Web3 Market July Review: NFT volume surged, DeFi Lock-up Position reached new highs

The Web3 market in July presented a complex and ever-changing pattern. Although the overall user activity slightly declined, with the daily active wallet count dropping to 22 million (a decrease of 8%), the market is still surging beneath the surface. The NFT sector performed remarkably well, with volume soaring by 96%, surpassing the activity of Decentralized Finance (DeFi), which is the first occurrence in recent months. Meanwhile, the total Lock-up Position in DeFi reached a historic high of $270 billion, while the market value of tokenized stocks skyrocketed by 220%.

However, the growth is not without risks. Hacking attacks have caused losses of $132 million. Although artificial intelligence is still seen as one of the promising fields, the usage of most AI-related applications has seen a double-digit decline. On the regulatory front, the United States has passed several important cryptocurrency bills, and the global regulatory framework is gradually becoming clearer.

From the strong performance of blue-chip NFTs to record inflows in DeFi, the data from July indicates that the Web3 industry is not stagnant, but is seeking new directions for development.

Main Observations:

1. The average daily active wallet number in July was 22 million, a month-on-month decrease of 8%.
2. Game applications accounted for the highest proportion at 22.4%, followed by artificial intelligence (18.7%) and NFT (17.5%).
3. NFT volume increased by 96%, reaching $530 million, with the average NFT price doubling to $105.
4. The total lock-up position of DeFi reached a new high of 270 billion USD on July 28, an increase of 30% month-on-month.
5. Most AI applications have seen a decline in activity, but Dmail, XPIN, and ChainGPT continue to grow.
6. In July, a loss of $132 million due to security vulnerabilities, an increase of 16% compared to June.

Overview of DApp Activities

In July, there was a typical summer slowdown, with the average daily active wallet number dropping by 8% to 22 million. The decline in the social sector was the most pronounced, with daily active users decreasing by 27% to 2.8 million. This trend is not surprising, as social applications often fluctuate with popularity. Currently, information platforms like Farcaster and new Base ecosystem applications have become the focus, but many communities still have relatively high entry barriers, limiting the participation of new users.

The AI sector has also seen a significant decline of 14%, with daily active users dropping to 4.1 million. DeFi shrank by 6%, continuing the recent cooling trend. The gaming sector has shown resilience, growing by 2%, while NFTs remain stable.

Games continue to lead the DApp ecosystem, occupying 22.4% market share in July, followed closely by AI (18.7%) and NFT (17.5%). It is worth noting that DeFi has slipped from its dominant position two months ago to below NFT, reflecting a shift in user behavior and priorities.

Common DApp Analysis

Decentralized exchanges based on Solana still dominate the market. The Memecoin craze is not over, and these exchanges remain important venues for retail activity.

In terms of gaming, "World of Dypians" performs outstandingly, consistently maintaining a stable user base and driving an increase in activity.

Two AI applications have made it to the top of the rankings, indicating that users' interest in AI-driven Web3 experiences has permeated everyday applications.

Although DeFi no longer dominates in overall share, it still occupies an important position in the DApp rankings. This is because successful DeFi applications often achieve higher activity levels and user loyalty. In contrast, the application types in areas such as gaming, social, or NFT are more diverse, and user attention is more scattered.

Trends in AI Application Development

In July, the activity of most AI applications declined, but Dmail Network, XPIN Network, and ChainGPT performed outstandingly, continuing to grow. Notable projects include:

• Dmail Network: Blockchain-based encrypted email service
• Exorde: Utilizing AI to collect global news and insights
• ChainGPT: An AI-based crypto toolset, including the ChainGPT Pad launch platform aimed at early-stage projects.

Lightchain AI has launched a mainnet specifically designed for on-chain machine learning, utilizing an AI-optimized virtual machine and a "smart proof" consensus mechanism, showcasing the development direction of decentralized AI infrastructure.

Theta Network integrates Amazon's Trainium and Inferentia chips to support applications such as "Quakebot," an AI agent that serves the San Jose Earthquakes of Major League Soccer.

Protocols like Aethir and Render Network are driving the development of decentralized computing. Aethir offers up to 1 billion hours of computing time and has launched an AI-driven crypto credit card. Render is migrating to Solana to enhance performance and cost-effectiveness.

The ASI Alliance, composed of SingularityNET, Fetch.ai, and Ocean Protocol, integrates into the $ASI token, dedicated to building a fully decentralized AGI stack.

In the gaming field, Elympics launched the $ELP token to realize AI-driven "Agentic Gaming" and partnered with NFT intellectual properties such as Pudgy Penguins and Doodles.

AI tokens such as TAO, RNDR, and AGIX have gained favor among investors, with TAO receiving a $10 million investment from TAO Synergies, setting a record for public AI fund investments.

Researchers have unveiled A1, an AI agent that can autonomously exploit smart contract vulnerabilities, demonstrating that AI as a tool and risk is rapidly evolving.

In terms of regulation, the United States has passed multiple bills to provide guidance for the AI and cryptocurrency sectors, and appointed commissioners for AI and cryptocurrency, highlighting the increasing importance of AI in the blockchain field.

Decentralized Finance Lock-up Position hits a new high

In July, DeFi performed strongly, with the total Lock-up Position (TVL) increasing by over 30%, reaching 259 billion USD by the end of the month. On July 28, the DeFi TVL reached a historical high of 270 billion USD, reflecting increased market confidence, enhanced liquidity, and a rising demand from users for lending, trading, and tokenized assets.

Tokenized stocks have become a highlight, with the number of related wallets surging from about 1,600 to over 90,000, and the total market capitalization increasing by 220%. This is not only growth but also signifies that real-world assets (RWA) are beginning to reach the critical point of scalable application.

Ethereum continues to dominate the DeFi space with a TVL of $166 billion, far exceeding Solana's $23 billion. In July, the price of ETH rose nearly 60%, possibly driven by favorable regulatory developments. The annualized yield for staking rewards has surged to 29.4%, reflecting increased market confidence and participation.

In the Solana ecosystem, Hyperliquid stands out, generating 35% of the chain's revenue in July, thanks to the rising demand for derivatives. Hyperliquid processed over 60% of the 24-hour perpetual contract volume, with an open interest of $15.3 billion, facilitating $5.1 billion in USDC cross-chain.

In terms of policy, July is an important period for cryptocurrency regulation in the United States. Legislators have passed:

• The GENIUS Act (: Establish a Stablecoin Framework
• CLARITY Act ): Clarifies the classification of digital assets

More importantly, SEC Chairman Atkins announced "Project Crypto", which outlines a roadmap for the integration of DeFi and traditional finance, covering token issuance, custody, and proposals for a dedicated compliance framework for DeFi.

NFT Activity Surpasses Decentralized Finance

In July, the NFT market demonstrated strong vitality, with activity surpassing Decentralized Finance, marking a shift that hasn't been seen for some time.

Volume increased by 96%, reaching $530 million. Although the number of sales decreased by 4% to 5 million, the average price of NFTs rose from $52 to $105, an increase of 103%. Blue-chip series once again became the focus, with large holders leading the market trend.

Blur dominates the Ethereum NFT volume, with an average daily share of up to 80%, thanks to professional traders and its Blend lending protocol. OpenSea maintains a lead in user numbers, averaging around 27,000 daily, due to the listing of long-tail assets and cross-chain activities. Zora gains attention with its creator-first L2 network and $ZORA token, providing convenient and low-cost NFT minting services.

In terms of enterprise NFT applications, Starbucks has ended its Odyssey NFT loyalty pilot. Nike's SWOOSH continues to release digital products and has partnered with EA Sports to launch in-game virtual sneakers. Louis Vuitton, Rolex, and Coca-Cola (China) are conducting NFT pilots related to authentication and collectibles. Netflix, NBA Top Shot, and FIFA continue to participate, but the licensing terms are clearer.

It is worth noting that NFTs are evolving from speculation into practical tools, shifting from mere collectibles and cultural symbols to applications such as identity, ticketing, gaming, and tokenized real assets.

Security vulnerability caused a loss of $132 million

As signs of market recovery emerge, criminals seem to have intensified their attacks. The losses due to vulnerabilities in July exceeded $132 million, a 16% increase compared to June.

Major security incidents include:

• CoinDCX ($44 million): Indian exchange server hacked, attacking internal liquidity accounts. User funds were unaffected, and the exchange is operating normally.
• GMX v1 ($42 million): On July 9, a vulnerability was discovered in the GMX v1 version on Arbitrum, allowing malicious contracts to manipulate internal accounts and withdraw excess funds. The GLP mining pool was affected; other GMX versions were not affected. A bounty has been set to recover the funds.
• BigONE ($28 million): On July 16, the centralized exchange BigONE experienced unauthorized access to its hot wallet, resulting in the loss of multi-chain assets. The platform stated that user assets are safe and will bear all losses.

These events remind us that Web3 security work is still ongoing. Whether participating in Decentralized Finance, NFT, or AI applications, one should carefully check smart contract permissions, avoid clicking on suspicious links, and use hardware wallets whenever possible.