Crypto market is ‘healthier’ than prices may indicate, says a16z report

Cryptocurrency prices are well below the dizzying highs of 2021, even as Bitcoin (BTC) hits above $30,000. Still, according to a16z’s latest “State of Crypto” report, the market is maturing and making progress despite last year’s crypto winter.

In a blog post dated April 11th, a16z said:

“…the report reflects an industry that is healthier than market prices indicate and a steady cycle of development, product launches and continuous innovation.”

Here are some key takeaways from the report highlighting the strengths of the industry.

Increase in active blockchain users

The report shows that blockchain adoption is on the rise as more and more new users interact with blockchain applications. Last month, we hit a record 15 million active addresses. This is almost double the number of active addresses two years ago.

One plausible explanation for this surge is that users are taking advantage of blockchain and Web 3.0 in more and more ways. Decentralized finance (DeFi) is on the rise, with 700 new Web 3.0 games released last year giving users more ways to interact with blockchain than ever before.

Additionally, advances in scaling solutions have lowered gas prices, attracting more users.

DeFi and NFT transactions increase

According to the report, decentralized exchange (DEX) Uniswap recorded higher trading volume than Coinbase in the past two months. Overall, a16z points out that last month he surpassed $100 billion in monthly DEX trading volume. This shows the growing popularity and adoption of DeFi.

Non-fungible tokens (NFTs) are also gaining momentum again as the speculative period cools. Reports show that the number of NFT buyers is on the rise, with the creator of the NFT earning over $1.9 billion in royalties over the past two years.

Number of active developers is stable

Developers are stuck in the 2020 bull market, says a16z. Reports show he has nearly 30,000 active developers in the last month, showing a 60% growth since the start of the 2020 bull market.

Additionally, nearly 50,000 unique addresses deployed smart contracts last month. This year he is 40% growth. Additionally, the number of verified smart contracts has reached an all-time high, indicating that we have a pipeline of product launches. According to a16z, the use of the core crypto developer library has also increased.

Blockchain scaling solutions and promising technologies are growing

Currently, about 7% of all Ethereum fees are paid by layer 2 rollups. This is up from just 1.5% of all Ethereum fees last year. This shows that more and more applications prefer to build on top of L2.

Moreover, zero-knowledge technology has progressed from theory to practice in the last few years. This not only has the potential to solve blockchain scalability problems, but also leads to a proliferation of new use cases such as privacy protection applications, the report notes.

US role in Web 3.0 is declining

Compared to the rest of the world, the proportion of US-based cryptocurrency developers has decreased by 26% between 2018 and 2022. According to the report, this is largely due to a lack of clarity in regulation.

Towards 2023

According to a16z, some of the most promising cryptocurrency products will be built during a downturn in the cryptocurrency market. Additionally, the VC expects the need for decentralized social media to grow as concerns about social media giants grow.

a16z says the adoption and use of zero-knowledge techniques will continue to grow, facilitating advances in hardware optimized for zero-knowledge proofs. Additionally, a16z also anticipates a surge in non-speculative use cases for the token amid rising blockspace affordability.