The beginning of 2025 proved to be a challenging time for web3, as AI and social dApps gained momentum, while decentralized finance faced a significant downturn.
The overall value locked in DeFi saw a 27% drop, totaling $156 billion, according to a report from DappRadar for Q1 2025. This decline in DeFi can be attributed to several notable security incidents, plummeting cryptocurrency prices, and ongoing economic instability.
A major setback occurred with a $1.4 billion exploit linked to Bybit, which investigators associated with the North Korean TraderTraitor group. In this incident, hackers managed to steal approximately 401,000 Ethereum (ETH), converting it into Bitcoin (BTC) and other cryptocurrencies, before dispersing it across various wallets.
DeFi’s situation was further complicated by a 45% drop in ETH prices throughout the quarter. Most leading blockchains experienced a decline in DeFi activity, with the exception of Berachain (BERA), which flourished due to its mainnet launch, a token distribution event, and a $142 million funding boost.
Conversely, AI-driven dApps flourished, as evidenced by a 29% rise in daily unique active wallets, reaching 2.6 million. The number of social dApps also increased by 10% to 2.8 million daily unique active wallets. This change was largely influenced by platforms like Pump.fun, which simplified the process of launching new tokens, resulting in a substantial 112% surge in user activity.
The NFT market also had a difficult quarter, suffering a 24% decline in trading volume down to $1.5 billion. However, with only a 10% reduction in sales, this suggests that price drops were more responsible for the downturn than a widespread exit from the market. Profile Picture (PFP) collections dominated sales, accounting for 56% of the overall NFT trading volume. OpenSea retained its status as the leading marketplace in terms of transactions, while OKX reported the highest trading volume.
In the meantime, scams and hacks resulted in over $2 billion in losses. Notable rug pulls like LIBRA and MELANIA caused $450 million in losses, but Bybit’s $1.5 billion exploit was the most significant security breach of the period. Additionally, a $50 million hack of the Infini stablecoin platform revealed critical vulnerabilities within the industry.