10 Highlights From a16z’s “State Of Crypto 2024”
On Oct. 16th, a16z released the 2024 edition of their annual report on “The State of Crypto”. This year’s report clocked in at 58 pages filled with data and related insights. It’s actually a quick read. Below are my highlights:
1. We NEED Decentralization to Fight Six Growing Monopolies (Facebook, Apple, Microsoft, Google, Amazon, & Nvidia) That Have Captured 70%+ Of All Tech Market Cap Created The Last 10 Years
Since January 2017 I’ve been writing about the massive negative impact of FAMGA (Facebook, Apple, Microsoft, Google, & Amazon), and added Nvidia to the mix last year. FAMGAN has captured ~70%+ of all tech market cap created the last 10 years. Great for them and their shareholders, horrific for the rest of humanity, including increasing income inequality and stifling innovation. Decentralization remains the major tool we have to fight these pernicious Goliaths. And the rise of AI only increases the power of FAMGAN relative to every other company given the massive, and rising, costs of cloud compute necessary to train frontier AI models:
2. AI Has Some Pressing Challenges That Can (Only?) Be Solved By Blockchain
When CryptoOracle announced our AI Web3 Accelerator last February, we identified five major AI problems that we thought crypto could solve. including three of the four noted above. We also noted two major crypto problems (e.g. decentralized identity and UI/UX), that AI could help solve. The bottom line is that crypto and AI go hand in hand, and massive wealth will be generated at the intersection.
3. Polymarket Is Killing It
It’s great to see a crypto consumer applications, like Polymarket, scaling. To date there been more than $2.1B wagered on Polyamrket just on the Presidential election. That said, it’s early days for Polymarket, and questions remain about how active the site will be post the election. There’s also lots of speculation on how Polymarket may be being manipulated. I went down the Polyamrket rabbit hole, and emerged with this Polymarket conspiracy theory.
4. It’s A Multichain World, And Ethereum Is At The Nexus
The chart above highlights that multiple different chains are driving meaningful flows between chains, and that Ethereum remains the nexus, driving more than 50% of all outflows, and receiving almost 40% of all inflows.
5. Account Abstraction Is The Key To Crypto Achieving Mass Market
In March , ERC-4337 went live on Mainnet 2023 to enable users to use smart contract wallets with custom verification logic as their main account, eliminating the need for users to maintain externally owned accounts. In other. words, it was the first protocol enabling users to interact with crypto, without having to have any knowledge of crypto. Al that complexity has been abstracted away. Now, 18 months later, usage is scaling, which is, hopefully, finally, a precursor to applicaitons that will be easy enough to use that they can drive mass adoption of crypto
6. Zero Knowledge Proofs Are Scaling Post EIP-4844
In March 2024, EIP-4844 went live on Mainnet as part of the Dencun upgrade. The protocol was implemented to improve scalability and reduce transaction fees by introducing a new type of transaction, called a blob, which is a large chunk of data that is later deleted from the chain. Post the implmenention we’ve seen a
EIP-4844: Shard Blob Transactions, improving (but long way to go), unlock a new programming paradigm (computations offchain, for cheap verifiable compute),
7. Stablecoins Have Found Product Market Fit Beyond Trading
The fact that stablecoin activity continued to grow during crypto winter, as trading volumes cratered 80% from it’s peak, highlights that stablecoin usage has gained massive traction outside of just trading.
My last three “highlights” are each instances of where a16z’s insight from the data are different from what I see.
8. No Mention Of Memecoins Being A Thing Or The Coming Memecoin Supercycle (Per Murad)
We get it. The SEC is not acting in our best interests. The SEC’s view is that it’s illegal to publicly offer cryptocurrency if it represents an investment of money in a common enterprise with profits coming from the efforts of others. But an investment of money into a memecoin, with the hopes of making a profit if the memes spreads, is legal.
But the far more important point that a16z whiffed on is that memecoins are a thing, what memecoins represent, and why some, notably Murad, are looking for a memecoin supercycle:
9. Crypto trading is not “…increasingly happening on decentralzied exchanges”
While I think the world would be a better place if more crypto trading happened on decentralized exchanges, the graph above shows that the % of crypto trading that happened on decentralized exchanges last month was less than it was 30+ months ago.
3. There’s Nothing Vibrant About Crypto Social ……. Yet
The first radio shows were people sitting at desks with microphones on them. They just put radio on tv, because that’s all they knew. That’s what Farcaster feels like to me. They’re putting a web2 product on web3 rails. I’d love Farcaster to disrupt X/Twitter. But ~250M use Twitter every day. Which means they really really like it.
So 50,000 users a week, is not meaningful usage. And users are declining! So while there may be a growing number of devs writing apps for Farcaster, “vibrant” is a misleading adjective when discussing the ecosystem.
Facebook became Facebook when they introduced the newsfeed, creating a whole new paradigm for social media. With crypto, we now have a new set of tools, enabling us to create another new paradigm, to re-imagine what social networks can be. That’s what I’m here for.
Bonus — Graph Making 101- What About NEAR?
First, while the title states that “Base and Solana” are the most active blockchains, per the numbers on the slide, NEAR is a lot more active than Base (31M vs 10M addresses). Given this slide, and a couple others (e.g. Slide 39), some have inferred an EVM bias. Or it could be that whoever made the slide never took Graph Making 101. Humorously, each inch in the green EVM bars represents about 3X more addresses then each inch of the Non-EVM yellow bars. So the line for Base is longer than the line for NEAR, even though NEAR has 3X as many users. That should be easy to correct.
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I’d really like to thank a16z, for all they do for the crypto community. For more insights from a16z, you can listen to their latest podcast on the report, or watch their guided tour of the report.
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This article has been prepared for informational purposes only and does not constitute an offer or solicitation to buy tokens or other securities of CryptoOracle Collective (the “Company”). None of the information or analyses presented are intended to form the basis for any investment decision, and no specific recommendations are intended. Accordingly, this presentation does not constitute investment advice or counsel or solicitation for investment in any security.
