This year’s must-read report in the Web3 field: 7 key points of a16z (current situation of cryptocurrency)
Interpret the 7 key points of a16z (current situation of cryptocurrency)
I only read one report this year, which is a16z (Cryptocurrency Status): Interpretation of the 7 key points
what happen?
The world's most well-known venture capital fund a16z (Andreessen Horowitz) also pays close attention to the Web3 field. It recently released the 2024 (Cryptocurrency Status Report) and put forward 7 key points:
Cryptocurrency activity and usage hit all-time highs
Cryptocurrency has become a key political issue ahead of the US election
Stablecoins have found product-market fit
Infrastructure improvements increase usage and significantly reduce transaction costs
DeFi remains popular and continues to grow
Cryptocurrencies could solve some of AI’s most pressing challenges
More scalable infrastructure unlocks new on-chain applications
Key Point 1: Cryptocurrency activity and usage hit record highs
As of September 2024, there are 220 million active encryption addresses in the world, which is a threefold increase compared to the data at the end of 2023.
This wave of growth mainly comes from the Solana blockchain, with the number of users accounting for approximately 100 million active addresses.
It is followed by NEAR (31 million active addresses), Coinbase’s popular L2 network Base (22 million), Tron (14 million), and Bitcoin (11 million).
In addition, according to a16z’s “Builder Energy” data dashboard, in addition to Ethereum still being the most popular blockchain among developers, Solana has also become one of the blockchains with the fastest growing interest among developers.
Compared with last year, the proportion of developers interested in Solana increased from 5.1% to 11.2%; while Base also increased from 7.8% to 10.7%.
In recent years, as global cryptocurrency adoption continues to increase, coupled with more and more projects complying with regulations, crypto wallet users have also increased, and in June 2024, the number of monthly users hit a record high of 29 million.
Monthly wallet users in the United States account for 12% of the total users. Others include Nigeria, India, where the population is exploding, and Argentina, where stablecoins have become popular due to currency depreciation.
Point 2: Cryptocurrency becomes a key issue in the US election
In the 2024 U.S. election, cryptocurrency has become one of the important political issues, and the search volume for cryptocurrency keywords has also increased significantly compared with the 2020 election.
The rise in user interest in cryptocurrencies may be influenced by the approval of Bitcoin and Ethereum spot ETFs in the United States this year. The number of Americans investing in cryptocurrencies has also increased as cryptocurrency spot ETFs have become available.
Not only that, the U.S. House of Representatives passed the Financial Innovation and Technology Act of the 21st Century (FIT21) this year, writing an important encryption policy milestone and expected to bring a clearer regulatory framework for cryptocurrency entrepreneurs.
Key Point 3: The Rise of Stablecoins
Stablecoins that can complete global payments quickly and cheaply have become the “killer application” in the cryptocurrency ecosystem.
Stablecoins, with their fast and low-cost global payment capabilities, have become powerful tools in the financial sector, making value transfer easier and expected to consolidate the U.S. dollar's international status in the future. In the second quarter of 2024 alone, the transaction volume of stablecoins has reached US$8.5 trillion, far exceeding Visa’s US$3.9 trillion.
At the same time, the transaction costs of stablecoins have also been significantly reduced due to the advancement of blockchain infrastructure. The average fee for a traditional cross-border transfer via international wire transfer is US$44. The transaction cost of the stable currency USDC on Ethereum has now dropped from US$12 in 2021 to US$1. If the Base network is used, the transaction cost is less than 1 cent.
Focus 4: Improvement of infrastructure and reduction of transaction costs
The upgrade of blockchain infrastructure has effectively expanded the processing capabilities of the blockchain network.
Compared with 4 years ago, the blockchain can now process 50 times more transactions per second. The rise of Ethereum’s second-layer solution (Layer2) and other more efficient blockchains has made blockchain networks more efficient and cheaper.
Ethereum’s “Cancun Upgrade” (Dencun) this year has further reduced transaction fees on the Layer 2 network, allowing the ecosystem on the Layer 2 network to flourish and make on-chain transactions more efficient.
In addition, the application of zero-knowledge proof (ZK) technology is also expanding. This technology is becoming more and more popular and cheaper, and will provide blockchain with more privacy and scalability in the future. application.
💡Zero-knowledge proof: It is a cryptographic technology that allows one party (certifier) to prove to another party (verifier) that the calculation is valid without exposing any underlying information used to establish the calculation.
Key Point 5: The continued growth of decentralized finance (DeFi)
Since the rise of DeFi in the summer of 2020, trading volume on decentralized exchanges has increased rapidly and now accounts for 10% of spot trading activity.
As of 2024, more than $169 billion in assets have been locked in thousands of DeFi protocols. Among them, the ETH pledge ratio on the Ethereum network has also increased from 11% two years ago to 29%, greatly enhancing the network's Security.
💡Staking: refers to locking cryptocurrency to support the security and functionality of the blockchain, thereby earning rewards in return.
Point 6: Cryptocurrency can solve some challenges of artificial intelligence
Artificial intelligence is one of the hottest trends this year, and it’s no exception in the cryptocurrency space.
The a16z report pointed out that AI is one of the most watched trends in the field of encryption. There is considerable overlap between users of ChatGPT and visitors to crypto websites, and it can be seen that there is a close connection between encryption and AI users.
In addition, about 34% of crypto projects stated that they use AI technology in their applications, while this proportion will be only 27% in 2023.
The future development of AI is likely to become increasingly centralized, and such characteristics and the decentralization of cryptocurrency can be said to be two extreme opposites.
But now, many blockchain projects are already trying to solve some of these challenges, including Gensyn, which hopes to democratize AI, and Story Protocol, which compensates creators by converting intellectual property rights (IP) into tokens, etc., to pave the way for future development. It brings more room for imagination.
Focus 7: New on-chain applications and scalability unlock the future of infrastructure
As blockchain transaction costs fall, new on-chain applications begin to emerge.
In the case of NFTs, it was much more expensive to trade on the chain a few years ago than it is now, and people were trading NFTs in the secondary market for large amounts totaling $1 billion.
Now that the frantic activity has subsided, users can also mint NFT collectibles on social apps like Zora and Rodeo for cheap fees.
Social networks are another example. Although currently accounting for only a small portion of daily on-chain activity, they are attracting strong developer activity.
According to a16z, about 10% of crypto projects will be social-related by 2024. In fact, projects related to social networks, such as Buterin’s favorite decentralized social media protocol Farcaster, are among the top five most popular ecosystems this year.
Cryptocurrencies have made significant progress in policy, technology and consumer adoption over the past year, but whether the cryptocurrency market has entered the fifth wave of price innovation in the cycle remains to be seen. But in any case, the Web3 industry has made considerable progress this year.
Perhaps the current Web3 industry is just waiting for a breakthrough product like ChatGPT to appear and completely change the entire world.
Reference: a16zcrypto
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