DappRadar Q1 2025 Report: DeFi TVL Plunges While AI and Social Dapps Surge Amid $2B in Hacks

The first quarter of 2025 presented a mixed bag for the decentralized application (dapp) industry, according to the latest report from DappRadar.

The first quarter of 2025 presented a mixed bag for the decentralized application (dapp) industry, according to the latest report by DappRadar. While the total value locked (TVL) in decentralized finance (DeFi) protocols experienced a significant 27% drop, the report highlighted explosive growth in the adoption of AI and social dapps.

The industry also grappled with substantial losses exceeding $2 billion due to various hacks, exploits, and scams, painting a picture of a dynamic yet volatile landscape.

DeFi Sector Faces Sharp Decline

Attributing the downturn to “broader economic uncertainty and the lingering aftershocks of the catastrophic $1.4 billion Bybit exploit” in February, total value locked (TVL) in DeFi protocols decreased by 27% quarter-on-quarter to $156 billion.

Further compounding the fall was Ethereum’s 45% price reduction to $1,820 during the same period.

The biggest blockchain by TVL, Ethereum saw frozen value drop 37% to $96 billion. Other big networks weren’t spared either; Sui suffered the most among top-10 blockchains, with TVL falling 44% to $2 billion. TVL declines above 30% also occurred at Solana, Tron, and Arbitrum.

“Blockchains that experienced a larger volume of DeFi withdrawals and had a smaller share of stablecoins locked in their protocols faced extra pressure on top of the falling token prices,” observed DappRadar’s paper.

Berachain Bucks the Trend Among Top 10 Blockchains

In contrast to the overall market challenges, recently introduced Berachain achieved the quarter’s best performance. Berachain is the only top-10 blockchain showing positive increase since its February 6 mainnet debut; it earned an amazing $5.17 billion in TVL by March 31.

This outstanding result follows a pattern of success with a Token Generation Event distributing $632 million worth of BERA tokens, the launch of developer-focused testnet Bepolia, and a significant $142 million fundraising round revealed in late March.

The economic optimism sparked by Optimism’s upcoming Airdrop on February 28 also contributed to a surge in TVL on Optimism, which climbed to $1.64 billion by the end of Q1.

This optimism was further fueled by the introduction of a legal framework for crypto in Argentina, which led to a surge in activity in the country, particularly in the DeFi sector.

The report also noted the emergence of "the first generation of hybrid decentralized autonomous organizations (DAOs) that combine elements of centralized and decentralized governance."

These hybrid DAOs, such as Uniswap and Aave, are "attempting to navigate the complexities of managing large-scale protocols with the responsiveness and efficiency of centralized organizations."

The report highlighted the growing pains of the nascent Web3 industry as it tries to balance innovation with economic stability.

AI and Social Applications Show Promise Despite Overall Hardship

While DeFi struggled, daily unique active wallets (DUAW) interacting with AI systems soared by 29% to reach an average of 2.6 million monthly users. Similarly, social applications experienced a 10% increase in DUAW, reaching 2.8 million, demonstrating resilience against broader market headwinds.

“There was explosive development in artificial intelligence agent protocols. They’re here, and they’re changing new user behaviors—they’re no more a concept or a promise but a reality that people can interact with now,” noted DappRadar.

Among the leading AI apps were Dmail Network, a distributed AI-powered email system, and Balance, an interactive entertainment platform funded by a16z where users build AI agents. Another app, LOL, a Telegram-based emotional analysis platform, rewarded actual laughter with tokens.

The report also highlighted the growing popularity of Real World Assets (RWAs) in the NFT sector, with Courtyard showcasing the tokenization of actual artifacts, offering a glimpse into the future of NFTs merging with the physical world.

NFT Market Shrinks But Shows Promise in New Trends

The NFT industry saw a 25% drop in trade volume to $1.5 billion, with OKX's NFT marketplace taking the top spot at $606 million in sales, narrowly edging out OpenSea's $599 million and Blur's $565 million.

PFP collections continued to dominate the space, accounting for 56% of all NFT trade volume. Among the leading PFP collections were Pudgy Penguins, which clocked in $177 million in sales, and CryptoPunks, which generated $63.6 million despite having only 477 transactions, highlighting its enduring premium positioning.

The report also touched upon the staggering losses due to hacks, exploits, and scams, which amounted to over $2 billion