In the madness of record-breaking gas prices, how has the NFT universe reacted to the frenzy of the DeFI?
This is no longer a discovery, in recent weeks the price of transaction fees has reached record levels. Creating a smart contract cost around $300, sending a simple transaction $5, transferring an NFT $20… Ouch!
Faced with this increase which took players in the sector by surprise, although total and average sales (USD) have increased significantly, we have seen a significant drop in the use of Dapps since mid-July.
Now that the gas fees are starting to decline, what is the outcome of this event? What were the trends that emerged from this turbulent period?
As a reminder, at the end of 2017 and beginning of 2018 the Ethereum blockchain experienced a historic bottleneck due to CryptoKitties, the average price of a transaction was 90 gwei. At the time, it was only transferring and breeding CryptoKitties or, sending of Ethereum and ICO tokens on the blockchain.
With the advent of DeFI (or Decentralized Finance) and all NFTs projects, the network has been called upon by many more so-called complex transactions.
To fully understand why Ethereum transaction fees “stuck” at 465 Gwei, Vitalik Buterin made a very easy to understand explanatory thread. This is purely mathematical, it is because of the limitation of the filling of blocks.
With a limit of 12.5 million gas per block, 465 Gwei is the best compromise so that the transaction is carried out without having empty space in the block. For example, if everyone sent a 1000 Gwei transactions, a 6 Gwei transaction would find its place in the block and be processed on the way.
For Vitalik, increasing the size of the blocks would therefore make no sense.
To fully understand the consequences of these exorbitant fees for Dapps, we analyzed 5 projects from the first week of July until the last week of August:
These names should sound familiar to you, they are the ones that appear mainly in our newsletter and weekly publications of weekly statistics on social networks.
During these two months, the volume of transactions, dollars or “Weekly Active Users” of these projects were disrupted but not all in the same way. There was, however, one thing in common, but we will come back to that later.
The community of a project is like the stones of a castle. In the face of an earthquake, it is the strength of the foundation that will hold the construction in place.
The Axie community grew strongly from early July.The reason is very simple, and it’s thanks to Small Love Potions (SLP), rewards obtained in-game by completing quests or fighting other players. Although it was possible to get some before then, July 2nd is the date the $SLP was listed… on Uniswap!
In addition, the announcement of a dedicated gaming sidechain named Ronin in early August had the desired effect!
Transaction fees that take place in Sorare are paid by the team. Without needing to update anything, players continued to be interested in the game!
Ethereum Name Services
The number of ENS users gradually increased over the two months before peaking at 798 weekly users. The reason is not to be found in a particular update of the project but rather in the expiration of ENS domain names.
Regarding the other projects, they unfortunately suffered from a lack of activity on the part of their usual users:
Even if the number of WAA is for the majority of projects on the decline, this does not mean that there has not been “off-chain” activity. The assets still exist, so we think this is just a hiatus for users from using the Ethereum blockchain while they wait for fees to return to normal!
The number of transactions for the sale of CryptoKtties assets is usually around 10,000. August 7 is the date of the announcement of the finalization of the Dapper Labs fundraiser for the Flow blockchain… and the peak of the number of sales of this chaotic period. The number of sales, after that, continued to decline without regaining its previous heights.
Sales of Sorare were largely disrupted during the month of August. Each comeback is the announcement of a new figure who has joined the ranks of the Fantasy / Strategy game.
Axie’s number of sales has not changed much. This is simply explained by the interest of players in accumulating SLPs, which are more profitable than an Axie which costs less than transaction fees.
The other projects that did not find alternatives to cover the costs of sales saw their number decline.
The announcements having had their effect, Sorare was able to attract traders who knew how to take advantage of the names of football players.
The increasing evolution of the USD volume linked to sales is explained by the combination of the increasing number of users and the new features that the game has offered.
True to form, SuperRare has managed to create more dollar volume for its sales than its competitors. The continued arrival of new artists as well as a number of collectors accustomed to paying a high price to buy the works has allowed the platform to maintain its level during this period.
Despite declining user and transaction counts, Decentraland’s USD volume managed to gradually increase over time. We will see in the next section the reason for this evolution.
Ethereum Name Service
The first names to be reserved during the launch of ENS were the ones that were worth the most at the time of booking: these are the ones that contain 3 to 4 characters.
When they expired, the cost of renewing them was understandably high, but the successful adoption of ENS resulted in some fairly expensive sales.
Overall, the other projects have not experienced a drastic decline during this period or have tended to gradually increase.
The common point of the evolution of these projects over the last two months, we have found in the average sales in USD: all the averages are on the rise!
For better readability of the graphics, we have separated them into 3:
SuperRare and Decentraland, with an average ranging from $ 400 to $ 1800.
Makersplace, Unstoppable Domains, and Gods Unchained have them, averaging between $0 and around $300.
The peak the project experienced at the end of August was due to the sale of the “sex.crypto” domain name at $89 796, disrupting the usual average.
The Axie Infinity, CryptoKitties, Sorare, and Ethereum Name Service projects have seen their average sales in USD range from $ 5 to around $ 180.
In this troubled time, vendors as well as developers had to find new alternatives to keep the business afloat.
For developers, many are now thinking about using sidechains or even other blockchains for their projects in the future. Dapper Labs, for example, is experimenting with its Flow blockchain with different projects as we speak and Decentraland is running Game Jam focused on Matic.
Only those who had sufficiently valuable items succeeded in doing so. The other users, meanwhile, were excluded from these high-profile transactions…