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Layer 2 and DeFi Dominate the Crypto Landscape in 2023 as NFTs Lose Popularity, Reveals Nansen Report

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As the hype around NFTs begins to fade, Layer 2 solutions and DeFi are set to take center stage in 2023, offering a more sustainable and practical approach to blockchain technology.

In 2023, the Ethereum blockchain has seen significant growth and changes in user and entity engagement. According to a recent report by Nansen, there has been a remarkable increase in daily active Ethereum addresses, surpassing 300,000.

Among these active addresses, DeFi entities have maintained their dominance in the ecosystem. As of October 12th, 2023, DeFi users outnumbered NFT and layer 2 scaling users by more than twice, solidifying the central role of DeFi in on-chain activities.

One notable trend is the rise of layer 2 activities as more users are embracing scalability solutions. Nansen’s report suggests that new users are increasingly choosing layer 2 platforms as their initial choice, indicating a shift in the ecosystem towards more efficient infrastructure.

In terms of entity interactions, the “Layer 2, Bridging, and Infrastructure” sector has experienced the highest growth, with a significant increase of 149.28% in incoming transaction counts. This further supports the adoption of layer 2 solutions and the potential for airdrop farming.

On the other hand, the NFT sector has seen a decline in user activity. Since the beginning of 2023, the daily user count in this sector has plummeted by over 50%. In contrast, layer 1/scaling users experienced a rise in March, coinciding with the launch of zkSync’s public mainnet and Arbitrum’s airdrop, before stabilizing at previous levels.

It is worth noting that DeFi remains the most dominant user group among these clusters. The DeFi user count has reached a “cruise” speed, sitting slightly below bull market levels, indicating its resilience and continued interest from users.

In contrast, the “NFT, Gaming, and GambleFi sector” has seen a 61.4% decline in activity, mirroring the drop in new NFT-focused users. The appeal of the NFT sector to new wallet holders has significantly decreased throughout 2023, with NFTs representing only slightly above 6% of initial actions by new users on October 12th, compared to over 24% at the beginning of the year.

Overall, these trends highlight the dynamic nature of the Ethereum ecosystem and the shifting landscape of user engagement. While DeFi remains strong, layer 2 solutions are gaining traction, and the NFT sector is experiencing a decline in activity.

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