Crypto Venture a16z Annual Report: 7 Key Points Shared, More Active Users, DeFi and NFT Trends Resurge
The cryptocurrency venture capital firm a16z released its 2023 Cryptocurrency Industry Report on the 11th, analyzing the development and future trends of the cryptocurrency industry through data observation. Among various findings, a16z outlined 7 key points to share its thoughts and insights with readers.
Today, we’re excited to share the 2023 State of Crypto Report and introduce the State of Crypto Index. https://t.co/nS2XjJoG1j
— a16z crypto (@a16zcrypto) April 11, 2023
Table of Contents
a16z Crypto Report: 7 Key Points for the Crypto Industry in 2023
1. More Active Users on Blockchain with Diverse Participation
According to statistics from a16z, despite the overall decline in cryptocurrency prices over the past year, the number of active addresses conducting on-chain transactions has been steadily increasing. In March of this year, there were 15 million addresses sending transactions, double the number during the bull market two years ago.
a16z believes one possible reason for this trend is the increasing ways to participate in blockchain and Web3 applications, such as DeFi or gaming.
However, it could also be due to the recent prevalence of airdrops, where more users are drawn to blockchain applications for potential profits rather than genuine engagement.
Additionally, with advancements in on-chain tools and scalability solutions, gas fees have decreased compared to the past, leading to a 50% increase in total blockchain transactions over the past two years.
2. DeFi and NFT Trends Resurging
With the increase in users and transaction volume, activities related to DeFi and NFTs have become more vibrant, showing more practical use cases beyond speculative behavior. These include lending, remittances, art, collectibles, and blockchain games.
Furthermore, Uniswap's trading volume has surpassed that of centralized exchange Coinbase for two consecutive months.
In comparison to Web2, Web3's users and creators benefit from lower platform fees and actual ownership of their work. Additionally, the open-source code and transparent data on Web3 platforms allow users to switch between platforms according to their preferences.
Over the past two years, the NFT market has paid nearly $2 billion in royalties to creators. This amount rivals that of Web2 giants today, with Meta setting aside only $1 billion for creators from 2021 to the end of 2022.
3. Stable Growth in Active Developers in the Crypto Industry
Currently, the crypto industry has nearly 30,000 active developers each month, growing at a rate of 60% since the 2020 bull market. Additionally, almost 50,000 unique addresses deployed smart contracts last month, a 40% increase this year alone.
4. Blockchain Expanding Through Various Scalability Solutions
Whether through emerging L1 or L2 technologies, blockchain is enhancing block space and increasing transaction throughput in different ways. For instance, in Ethereum, L2 accounted for only 1.5% of Ethereum's payment fees last year. This proportion has significantly increased this year, now reaching 7% of total Ethereum payment fees, indicating more Dapps are choosing to build on L2, a trend expected to continue according to a16z.
5. Previously Considered Impossible Technologies Now Being Achieved
Over the past year, advancements in zero-knowledge systems have progressed rapidly, unlocking blockchain scalability and introducing new use cases such as privacy applications and decentralized machine learning verification calculations.
6. US Losing Its Leading Position in the Web3 Space
As a nascent technology, cryptocurrency requires comprehensive policy and regulatory protection for safe development while meeting its potential for economic growth in the US.
However, the current regulatory framework in the US remains unclear, hindering the development of Web3 to some extent. Consequently, the US may be losing its advantage, as the proportion of US cryptocurrency developers compared to other regions worldwide decreased by 26% from 2018 to 2022.
7. Unaffected by Financial Environments, Product Cycles More Stable
a16z believes that while we are still in the early stages of Web3, we have moved beyond the initial instability, and product cycles are becoming more stable.
The current cryptocurrency market is experiencing four cycles, with price and market value, interest and community engagement, new ideas and developer activities, and new project funding activities steadily increasing.
If cryptocurrency prices continue to rise in the future, attracting more interested individuals, this attention will, in turn, stimulate and fund new ideas, startups, and projects, ultimately leading to the creation of widely adopted products in the long run.
