a16z report suggests crypto market is more robust than current prices reflect

Cryptocurrency values are significantly lower than the remarkable peaks of 2021, even with Bitcoin’s (BTC) price surpassing the $30,000 threshold. Nevertheless, despite the previous year’s crypto winter, the market has evolved and made strides, as highlighted in a16z’s recent ‘State of Crypto’ report.

In a blog entry dated April 11, a16z remarked:

“… the report showcases a more robust industry than market prices might suggest, along with a consistent cycle of development, product introductions, and continuous innovation.”

Here are several key insights from the report that underscore the industry’s resilience:

Growth in active users on blockchains

The report reveals that blockchain adoption has risen, with an increasing number of new users engaging with blockchain applications. Last month, the count of active addresses hit a record high of 15 million — nearly double the number of active addresses from two years prior.

A likely reason for this surge is that users now have more avenues to connect with blockchains and Web 3.0, as noted in the report. With the expansion of decentralized finance (DeFi) and the launch of 700 new Web 3.0 games last year, users have unprecedented opportunities to interact with blockchains.

Furthermore, advancements in scaling solutions have reduced gas fees, attracting additional users — blockchain transactions have increased by 50% over the last two years, according to a16z.

Growth in DeFi and NFT transactions

The report states that decentralized exchange (DEX) Uniswap has outperformed Coinbase in trading volume over the past two months. In total, DEXs recorded monthly trading volumes exceeding $100 billion last month, a16z noted. This suggests that the popularity and adoption of DeFi are on the rise.

Non-fungible tokens (NFTs) are also regaining traction as the speculative phase has subsided. The number of NFT purchasers has risen, while NFT creators have earned over $1.9 billion in royalties during the past two years, according to the report.

Stable number of active developers

Developers who were attracted during the 2020 bull market have remained engaged, a16z noted. Last month, there were nearly 30,000 active developers — reflecting a 60% increase since the onset of the 2020 bull market, as per the report.

Additionally, nearly 50,000 unique addresses deployed smart contracts last month — a 40% increase this year. Moreover, the number of verified smart contracts has reached an all-time high, indicating a robust pipeline of product launches. The usage of core crypto developer libraries has also seen an uptick, a16z stated.

Expansion of blockchain scaling solutions and innovative technologies

Currently, approximately 7% of all fees on Ethereum are attributed to layer 2 rollups. This has risen from just 1.5% of all Ethereum fees last year. This trend indicates a growing preference for applications to be built on L2s.

In addition, zero-knowledge technology has transitioned from theoretical concepts to practical applications over recent years. This advancement has the potential to address blockchain’s scalability challenges and has led to the emergence of new use cases, such as privacy-preserving applications, as noted in the report.

Declining influence of the U.S. in Web 3.0

The share of crypto developers located in the U.S. compared to the global total decreased by 26% from 2018 to 2022. This suggests that the U.S.’s advantage in the Web 3.0 sector may be diminishing, according to the report. This trend is primarily attributed to a lack of regulatory clarity, as stated in the report.

Prospects for 2023

A16z anticipates that some of the most promising crypto products will emerge during downturns in the crypto market. Furthermore, the VC firm expects an increased demand for decentralized social media in light of growing concerns surrounding major social media platforms.

The adoption and utilization of zero-knowledge technology are expected to continue rising, which will drive the development of hardware optimized for zero-knowledge proofs, a16z indicated. Additionally, a16z foresees the growth of non-speculative use cases for tokens as block space becomes more affordable.

The post Crypto market is ‘healthier’ than prices may indicate, says a16z report appeared first on CryptoSlate.