Original source: Messari

Compiled by: Felix, PANews

Main points

  • The market value of BNB Chain this quarter followed the recovery of the broader market, rising 24.9% month-on-month. However, BNB Chain revenue (total transaction fees paid in BNB) fell 11.7% month-on-month.

  • During the first quarter, several ecosystem developments continued to drive address and transaction activity, thanks to the launch of Uniswap, new GameFi and SocialFi applications.

  • Network upgrades in Q4 promoted 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 indicators

Performance Analysis

Network overview

After reaching a base user base in the third quarter of 2022, BNB Chain’s average daily active addresses and daily transaction volume began to trend upward in the fourth quarter of 2022. Activity levels stabilized in the first quarter of 2023, but continued to trend upward quarter-on-quarter.

BNB Chain's underlying network utilization was higher in the fourth quarter of 2022, as the average daily active address count reversed, growing by approximately 30% by the end of 2022. Despite the ongoing economic downturn, several ecosystem developments continued to drive address activity in the first quarter of 2023.

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

  • Lifeform: DID solution provider

  • CyberConnect: A 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 trading ended the quarter with a slight decline (3.9%), but steadily increased throughout the first quarter.

Financial overview

After a tumultuous 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, the circulating market value increased by 24.9% month-on-month.

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

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

DeFi

TVL rose 10.2% in U.S. dollars as the rally began in January. However, TVL denominated in BNB fell by 14.6%, suggesting that TVL was generated by increases in USD-denominated asset prices rather than BNB usage.

The liquidity staking and mining platform continues 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 10 in Q1 TVL, holding a total of approximately $245 million in TVL. Note that TVL is not double counted for these platforms.

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

The continued shift in TVL dominance on BNB Chain indicates that a more robust 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 approximately 43% of the TVL in the BNB Chain DeFi space, down from 46% in the previous quarter. Despite declining market share, PancakeSwap continues to innovate. It announced the launch of its V3, which will launch a slew of new features and events early in the second quarter.

In addition to PancakeSwap, BNB Chain has made significant progress in expanding DeFi by launching Uniswap in mid-March. Uniswap gained traction upon launch: processing more than $50 million in transaction volume and earning $11 million in TVL within the first two weeks.

Other noteworthy developments in BNB Chain DeFi include:

  • Trader Joe: An emerging DEX originating from Avalanche and expanding 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 leverage trading platform launched on BNB Chain.

  • Lif3: LP perpetual exchange launched on BNB Chain.

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

Stablecoin

BNB Chain's position in the stablecoin field is relatively impressive, with the total market value of stablecoins ranking third, second only to Ethereum and Tron.

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

Although BNB Chain’s stablecoin market capitalization ultimately fell by 30% month-on-month (approximately $2.8 billion), BNB Chain still ranks third in terms of total stablecoin market capitalization on the chain.

NFTs

2022 is an explosive year for the BNB Chain NFT field. While macro factors may have caused sales to stagnate in the fourth quarter, sales stabilized in the first quarter as total NFT secondary market sales increased 2.9% sequentially.

Although sales were mediocre, independent buyers continued to outpace independent sellers. Buying activity surged in Q4 2022 when BNB Chain NFTs became available for listing and sale on OpenSea. Likewise, buying activity surged at the end of the first quarter as the Joepegs NFT market expanded to BNB Chain and hosted the “ORIGINS Series” event. In addition, Korean pop star G-Dragon collaborated with Fandom Studios to release the "Archive of PEACEMINUSONE" series on OpenSea.

GameFi

"Era7: Game of Truth," "X World Games," "Tiny World," "Meta Apes" and "SecondLive" were all games launched last year. These five games are the top five game applications with the highest daily average independent active wallets (UAW) on BNB Chain. Wallet activity slowed during the first quarter as gaming UAW fell 41% overall compared to Q4 2022.

While wallet activity on these top gaming apps has declined, new games continue to be launched and gain traction on BNB Chain. Yuliverse and PlayZap games averaged very few daily UAWs in Q4 2022. However, by the end of the first quarter, both games were trending upward, with Yuliverse and PlayZap averaging 1,500 and 8,500 daily UAWs respectively.

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

Other use cases, infrastructure and tools

Outside of the DeFi, NFT, and GameFi realms, network activity for other use cases is worth watching.

After growing rapidly in Q4 2022, gamified SocialFi platform Hooked Protocol solidified its user base in Q1.

Social platform CyberConnect also followed a similar trend to Hooked Protocol in the first quarter. Driven by Connected 2023, CyberConnect has 30,000 UAW. Connected 2023 was a hackathon that included four weeks of app development, culminating in 23 teams winning $50,000 in six categories.

In the first quarter, BNB Chain maintained an aggressive strategy, deploying financial and human resources across the entire ecosystem. While BNB Chain has its share of DeFi, NFT, and GameFi, its largest incremental network activity is driven by other use cases, especially in the SocialFi space.

Staking and Decentralization Overview

During the first quarter, network staking and decentralization continued to improve. Total stake, average participating stake (total stake divided by total supply), and the number of validators validating blocks all increased month-on-month.

As highlighted in the 2022 BNB Chain Q4 Report, the network will continue to further decentralize and increase scrutiny of the network through continued efforts in:

  • BEP-131: Introducing candidate validators on the BNB smart chain.

  • BEP-153: This version was released in the fourth quarter and implemented 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 contribute to the growth of the active and candidate validator sets. This growth should facilitate more verification and staking participation, thus facilitating greater staking distribution.

Qualitative analysis

Key events, catalysts and strategies for ecosystem growth

In addition to the growth mentioned above, BNB Chain had three other levels of growth in the first quarter:

  • Technology Development: Develop network architecture and improve functionality.

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

  • Community: Engage developers and drive adoption through community building.

ecosystem challenges

While BNB Chain has made progress toward its long-term goals and continued 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 disclosed the issue privately to the BNB team. The BNB team then 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, accusing them of violating trading and derivatives regulations. While the outcome of the lawsuit is unpredictable, negative results may slow down the development of the BNB Chain ecosystem.

For the sake of clarity, Binance and BNB Chain are separate entities, with the former being a centralized entity and the latter being a growing 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

BNB Chain’s user activity remains strong as market sentiment shifts and rebounds in Q1. Average daily active addresses and transaction volume remain stable. Increased stakes and validator sets signal the network’s move toward more decentralization.

With the launch of Uniswap, DeFi on BNB Chain expands beyond PancakeSwap. New games are constantly being released and gaining a certain amount of attention. Additional use cases in the SocialFi space are driving growth in network activity.

Although BNB Chain has made progress towards 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 the Binance exchange.

Despite these challenges, BNB Chain hopes to remain competitive and continue its growth strategy as it strives to achieve its 2023 growth plans.

(The above content is excerpted and reprinted with the authorization of our partner PANews, original text link)

Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.

This article First Quarter BNB Chain Report: Financial Results Improved, User Activity Remains Strong originally appeared on Blockchain.