In 2024, the cryptocurrency field continues to show strong vitality and change. The "2024 Cryptocurrency Status Report" released by a16z is like a beacon, illuminating this field full of opportunities and challenges.
1. Cryptocurrency activity and usage hit new highs
Cryptocurrency activity and usage reached an all-time high in 2024, reports show. In September, there were 220 million monthly active crypto addresses, a number that more than tripled from the end of 2023. Blockchains such as Solana and NEAR have many active addresses, showing the vitality of different blockchains in the market. Meanwhile, monthly mobile crypto wallet users reached an all-time high of 29 million in June 2024, with countries such as Nigeria, India, Argentina and others showing significant growth, although the U.S.’s share of the total has declined.
Estimates of actual user activity suggest that there are approximately 30-60 million monthly active crypto users worldwide, which only accounts for 5-10% of the 617 million cryptocurrency owners worldwide. This means that there is still huge potential waiting to be tapped in the cryptocurrency market. In terms of builder interest distribution, Ethereum still occupies the largest share, attracting 20.8% of builder interest. However, Solana and Base are growing rapidly, and Bitcoin has also increased from 2.6% to 4.2%, showing a diversified development trend in the market.
2. Cryptocurrency becomes a key political issue in the US election
Cryptocurrency has become a national topic during this US election cycle. Swing states such as Pennsylvania and Wisconsin have seen a significant increase in crypto search interest, and the listing of Bitcoin and Ethereum exchange-traded products (ETPs) may have played an important role behind this phenomenon. Currently, these ETPs hold $65 billion in on-chain assets.
In terms of policy progress, the approval of ETPs by the U.S. Securities and Exchange Commission (SEC) has become an important crypto policy milestone. In addition, the U.S. House of Representatives approved the (21st Century Financial Innovation and Technology Act) and Wyoming passed the (Decentralized Unincorporated Nonprofit Associations Act). Internationally, the EU and the UK have also been very active in crypto policy and regulation. The EU's (Crypto Asset Market Regulation) is about to take full effect, and all parties are actively formulating crypto policies, providing a clearer direction for the development of cryptocurrencies.
3. Stablecoins Find Product-Market Fit
Stablecoins emerge as one of the most obvious “killer apps” for cryptocurrencies in 2024. Stablecoins have found their place in the market by enabling features such as fast and cheap global payments. The major expansion upgrade significantly reduces crypto transaction costs, including stablecoin transaction costs. For example, USDC fees have dropped significantly on Ethereum and Base.
99% of stablecoins are denominated in US dollars, which not only consolidates the international status of the US dollar, but also makes stablecoins one of the top 20 holders of US Treasury bonds. In the second quarter of 2024, stablecoin transactions reached $8.5 trillion, exceeding Visa's transactions in the same period. The use of stablecoins is also expanding, unrelated to the crypto market cycle, accounting for nearly one-third of daily cryptocurrency use, second only to DeFi.
4. Infrastructure Improvements Reduce Transaction Costs
The growth in blockchain capacity is one of the highlights of 2024. The rise of the Ethereum L2 network and other high-throughput blockchains has enabled blockchains to process more than 50 times the number of transactions per second than they did just four years ago. Ethereum’s major upgrade “Dencun” significantly reduces the fees on the L2 network, and zero-knowledge proof technology also reduces transaction costs. At the same time, its ETH denominated value on the ZK rollup increases.
Blockchain infrastructure remains one of the most popular categories for builders, and L2 has become a popular subcategory. This shows that improvements in infrastructure not only provide users with a more efficient and low-cost transaction environment, but also attract more developers to participate in the construction of the cryptocurrency ecosystem.
5. DeFi continues to grow
Decentralized finance (DeFi) continues to grow in 2024. Since the summer of 2020, decentralized exchanges (DEX) have grown their share of spot crypto trading activity to 10%. Currently, more than $169 billion is locked in thousands of DeFi protocols, covering multiple subcategories such as staking, lending, and more.
After Ethereum completed its transition to proof-of-stake, the share of staked ether increased, enhancing network security. DeFi provides a promising alternative to the centralized trend of the U.S. financial system, providing users with more open, transparent and fair financial services.
6. Cryptocurrency and AI
AI is a hot trend this year and has also received much attention in the cryptocurrency space. There is a strong connection between cryptocurrency and AI users, with about a third of crypto projects using AI, especially blockchain infrastructure projects. The centralized challenges of AI are in contrast to the decentralized opportunities of blockchain networks, and some crypto projects are trying to address these challenges, such as democratizing AI computing through decentralized computing resource allocation.
7. New on-chain applications
As transaction costs decrease and blockchain capacity increases, many new crypto consumer applications become possible. NFTs shift from high-priced secondary market transactions to low-cost casting for social applications, social networks attract strong builder activity, on-chain games drive blockchain expansion, and cryptocurrency prediction markets develop. These new applications were difficult to achieve in the past when blockchain infrastructure was poor and transaction costs were high, and their emergence has brought more vitality and innovation to the cryptocurrency ecosystem.
In conclusion, a16z's 2024 State of Cryptocurrency report shows us a world of cryptocurrency that is full of vitality and opportunities. The record highs in cryptocurrency activity and usage, the emergence of cryptocurrencies as a key political issue in the U.S. election, the development of stablecoins, infrastructure improvements, the growth of DeFi, the integration with AI, and new on-chain applications all indicate that the cryptocurrency space is evolving and maturing. However, we should also recognize that the cryptocurrency market still faces many challenges, such as regulatory uncertainty and price volatility. But with the continuous advancement of technology and the continued maturity of the market, I believe that cryptocurrencies will play a more important role in the financial and technological fields in the future.
