About 10 years ago,Well-known VC Andreessen Horowitz (a16z) broke inCryptocurrency industry. Time flies, and now the entire market has undergone tremendous changes. On May 17, 2022, a16z released its first annual overview of cryptocurrency industry trends.
In order to give everyone a faster and clearer understanding of the main content of this report, we have distilled 5 key summary points. You only need 5 minutes to fully understand what the report says.
Key takeaway #1: We are in the middle of the fourth “price innovation” cycle
Any market is cyclical, and cryptocurrencies are no exception.
From the Summer of DeFiarriveCrypto winter, the progress BUIDLers made in the dark times, will finally reignite optimism in the market when the dust settles. The cryptocurrency market has been quite sluggish lately, as we may now be entering the mid-phase of the fourth “price-innovation” cycle. While price is often a lagging indicator of market performance, in cryptocurrencies it is a leading indicator.Price is a hook, and numbers drive interest, which then drives ideas and activity, which in turn drives innovation.This feedback loop, known as the “price innovation loop,” has been the engine that has propelled the cryptocurrency industry through many different waves since Bitcoin’s inception in 2009.
You know, those who vowed to give up technology and the Internet after the DOTCOM bubble burst in the early 2000s missed out on the best opportunities of the decade: cloud computing, social networking, online video, smartphones, and more.
Key takeaway #2: web3 is much better than web2 for creators
Web2 giants have a high acquisition rate, and Web3 platforms offer fairer economic terms, for example, Meta in Facebook and Instagram have a close to 100% acceptance rate, while NFT market OpenSea This indicator is only 2.5%. But as U.S. Congressman Ritchie Torres said, “When the big tech take-up rate is higher than the Mafia, you know there’s a serious problem with our economy.”
In 2021, the primary sales of Ethereum-based NFTs (ERC-721 and ERC-1155), plus the royalties paid to creators from OpenSea’s secondary sales, totaled $3.9 billion in revenue for creators, while Meta gave designated creators $3.9 billion in revenue. The cost of the former is only $1 billion, only about a quarter of the former.
Considering the number of web2 vs web3 users, you can see that the absolute value gap is even larger, as a16z counts 22,400 web3 creators (based on the number of NFT series), while there are nearly 3 billion users publishing content on the Meta platform. While Spotify and YouTube pay creators more — $7 billion and $15 billion, respectively — the “per capita” gap is staggering. According to our analysis, web3 pays $174,000 per creator, while Meta pays $0.10 per user, Spotify pays $636 per artist, and YouTube pays $2.47 per channel.
In a word, Web3 may seem small, but it is very powerful.
Key takeaway #3: Cryptocurrencies are having a real-world impact
financeThe current state of the system has disappointed many, with more than 1.7 billion people unbanked according to the World Bank, and over the past few years there has been a growing interest in decentralized finance (DeFi) and USDstablecoindemand is rapidly increasing.
On the other hand, cryptocurrencies are also addressing other broken markets, such as:
Flowcarbon is improving carbon credits by making these increasingly important units of account transparent and traceable on the blockchain.
Helium is a grassroots wireless network that is taking on the first legitimate, decentralized challenge to the entrenched telecom giant.
Spruce empowers people to control their identities, rather than ceding that power to Google, Meta, tech giants that exploit people’s personal assets for profit through their data-mining business models.
Not only that, DAOs are showing how strangers can coordinate and cooperate economically to achieve goals, NFTs grant people virtual property rights over profile pictures, artwork, music, in-game items, access passes, virtual world land, and other digital goods. Token incentives enable newcomers to bypass the “cold start” problem and quickly activate network effects.
In fact, cryptocurrency is not just a financial innovation, but a social, cultural and technological innovation.It’s no exaggeration to say that we’re probably only scratching the surface of this area right now.
Key takeaway #4: Ethereum is the cryptocurrency leader, but faces competition
Ethereum dominates the web3 conversation, but there are now many other blockchains making adjustments to it, such as Solana,Polygon,BNB Chain,Avalanche and Fantom Wait.
In terms of developer interest, Ethereum has the most developers, with nearly 4,000 monthly active developers. This is followed by Solana (nearly 1,000) and Bitcoin (about 500).
However, Ethereum is also a double-edged sword. Since Ethereum has historically valued decentralization over scalability, other blockchains have been able to lure users by promising better performance and lower fees.
Blockchain is a hot commodity in a wave of innovative computing, just like PCs and broadband in the 1990s and 2000s, and mobile phones in the past decade. There is a lot of room for innovation, and I believe there will be multiple winners in the future.
Key takeaway #5: We are still in the early stages of the cryptocurrency industry
While it’s hard to know the exact number of Web3 users, the scale of the movement can be inferred. Based on various on-chain metrics, it is estimated that there are currently between 7 million and 50 million active Ethereum users worldwide.
In terms of development stage, analogy to the early commercial network, we are roughly equivalent to around 1995. By 2005, there were 1 billion internet users — which, by the way, was also when tech giants like Facebook and YouTube started to take shape.
Likewise, if the trend line continues as depicted, web3 could reach 1 billion users by 2031 (exact numbers are hard to estimate).
That said, we are still in the early stages of the cryptocurrency industry, and there is still a lot of work to do.
Let’s move on to BUIDL!