How DeFi Killed NFTs in 2024: The New Digital Asset Landscape

NFT or the non-fungible token market, changed dramatically in the last year as traders moved away from it. In fact, 2024 happened to be the worst year for the NFT market since 2020. However, in its place, DeFi or decentralized finance has emerged as the new superhero of the crypto industry as it is finding utility in blockchain development

As per the 2024 Industry Report of DappRadar, the decline of NFT is striking when we compare it to the rise of DeFi. This shows that the NFT era is on the verge of extinction.

The report underlines how NFTs started with a bang at the beginning of 2024 as the US SEC approved Bitcoin spot ETFs. This optimistic wave led to $5.3 billion in NFT trading volumes in the first quarter of the year. However, the sector couldn’t keep up the momentum as the year progressed despite an ETF boom. By the time the third quarter of 2024 arrived, the NFT trading volumes declined to $1.6 billion.

Although the NFT market saw some action from the US presidential election, which resulted in the trading volume hitting $2.6 billion in Q4 2024, that couldn’t prevent the ship from sinking. The total NFT trading volume of 2024 stood at $13.7 billion despite the surge in the fourth quarter, marking a 19% decline from the previous year’s total volume.

However, the most concerning part was the 18% drop in NFT token sales, which hit the lowest point since 2020. Token sales dipped to 49.8 million in 2024 from 60.6 million in 2023. The highest token sales were observed in 2022 at 121.7 million.

From JPEG Dreams to DeFi Schemes: The $13.7B Reality Check

The transformation of the NFT landscape was perhaps best illustrated by the performance of Pudgy Penguins , the year's leading NFT collection. While maintaining its top position, the project saw a 44% decrease in sales count, though interestingly, its floor price surged by 114%. This paradoxical performance reflected a broader shift in the NFT market toward utility-based projects. Pudgy Penguins' success in securing partnerships with major retailers like Walmart and Walgreens in the United States, and Selfridges in the UK, demonstrated that NFTs could only survive by providing tangible value beyond digital ownership.

Meanwhile, DeFi emerged as the clear winner of 2024, with its total value locked (TVL) doubling to reach an astronomical $214 billion by early December. This growth was partially fueled by the year's memecoin phenomenon, which served as an unexpected gateway for new users into the DeFi ecosystem. The sector's evolution was marked by sophisticated developments, particularly in AI integration, which saw an unprecedented 2,270% surge in activity throughout the year.

The security landscape of the digital asset space also underwent significant changes. While the dApp sector still suffered losses of $1.3 billion, this represented a 30% improvement from 2023's figures and the lowest loss total since 2020. Access control vulnerabilities emerged as the primary threat, followed by rug pulls and flash loan attacks, highlighting the ongoing need for enhanced security measures in the space.

When AI Met DeFi: A $214B Love Story

The latter half of 2024 saw a transformative development with the introduction of AI agents in the DeFi ecosystem. These sophisticated tools revolutionized trading and governance processes, streamlining operations and driving unprecedented user engagement. This innovation coincided with the Federal Reserve's rate cuts, which sparked renewed interest in DeFi lending protocols. Platforms like Aave and Compound experienced substantial growth as investors sought higher yields in the low-interest-rate environment.

The stark contrast between NFT and DeFi performance in 2024 marked a definitive shift in the digital asset landscape. While NFTs struggled to maintain relevance beyond their initial speculative appeal, reminiscent of the 2017 ICO mania, DeFi demonstrated its staying power through practical utility and technological advancement. The sector's growth was further evidenced by the surge in unique active wallets, which increased by 485% to reach 24.6 million daily active users.

As we move forward, the data suggests that the era of purely speculative NFTs has ended, replaced by a more mature market focused on utility and real-world applications. Meanwhile, DeFi's integration of AI technology and its ability to provide tangible financial services positions it as the leading force in the blockchain space, fundamentally reshaping how we think about digital assets and their practical applications in the financial world.