4 Essential Takeaways from a16z's State of Crypto 2023
4 Essential Takeaways from a16z's State of Crypto 2023
Users keep growing, developers are staying, and the U.S. isn't the only player.
TL;DR
Blockchain services familiar to Web 2.0 users, such as gaming and social networking, are attracting more users to Web 3.0.
Despite the crypto winter, the number of developers continues to grow, which is expected to support the uninterrupted growth of the Web 3.0 market.
The development of zero-knowledge (“zK”) proof is accelerating, raising expectations that blockchain expansion satisfying both security and stability will be possible in the near future.
The U.S.-centric Web 3.0 paradigm is gradually becoming more global, presenting significant opportunities for new projects and protocols in Europe, Asia, and South American countries.
Introduction
Andreessen Horowitz (a16z) is a U.S. venture capital firm that invests in early-stage startups and high-growth companies. a16z is a leading investment company with an optimistic view of the cryptocurrency market and regularly publishes reports on the market.
Recently, a16z released a report titled "2023 State of Crypto Report: Introducing the State of Crypto Index" that covers seven key points of the cryptocurrency market. This article will discuss four of these points and provide additional insights, so the content may differ from the original report. If you are curious about the accurate views of a16z or would like to read the remaining points, please refer to the report published by a16z.
1. Services lead the way, and users drive the momentum
Even during the crypto winter that followed the NFT and DeFi boom, blockchain project builders tirelessly created new services. As a result of their efforts, various services have been launched in areas beyond what was previously available, attracting more participants. In particular, as familiar services like blockchain games and social media platforms emerged alongside the relatively unfamiliar NFT and DeFi sectors, many users entered the blockchain field despite the crypto winter. One notable area is blockchain gaming, which saw the launch of 717 Web3 games last year. These games generated 23 times more on-chain transactions than DeFi, demonstrating significant user engagement.
The emergence of more familiar services has made it easier for ordinary users to enter the blockchain field, and the number of active wallet addresses reached an all-time high of 15 million last month. There have been more monthly active addresses than ever before, with a figure more than twice as high as during the peak of the cryptocurrency market two years ago.
Despite the growth, the number of active wallets is still at a level comparable to the number of internet users in 1996, making it clear that the blockchain market is still in its early stages. However, the blockchain market still holds boundless opportunities for growth. Games and social protocols such as Lens Protocol, DeSo, and CyberConnects lead us to the "lighthouse" for significant growth in the coming year.
2. Unwavering number of developers
It appears that developers who entered the market during the 2020 bull run are still present. Almost 30,000 developers were involved in building or participating in blockchain projects last month, and the number of developers has consistently increased by more than 60% over the past three years.
According to Tiger Research's analysis of collected GitHub repos, the number of Ethereum Dapp-related repos created annually continues to increase. This trend is speculated to be due to increased development motivation from 1) rising Ethereum prices and trading volumes and 2) expanding VC investment sizes.
The fact that developers are not leaving but instead fostering the development of more blockchain projects and services suggests that the blockchain market's growth can be expected to continue.
3. Zero-knowledge technology's progress marches on
Since last year, zero-knowledge technology, which improves blockchain scalability, has made significant progress. As shown above, research on this technology is steadily increasing, and the number of actual transactions using it is also on the rise.
Zero-knowledge proofs are a technology that records block validity on a network without revealing the data, saving computer power and storage resources while enhancing blockchain scalability. This allows for more efficient block validation processes and increases both security and efficiency.
By utilizing this technology, transactions within games or item exchanges can be made more secure and transparent. In the social media field, it is expected to improve personal information protection and data security.
4. Decentralization of the Web3 paradigm
Lastly, according to a16z data, the proportion of blockchain-related developers in the United States compared to the global total is gradually decreasing, and blockchain-related web traffic is reportedly dropping to around 15%. It's not an exaggeration to say that the United States has thoroughly led the blockchain market for the past decade or so.
While we cannot view the specific raw data, it is speculated that this trend is due to 1) the total number of global developers increasing rapidly, making the number of developers in the United States appear relatively smaller, or 2) global crypto-related traffic being distributed to countries outside the United States.
This trend is seen as a positive development, indicating that the U.S.-centric Web3 paradigm is gradually becoming decentralized and moving towards Europe, Asia, and South America, displaying global growth. In particular, we look forward to the movements of strong players in the Asian market, armed with games and content.
Conclusion
To summarize, despite the so-called crypto winter, the number of blockchain-related developers has remained steady, and more users are entering the blockchain market due to the projects and services they have created. Additionally, the advancement of zero-knowledge proof technology, which secures user convenience and scales the blockchain, is accelerating, suggesting that overall market growth can be fairly optimistic. In particular, as mentioned repeatedly, 2023 is anticipated to see the launch of more projects and services - a time to build, with the growth of gaming and SNS standing out among them.