After March 2024 Crypto Surge, Did On-Chain Utility Improve?

TL;DR

✅In early March 2024, the prices of cryptocurrencies, including Bitcoin, surged, but the on-chain utility of blockchain did not show significant changes accordingly.

✅This indicates that, apart from the market price surge, the appeal of dApps within the blockchains has not significantly improved.

✅If more diverse and appealing dApps emerge, the blockchain fundamentals could receive much higher evaluations than the current levels. 

Introduction

In early March 2024, the price of Bitcoin hit an all-time high. This surge is attributed to factors such as the enthusiasm in investments in Bitcoin exchange-traded funds (ETFs) listed on the US stock market, stabilization of interest rates by the US Federal Reserve, and the upcoming Bitcoin mining reward halving.

As depicted in Figure 1, this bullish trend extended to most other cryptocurrencies, indicating a general enthusiasm in the cryptocurrency market. However, alongside this price surge, did the actual on-chain utility of blockchain also increase? This article will examine the "app infrastructure" utility of Ethereum and other major EVM-compatible blockchains supported by the D’CENT Wallet, analyzing Stickiness and Retention metrics.

[Figure 1] Total Market Cap Trend of Crypto Assets (CoinMarketCap)

Two Key Metrics Showing App Engagement: Stickiness and Retention

Various dApps operate within Ethereum and other major EVM-compatible blockchains. Through Stickiness and Retention, which indicate network activity, we will examine how effectively dApps within each network engage their respective account holders.

Definition of Metrics

Stickiness is a metric that indicates how engaged users are with a particular app. It can be calculated using combinations of number of active users over different periods such as DAU÷MAU, DAU÷WAU, and WAU÷MAU, each with the following mathematical interpretations:

DAU÷MAU: The ratio of users who have activated the network at least once a day over the past month.

DAU÷WAU: The ratio of users who have activated the network at least once a day over the past week.

WAU÷MAU: The ratio of users who have activated the network at least once a week over the past month.

Retention, on the other hand, is a metric that indicates whether users continue to use an app rather than simply visiting it once. Cohort retention, particularly, groups users based on their initial usage date and analyzes the retention changes within each group over time. This allows us to assess the fluctuations in retention over time.

Stickiness Analysis Results

Despite the sharp increase in market prices, the Stickiness of most blockchains showed no significant changes as shown in Figure 2. In other words, even with the market price surge, there was no notable shift in the attractiveness of dApps within each blockchain.

[Figure 2] Stickiness of Ethereum

In particular, Polygon stands out as the only case where Stickiness has sharply increased since early 2024, as shown in Figure 3. However, this may need to be considered in light of the possibility of noise generated by specific contract calls.

[Figure 3] Stickiness of Polygon

Upon examining the scale of transactions based on the number of unique addresses that executed transactions, it was discovered that there was a significant increase primarily in the usage of one single specific ERC-721 contract, as shown in Figure 4. Therefore, this surge appears to be rooted in the reliance on a specific contract, and it may not be generalized as an overall increase in the attractiveness of dApps within the Polygon blockchain.

[Figure 4] Number of Sender Addresses grouped by the Receiver Addresses from at least 10,000 Sender Addresses

Retention Analysis Results 

Similarly, in the case of Weekly Cohort Retention, there were no significant changes observed across all the blockchains as shown in Figure 5. In other words, it is challenging to interpret the sustained frequency of usage among newly created addresses as an improvement following the increase in market prices.

[Figure 5] Weekly Cohort Retention of Ethereum

Conclusion

Despite the significant increase in cryptocurrency market prices driven by factors such as the enthusiasm for Bitcoin ETF investments, the Federal Reserve's interest rate freeze, and the upcoming Bitcoin halving, Ethereum and other major EVM-compatible blockchains have yet to establish a strong position as "app infrastructures."

Among the various factors influencing the price of governance tokens, the most crucial aspect is the steady increase in demand for executing smart contracts as fuel. Therefore, in addition to investment market indicators, it is essential to assess the emergence and growth of dApps and whether blockchain networks are providing stable infrastructures for them. With the advancement of blockchain technology and mass adoption, the emergence of more diverse and active dApps is expected to significantly increase the utilization of blockchain infrastructures. Evaluating this utilization will be crucial, and Stickiness and Retention metrics will play an important role in this assessment.