A16z State of Crypto Report: Ethereum a double-edged sword, and other takeaways
The 'State of Crypto' report by Andreessen Horowitz (a16z) focused on five topics, including Ethereum, web3, crypto adoption, Defi, and stablecoins
By Shashank Bhardwaj
The 2022 ‘State of Crypto’ report released by Andreessen Horowitz, the crypto venture fund, stated that Ethereum is witnessing unmatched development and demand despite the high gas fees on the network. But warned that ETH’s popularity is ‘a double-edged sword’.
A16z said, “Ethereum’s overwhelming mindshare helps explain why its users have been willing to pay more than $15 million in fees per day on average just to use the blockchain.” The warning pertains to Ethereum prioritizing decentralisation over scalability, which has resulted in the other competitors eating into its market share, by offering promises of better performance and lower fees. The report said, “Ethereum’s lead has much to do with its early start and the health of its community.”
A16z also commented on the current state of the internet, as we know it, as being flawed as it is controlled by ‘big tech oligopolies and digital authoritarianism’.
Web3 will bring decentralisation and user ownership of data. Ethereum is the industry standard for decentralised applications, but the high demand is causing the rise in gas fee prices on the network. Gas fees on the Ethereum network have risen to astronomical levels. On May 1, ETH gas fees rose to $200 per transaction following an NFT launch.
The data from the report revealed some interesting insights. Ethereum is the top choice for developers in terms of builder interest. The network has around 4,000 active monthly developers, compared to 1,000 for Solana, 500 for Bitcoin, and 400 for Cardano. The demand can also be noted across the estimated transaction fees paid on each network. Ethereum’s transaction fees over a seven-day average accounted for $15.24 million, while it was $2.5 billion for BNB Chain, Polygon, Fantom, Avalanche, and Solana combined.
The report, besides Ethereum, also talked about web3 development, stablecoins, crypto adoption rates, and decentralised finance. Defi sector’s TVL of $13 billion approximately makes it the 31st largest bank in the US. It said, NFTs were able to generate $3.9 billion revenue for the creators in the year so far, and that web3 adoption could hit one billion users by 2031.
The report said that the crypto sector is still in its early stages and has social and cultural value beyond finance. It concluded, “There’s a lot of room to build, and we believe there will be multiple winners.”
The report was introduced via a blog post. The firm’s data scientist Daren Matsuoka, general partner Chris Dixon, head of protocol design and engineering Eddy Lazzarin, and head of content Robert Hackett worked on the report.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash