Crypto prices are languishing way below the dizzying heights of 2021, even with Bitcoin’s (BTC) price breaching the $30,000 mark. And yet, despite the crypto winter last year, the market has matured and made progress, according to a16z’s latest ‘State of Crypto’ report.
In a blog post on April 11, a16z noted:
“… the report reflects a healthier industry than market prices may indicate, and a steady cycle of development, product launches, and ongoing innovation.”
Here are a few key takeaways from the report that highlights the strength of the industry:
Active users on blockchains have increased
The report indicates that blockchain adoption has increased with more and more new users interacting with blockchain applications. Last month, the number of active addresses reached an all-time high of 15 million — nearly twice the number of active addresses two years ago.
One plausible explanation for this spike is that users have increasingly more ways to engage with blockchains and Web 3.0, the report noted. With decentralized finance (DeFi) expanding and 700 new Web 3.0 games launched last year, users have more ways than ever to interact with blockchains.
Moreover, the advancement of scaling solutions has lowered gas fees and attracted more users — blockchain transactions are up 50% over the past two years, a16z noted.
DeFi and NFT transactions are increasing
According to the report, decentralized exchange (DEX) Uniswap recorded higher trading volume than Coinbase over the past two months. Collectively, DEXs saw monthly trading volumes of over $100 billion last month, a16z noted. This indicates that the popularity and adoption of DeFi are on the rise.
Non-fungible tokens (NFTs), too, are once again gaining momentum as the speculation period cooled off. The number of NFT buyers has increased while NFT creators earned over $1.9 billion in royalties over the last two years, according to the report.
The number of active developers remains steady
Developers were drawn in during the bull run of 2020 and they have stuck around, a16z noted. There were nearly 30,000 active developers last month — indicating a growth of 60% since the start of the 2020 bull run, as per the report.
Furthermore, almost 50,000 unique addresses deployed smart contracts last month — a growth of 40% this year. Besides, the number of verified smart contracts has reached an all-time high, indicating that there’s a pipeline of product launches. Core crypto developer library usage has also increased, a16z said.
Blockchain scaling solutions and promising technologies are growing
Currently, around 7% of all fees on Ethereum are paid by layer 2 rollups. This has grown from just 1.5% of all Ethereum fees last year. This indicates that more and more applications now prefer to build on L2s.
Additionally, zero-knowledge technology has progressed from theory to practice over the last few years. This has the potential to not only solve blockchain’s scalability problem but has led to the proliferation of new use cases, such as privacy-preserving applications, the report noted.
The role of the U.S. in Web 3.0 is diminishing
The proportion of crypto developers based in the U.S. compared to the rest of the world fell by 26% between 2018 and 2022. This indicates that U.S.’ edge in the Web 3.0 space may be slipping, the report noted. This is mainly due to a lack of regulatory clarity, according to the report.
What lies ahead for 2023
According to a16z, some of the most promising crypto products will be built during the crypto market downturns. Additionally, the VC firm expects the need for decentralized social media to grow amid rising concerns around social media giants.
The adoption and use of zero-knowledge technology will continue to rise, which will propel the advancement of hardware optimized for zero-knowledge proofs, a16z said. Additionally, a16z also expects the proliferation of non-speculative use cases for tokens amid the rising affordability of block space.
The post Crypto market is ‘healthier’ than prices may indicate, says a16z report appeared first on CryptoSlate.
