TL;DR
- DeFi Downturn: Q1 witnessed a 27% TVL decrease to $156B, with major blockchains like Ethereum (-37%) and Sui (-44%) feeling the impact, though Berachain bucked the trend with strong gains.
- Rising User Activity: AI protocols registered a 29% jump in daily active wallets (2.6M DUAW), while social apps climbed 10% to 2.8M, underscoring a shift in user engagement.
- Sector Shifts: Despite DeFi’s struggles, the NFT and GameFi sectors also lagged, with NFT trading volume dipping 25%, emphasizing evolving priorities in the Web3 ecosystem.
The decentralized finance (DeFi) sector has taken a significant hit in the first quarter of 2025, with total value locked (TVL) plummeting by 27% to $156 billion. This sharp decline is primarily attributed to broader economic instability and the lingering effects of the Bybit exploit, which sent shockwaves through the industry.
Ethereum, the largest blockchain by TVL, saw a 37% drop to $96 billion. At the same time, Sui suffered the most among the top 10 blockchains, falling 44% to $2 billion. Other major blockchains, including Solana, Tron, and Arbitrum, also experienced substantial losses, with their TVLs slashed by over 30%.
The downturn was exacerbated by a decrease in stablecoin holdings and a surge in DeFi withdrawals, further pressuring the sector. However, one standout performer emerged—Berachain—accumulating $5.17 billion in TVL since its launch in February, bucking the overall trend.
AI and Social Apps Surge in User Activity
While DeFi struggled, artificial intelligence (AI) and social applications flourished, marking a notable shift in user engagement. The number of daily unique active wallets (DUAW) interacting with AI protocols surged by 29%, reaching 2.6 million, while social apps saw a 10% increase, climbing to 2.8 million.
DappRadar’s report highlights the explosive growth of AI agent protocols, which are no longer just theoretical concepts but are actively shaping user behavior. Social platforms also benefited from increased adoption, with streamlined token launch mechanisms driving engagement.
NFT and GameFi Sectors Struggle
Despite the rise in AI and social apps, NFTs and GameFi protocols faced setbacks. NFT trading volume dropped 25% to $1.5 billion, with OKX’s marketplace leading sales at $606 million, followed closely by OpenSea and Blur. Pudgy Penguins emerged as the most traded collection, generating $177 million in sales, while CryptoPunks maintained their prestige despite price fluctuations.
The Shifting Landscape of Web3
The contrasting trends in DeFi, AI, and social apps underscore the evolving dynamics of the Web3 ecosystem. While DeFi grapples with economic pressures and security concerns, AI and social applications are rapidly gaining traction, signaling a potential shift in user priorities.
