With decentralized finance and specific tokens rising sharply, it is easy to believe that crypto applications have finally made it. But, is it the actual growth of users? Or are they just the same influencers moving from one faded market to another? We will try to answer this puzzle and find out what it means for the future of innovation. So let’s take a closer look at the growth of DeFi and NFT.
Success of decentralized finance and NFT
DeFi is probably the most widespread application of smart contracts today. The most talked-about are automated markets, algorithmic stablecoins, and yield farming strategies.
The madness started at the beginning and lasted until the end of 2020. This is a period that the media likes to remember as the “summer of DeFi”. SushiSwap then launched a liquidity attack to withdraw funds from Uniswap. It attracted more than $1 billion in lividness to its platform in less than a week. The name “Vampire attack” was used for this event. Yearn.finance launched the first “yield farm”, and Uniswap implemented return airdrops.
We could see the most robust communities forming around the ownership of protocol tokens, creating a positive feedback loop that ensured that the appreciation of DeFi assets grew higher and higher.
Popularized today by the iconic CryptoPunks, NFTs have gained an ever-increasing share of Ethereum network activity. Thanks to rapid development, NFTs now cover several emerging market segments, such as avatar-based projects, blockchain art, collectibles, virtual plots, and profitable games.
In addition, public officials such as Andy Murray and Ashton Kutcher, and contemporary artists such as Damien Hirst, have been eager to enter the NFT market. The growth of NFT applications and the growing activity on the blockchain make it challenging to ignore them as emerging asset classes.
Are you interested in cryptocurrencies but you don’t know where to begin? Click here to register an account so you can start with crypto today.
Users of both – NFT collectors and DEX traders
We will talk about wallets active in the decentralized finance and NFT area through our marking system. The “legendary NFT collector” is in the top 0.1% of NFT transactions, while the “elite DEX trader” is in the first 1% of decentralized exchange (DEX) transactions.
The overlap of users across these labels shows that NFT collectors and DEX traders have different user bases. It also identifies a new type of user: the NFT-DEX ultimate user. There are currently 23 such users who are legendary collectors of NFT and Elite DEX traders at the same time.
Let’s take into account the representation of individual groups. Another trend is apparent: The more active the user trades in DeFi, the more likely he is an NFT collector.
DeFi needs NFT, and NFT needs DeFi
No wonder DeFi has reached a point where interchangeability is no longer enough. Property ownership can become so personal or optimized to such an extent that it would make sense to use non-interchangeable tokens (NFTs) instead. Uniswap v3 has introduced a fee that allows users to adjust the price range for their liquidity position in the new design of the automated market system.
The NFT world is also quickly projected into DeFi. Thanks to leading protocols such as NFT20 and NFTX, NFTs gain financial benefit by dividing them into individual tokens and linking them to liquid pools running on DEX (decentralized exchanges). Users can now access digital art collections without having to buy unique pieces. The connection of NFT and DeFi violates the very definition of the unmistakable. What’s next?
The winner will be the products combining both
NFT and DeFi seems to be judging each other. Axie Infinity is a case in point. Axie is probably the most significant revenue-generating blockchain product that combines earnings-based gaming based on the rarity of NFT with liquid pools for gaming items. A true NFT-DeFi hybrid.
The network perspective of Ethereum transactions shows Axie’s ability to interconnect the DeFi and NFT communities. The success of future crypto products will depend on their ability to reach both NFT and DeFi users simultaneously. Based on Ethereum transactions over seven days, Axie pools are successfully merging the two subgroups.
The growth of decentralized finance and NFT user groups indicates interest in long-term innovation for Ethereum and the broader crypto ecosystem. Tokens, applications, and products that can reach new and experienced users in these markets will be the first to reap the well-deserved reward.
If you agree that users from different groups contribute to the value of a product through greater resilience, then you can speculate that markets are ripe for a robust phase of growth.
Thanks to the large number of use cases for DeFi and NFT, cryptocurrencies could work in both megaprojects and specialized applications. The breadth of user growth suggests that creating new value in cryptocurrencies will continue to outperform older financial and artistic societies in the distant future.