeFi TVL, reaching $81.15 billion, but most importantly, it helped the market to quickly regain trust showing robustness all along the process.

The collapse of Silicon Valley Bank (SVB) sparked a conversation about the need for stablecoin regulations. Stablecoins are digital currencies that are backed by a reserve asset, typically the US dollar, and are designed to maintain a stable value. USD Coin (USDC), issued by Circle Financial, is one of the leaders in the $100 billion plus stablecoin market. However, when SVB failed, Circle revealed that it had $3.3 billion in deposits at the shuttered bank, causing the stablecoin to trade below its $1 peg for about three days, to as low as 88 cents.

The incident highlighted the fact that the stablecoin market is in dire need of a set of road rules. While Circle and other stablecoins claim to hold 1-to-1 collateral for every digital dollar they mint, Circle was holding $11 billion in uninsured bank accounts, which are not as safe as previously assumed. On the other hand, Tether openly admits that billions of its stablecoin reserves are held in corporate bonds, secured loans, precious metals, and even other cryptocurrencies.

Regulators have been quick to respond to the SVB fallout. Securities and Exchange Commission Chairman Gary Gensler has said that most cryptocurrencies other than bitcoin should be considered securities. In the case of stablecoins, the backing by something other than the exact pegged currency makes them look like money market funds, which are regulated by the SEC under the Investment Company Act of 1940.

Representative French Hill (R-Ark.), who chairs the House Subcommittee on Digital Assets, Financial Technology, and Inclusion, thinks that legislation is needed to provide clarity to digital assets on how they’re categorized for that functional regulation. However, the events of the last couple of weeks have only demonstrated the urgency of creating a crypto regulatory framework.

Despite these challenges, DappRadar said the overall sentiment in the cryptocurrency market is optimistic and bullish. The first quarter of 2023 has demonstrated the resilience and adaptability of the blockchain ecosystem, and on-chain metrics and market trends suggest that the future remains bright.

Blockchain gaming stats

In March, the number of daily unique active wallets interacting with gaming dapps on-chain was 741,567, a decrease of 3.33% from the previous month. Looking at the quarterly performance, there was a decrease of 8.58% from last quarter, where on average 865,783 dUAW were connected. Although these figures might appear disappointing, it’s essential to consider that the industry is still relatively new and continuously evolving.

In Q1 2023, blockchain gaming has shown a bullish sign of growth, with an increase in dominance from 42.87% in Q4 of 2022 to 45.60% in Q1 of 2023. This means that despite the decrease in dUAW numbers, blockchain gaming has become a bigger part of the Web3 ecosystem.

DappRadar, along with the Blockchain Gaming Association (BGA) will launch the quarterly gaming report on April 6. The report will provide a comprehensive analysis of the blockchain gaming industry’s performance in Q1 2023. The report will include data on the number of active wallets, transaction volume, and the overall growth and updates of the industry.

At the moment, DappRadar notes that Alien Worlds is the No. 1 blockchain game in terms of active user wallet transactions.

Web3 gaming developments

Web3 gaming is rapidly expanding, and the demand for scalable and efficient infrastructure has never been greater. ImmutableX and Polygon have come together to create a strategic alliance that aims to make web3 gaming faster, easier, and more accessible to developers. The partnership introduces a new EVM-compatible zk-rollup powered by Polygon technology called Immutable zkEVM, which will enable developers to build high-quality games that support true asset ownership.

Immutable zkEVM is the first EVM-compatible solution for games with enforceable royalty fees, making it easier for game developers to protect and grow their revenue while empowering their communities with asset ownership. This technology dramatically improves transaction speeds and reduces costly gas fees while leveraging the battle-tested security of the Ethereum blockchain.

Polygon’s scaling solutions have seen widespread adoption, boasting over 220.8 million unique addresses, 1.18 million smart contracts created, and 2.48 billion total transactions processed. With this partnership, developers can easily migrate their games and smart contracts from Ethereum, Polygon, and any other EVM-compatible solution into the product suite of Immutable, without any modifications. This unlocks everything developers need to take their game from concept to reality, complete with custom smart contracts, rich economies, and on-chain functionality.

ImmutableX and Polygon’s partnership will pave the way for web3 gaming to become mainstream, bringing digital ownership to millions of people worldwide. By combining Polygon’s ground-breaking zero-knowledge technology with Immutable’s deep gaming knowledge and product suite, players can expect a wave of AAA web3 games that push the boundaries of what’s possible.

As always, utility is key, and there are big plans ahead with the introduction of Immutable zkEVM. Upon launch, IMX will be used as gas for Immutable zkEVM, becoming the native network token and representing the equivalent utility of most current L1 blockchains.

Additionally, 20% of trades on the Immutable platform, regardless of rollup, must be paid in IMX. This fee utility will scale significantly as it expands to all new Immutable zkEVM environments and applications, ultimately creating more rewards for IMX holders.

In conclusion, DappRadar said the partnership between ImmutableX and Polygon is a significant milestone for the Web3 gaming industry. With the introduction of Immutable zkEVM, developers can create high-quality games that support true asset ownership, making Web3 gaming accessible to millions of people worldwide. As the demand for true digital asset ownership and Web3 gaming continues to expand, this partnership will undoubtedly pave the way for L3. ImmutableX and Polygon’s collaboration is an industry-defining strategic alliance that will make web3 gaming faster, easier, and more accessible than ever before.

Top-valued blockchains

For the top blockchain protocols in the DeFi landscape, Ethereum dominates with a TVL of $55.8 billion. This is an increase of 48.32% from the previous quarter and represents 66.95% of the entire DeFi TVL.

BNB Chain comes in second place with an increase of 20.69%, reaching $7.2 billion in Q1 2023, with PancakeSwap still the most used dapp in the industry with 1.37 million UAW in March. Tron remains the third largest blockchain by TVL with $5.2 billion, an increase of 17.55% amidst charges from the SEC against Justin Sun and the Tron Foundation. This includes allegations that TRX is a security. Despite the news, TVL has remained pretty steady.

Arbitrum and Optimism have maintained their position in the top 10 TVL blockchains and have actually increased their dominance in the market. Arbitrum is one of the top performers this quarter with an increase of 118.40%, reaching $3.2 billion. Optimism reaches $1 billion this quarter, translating into an increase of 85% from the previous quarter. This indicates that Layer-2 solutions are gaining traction in the DeFi sector.

Surprisingly, Solana has seen an increase in its TVL by 127.05%, reaching $791 million. The increase seems to have been driven by the DAO building tool SPL Governance, which was recently launched and has already $179.75 million in TVL. Additionally, Solana’s token SOL has also increased by 115% this quarter, reaching $21.13 at the time of writing.

The NFT market

The NFT market saw a 137% increase in trading volume in Q1, reaching a total value of $4.7 billion. March saw a 15.65% decrease in trading volume after a February inflated by the Blur token farming period.. NFT sales count only decreased by 4.63% in March, with 2.7 million NFTs sold. However, Q1 2023 had a total of 19.4 million NFT sales, which is an increase of 8.56% from the last quarter of 2022.

Ethereum remains the dominant blockchain in the NFT market by volume, accounting for 89.50% of the market share in March. Furthermore, Ethereum’s quarterly trading volume increased by 245.43% to $4.1 billion in Q1 2023, compared to Q4 2022.

CryptoPunks was the most traded NFT collection on Ethereum with a trading volume of $241 million, an increase of 1,214% from the previous month. In March 2023, Yuga Labs NFT collections dominated Ethereum volume, accounting for 38.61% of the NFT volume on Ethereum and 34.55% of the entire NFT industry.

Surprisingly, Solana is in second place with a trading volume of $242 million, which is an increase of 4.55% from the previous quarter. The NFT collection Monkey Kingdom drove the Solana NFT protocol in March, with a trading volume of $7.9 million, doubling its number from February.

Back in December, two of the most popular NFT collections on Solana announced they would bridge to Ethereum and Polygon, which was a big setback for Solana. On March 27, one of the co-founders of DeGods and y00ts announced the first sale of y00ts on Polygon, which marked the success of the bridge for one of the collections.

Furthermore, Polygon had a bullish start to the year, with a trading volume of $29.8 million in March, despite a 24.20% decrease from the previous month. However, looking at the quarterly data, it had a trading volume of $85 million in Q1 2023, which is a remarkable 125.04% increase from the previous quarter and one of the best quarters recorded since Q4 2021.

Polygon’s popularity has been on the rise among NFT creators in recent months. This is due to its low fees and fast transaction times compared to other blockchains, making it an attractive option for those looking to launch and trade NFTs. In addition to this, on March 8, Binance NFT, the non-fungible token (NFT) arm of crypto exchange Binance, announced that the Polygon network had been included in its supported blockchains within the marketplace.

Overall, 2023 has started on a very bullish note for the NFT market. Despite a slight decrease in trading volume in March, the overall performance in Q1 has been remarkable, with an increase of 137.04% compared to the previous quarter. The dominance of Ethereum and the growing popularity of Polygon have been the key highlights of the NFT market performance in Q1.

In Q1 2023 total of $373 million of funds lost due to hacks and exploits, a significant decrease of 92.60% compared to the previous quarter’s total of $5 billion, according to REKT Database. However, this doesn’t mean that the crypto space is completely free of security issues.