Messari Q1 BNB Chain Report: Revenue Down 11.7% QoQ, User Activity Remains Strong

Original title: 《 Messari Q1 BNB Chain report: Revenue down 11.7% QoQ, user activity remains strong 》

Original author: Messari

Original translation: PANews

Key points

BNB Chain's market value followed the market's recovery this quarter, up 24.9% QoQ. However, BNB Chain revenue (total transaction fees paid in BNB) fell 11.7% QoQ.

In Q1, the development of several ecosystems continued to drive address and transaction activity, thanks to the launch of Uniswap, new GameFi, and SocialFi apps.

Network upgrades in Q4 contributed to further decentralization this quarter. The average number of validators and total stake increased by 10.7% and 12.1%, respectively.

Jump Crypto discovered a vulnerability in the BNB beacon chain and fixed it within 24 hours, preventing malicious exploitation and protecting funds.

Key Metrics

Performance Analysis

Network Overview

After reaching a base user base in Q3 2022, BNB Chain’s average daily active addresses and daily transaction volume began to trend upward in Q4 2022. In Q1 2023, activity levels stabilized, but continued to trend upward quarter-on-quarter.

BNB Chain saw higher underlying network utilization in Q4 2022 as average daily active addresses reversed, growing by approximately 30% by the end of 2022. Several ecosystem developments in Q1 2023 continued to drive address activity despite the ongoing downturn.

Similar to Hooked Protocol's accelerated adoption in Q4, the Q1 surge in activity stemmed from:

Lifeform: DID solution provider

CyberConnect: Decentralized social graph protocol

Daily transaction activity follows a similar pattern to daily active addresses. After reaching a base user base in Q3 2022, transaction activity stabilized in Q1 2023. Overall, BNB Chain's average daily transactions were slightly down (3.9%) at the end of the quarter, but rose steadily throughout Q1.

Financial Overview

After a turbulent 2022, crypto markets rebounded in January and showed resilience at the end of the quarter. As a result, BNB Chain's financial performance improved as network activity trended upward. Average transaction fees fell and revenue decreased; at the same time, circulating market capitalization increased by 24.9% month-on-month.

Due to BNB's token destruction mechanism, the circulation of BNB continues to decline. Since the destruction mechanism was launched in 2017, as of March 31, 2023, more than 44 million BNB (about 22% of its total supply of 200 million) have been destroyed. Last year, BNB's average deflation rate was 1.1%.

BNB's revenue (total transaction fees paid in BNB) fell by 11.7% while network value grew by 24.9% month-over-month. The deviation between the two may indicate that overall market sentiment is driving value growth more than underlying network utility.

DeFi

TVL in USD rose by 10.2% as the rally began in January. However, TVL denominated in BNB fell by 14.6%, suggesting that TVL was generated by the rise in USD-denominated asset prices rather than the use of BNB.

Liquidity staking and mining platforms continue to support BNB Chain and its DeFi ecosystem. LSD Protocol Ankr and liquidity mining platform Coinwind continued to grow during the quarter. They ranked in the top ten by TVL in Q1, holding a total of approximately $245 million in TVL. Note that these platforms are not double-counted for TVL.

Almost all DeFi applications on BNB Chain benefited from the market rebound throughout the first quarter. BNB Chain's most prominent protocol, PancakeSwap, grew 3% quarter-over-quarter in terms of TVL. Meanwhile, TVL on Venus and Alpaca Finance grew at double-digit rates, causing PancakeSwap's dominance to decline for the third consecutive quarter.

The continued shift in TVL dominance on BNB Chain suggests that a stronger DeFi ecosystem is taking shape. The risk of TVL being concentrated in a single protocol such as PancakeSwap is decreasing. As of the end of the first quarter, PancakeSwap accounted for about 43% of the TVL in the BNB Chain DeFi sector, down from 46% in the previous quarter. Despite the decline in market share, PancakeSwap continues to innovate. It announced the launch of its V3 and will launch a series of new features and activities in early Q2.

In addition to PancakeSwap, BNB Chain launched Uniswap in mid-March, making significant progress in expanding DeFi. Uniswap gained traction upon launch: processing over $50M in volume in the first two weeks and achieving $11M in TVL.

Other notable developments in BNB Chain DeFi include:

Trader Joe: An emerging DEX that originated on Avalanche and expanded to BNB Chain.

Euler Finance: A non-custodial lending protocol deployed on BNB Chain.

Symbiosis: A multi-chain liquidity protocol integrated with BNB Chain.

Uniwhale: A decentralized leveraged trading platform launched on BNB Chain.

Lif3: A LP perpetual exchange launched on BNB Chain.

Radiant Capital: A cross-chain lending protocol based on LayerZero, deployed on BNB Chain.

Stablecoins

BNB Chain has a relatively impressive position in the stablecoin field, with the total stablecoin market value ranking third, second only to Ethereum and TRON.

At the beginning of the first quarter, BUSD accounted for 52% of the stablecoin market value of BNB Chain. However, after regulators forced Paxos to stop issuing BUSD, its users stopped using BUSD. As a result, BNB Chain's USD market value fell by about $2.5 billion (about 54%) month-on-month, and USDT began to dominate.

Although BNB Chain's stablecoin market value ultimately fell by 30% month-on-month (about $2.8 billion), BNB Chain still ranked third in terms of total stablecoin market value on the chain.

NFTs

2022 is the year of the BNB Chain NFT space. While macro factors may cause sales to stagnate in the fourth quarter, sales stabilized in the first quarter as total NFT secondary market sales increased by 2.9% month-on-month.

While sales were flat, independent buyers continued to outpace independent sellers. In the fourth quarter of 2022, when BNB Chain NFTs became available for listing and sale on OpenSea, buying activity surged. Likewise, as the Joepegs NFT marketplace expanded to BNB Chain and held the “ORIGINS Series” event, buying activity surged at the end of the first quarter. In addition, Korean pop singer G-Dragon partnered with Fandom Studios to release the “Archive of PEACEMINUSONE” series on OpenSea.

GameFi

Era 7: Game of Truth, X World Games, Tiny World, Meta Apes, and SecondLive are all games that launched last year. These five games are the top five gaming apps with the highest daily unique active wallets (UAW) on BNB Chain. In the first quarter, wallet activity slowed as gaming UAWs overall fell 41% compared to the fourth quarter of 2022.

While wallet activity for these top gaming apps has declined, new games continue to be launched and gain traction on BNB Chain. In the fourth quarter of 2022, Yuliverse and PlayZap games had very few average daily UAWs. However, by the end of the first quarter, both games were on an upward trend, with Yuliverse and PlayZap having average daily UAWs of 1,500 and 8,500, respectively.

In addition, MOBOX's UAW continues to remain around 5,000, and Gameta continues to launch multiple mini-game series on its platform, consolidating its position in the top 15 on BNB Chain.

Other Use Cases, Infrastructure, and Tools

Beyond the DeFi, NFT, and GameFi sectors, network activity for other use cases is worth watching.

After the rapid development of the gamified SocialFi platform Hooked Protocol in the fourth quarter of 2022, its user base was consolidated in the first quarter.

Social platform CyberConnect also followed a similar trend to Hooked Protocol in Q1. CyberConnect’s UAW was $30,000, driven by Connected 2023, a hackathon that included four weeks of application development and culminated in 23 teams winning $50,000 in prizes across six categories.

During Q1, BNB Chain maintained an aggressive strategy, deploying financial and human resources across the ecosystem. While BNB Chain has established a presence in DeFi, NFTs, and GameFi, its largest incremental network activity is driven by other use cases, particularly in the SocialFi space.

Overview of Staking and Decentralization

Network staking and decentralization continued to improve in Q1. Total stake, average participating stake (total stake divided by total supply), and the number of validators validating blocks all increased quarter-over-quarter.

As highlighted in the 2022 BNB Chain Q4 Report, the network continues to further decentralize and increase the network’s censorship resistance through ongoing efforts in:

BEP-131: Introducing candidate validators on the BNB Smart Chain.

BEP-153: Released in Q4, this version enables staking support for BNB Chain through a new staking system contract.

BEP-159: This BEP introduces a permissionless validator election mechanism, bringing staking economics to the Beacon Chain.

BEP-131, 153, and 159 will continue to drive growth in the set of active and candidate validators. This growth should enable more validation and staking participation, which in turn should lead to greater stake distribution.

Qualitative Analysis

Key Events, Catalysts, and Strategies for Ecosystem Growth

In addition to the growth mentioned above, BNB Chain has seen growth on three other levels in Q1:

Technical Development: Evolving the network architecture and improving functionality.

User Access and Experience: Attracting users and developers by improving user access and experience.

Community: Attract developers and drive adoption through community building.

Ecosystem Challenges

While BNB Chain has made progress towards its long-term goals and sustained adoption, the network also faced some challenges in the first quarter.

In February, Jump Crypto’s security team discovered a vulnerability in the BNB beacon chain. If exploited, the vulnerability would allow an attacker to mint an unlimited number of arbitrary tokens on the BNB chain, resulting in potential loss of funds. Jump Crypto privately disclosed the issue to the BNB team. The BNB team subsequently developed and deployed a patch to protect funds within 24 hours.

In March, the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Changpeng Zhao "CZ", Binance Holdings limited, Binance Holdings (IE) Limited, Binance (Services) Holdings Limited, and Samuel Lim, alleging violations of trading and derivatives regulations. While the outcome of the lawsuit is unpredictable, negative results could slow the development of the BNB Chain ecosystem.

For clarity, Binance and BNB Chain are separate entities, the former being a centralized entity and the latter being an evolving decentralized network. However, Binance, Binance Labs, and Binance Launchpad help the BNB Chain ecosystem grow through asset listings, liquidity provision, investments, and project launches.

Conclusion

User activity on BNB Chain remains strong as market sentiment shifts and rebounds in the first quarter. Daily active addresses and transaction volume remain stable. The increased number of stakes and validator sets signal the network's move toward greater decentralization.

With the launch of Uniswap, DeFi on BNB Chain has expanded beyond PancakeSwap. New games continue to be launched and gain a certain amount of attention. Other use cases in the SocialFi field have driven the growth of network activity.

Although BNB Chain has made progress in achieving its long-term goals, it still faced some challenges in the first quarter. Jump Crypto discovered a vulnerability in the BNB beacon chain. Regulators forced Paxos to stop issuing BUSD, and the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance.

Despite these challenges, BNB Chain hopes to remain competitive and continue its growth strategy, working towards its growth plan for 2023.

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