a16z State of Crypto 2022: Navigating the Current Crypto Landscape

The crypto landscape is constantly evolving, and it's essential to stay informed about the current trends and challenges. In 2022, the global cryptocurrency market capitalization reached $2.5 trillion, a significant increase from the previous year.

The a16z State of Crypto 2022 report highlights the growth of decentralized finance (DeFi) and non-fungible tokens (NFTs), with DeFi protocols experiencing a 30x increase in total value locked (TVL) over the past year. This surge in adoption is a testament to the increasing interest in decentralized financial systems.

Decentralized finance (DeFi) protocols have become increasingly popular, with a 30x increase in total value locked (TVL) over the past year. This growth is driven by the desire for transparent, secure, and censorship-resistant financial systems.

Non-fungible tokens (NFTs) have also seen significant growth, with the number of NFT transactions increasing by 50% in 2022. This growth is fueled by the creativity and innovation of artists, musicians, and collectors who are using NFTs to showcase their work and build new business models.

Web3 is revolutionizing the way creators earn money, with platforms like OpenSea offering fairer economic terms compared to Web2 giants like Meta. OpenSea takes a mere 2.5% of the revenue, leaving creators with a much bigger share.

NFT creators on the Ethereum network earned a staggering $3.9 billion in 2021, while Meta set aside only $1 billion for creator payouts in 2022, which is roughly 1% of its revenue.

The average creator payout in the Web3 ecosystem is $174,000, dwarfing the $636 paid to Spotify artists and $2.47 paid to YouTube creators. This is a game-changer for creators who have long been exploited by Web2 platforms.

The Web3 ecosystem is also showing significant growth, with 700 new Web3 games launched last year and games now generating 23 times more on-chain transactions than DeFi. This is a testament to the power of decentralized blockchain networks.

The benefits of Web3 extend beyond the creator economy, with the potential to bring financial inclusion to millions of people worldwide. Over 1.7 billion people don't have bank accounts, and Web3 could be the solution to this problem.

Ethereum still dominates the crypto landscape, with over 4,000 active monthly developers, far surpassing its closest competitors. This strong lead is a double-edged sword, as it emphasizes decentralization over scalability, leading to severe fees that users are fleeing from.

Fees on Ethereum have become a major issue, with users spending over $15 million in gas costs daily. In contrast, other chains like BNB, Avalanche, Fantom, Polygon, and Solana generate only $2.5 million in daily fees combined.

Ethereum's active addresses over the past 30 days show 5.5 million addresses responsible for 1.1 million transactions daily, but Solana's 15.4 million active addresses and 15.3 million transactions paint a different picture. This highlights the growing competition in the crypto space.

Despite the challenges, a16z estimates that 7-50 million people are using Ethereum today. They predict a multi-chain future, where no single chain will emerge as a clear winner.

Crypto's real-world impact is being felt in many areas, but one example that stands out is creator payouts. More than 1.7 billion people don't have bank accounts, according to the World Bank.

Crypto is providing a solution for these individuals and many others who have been left behind by the traditional financial system. The status quo has failed far too many people.

Analysts at Andreessen Horowitz have released their inaugural "State of Crypto" research report, highlighting the growing impact of digital currencies on commerce, corporates, and culture.

The report suggests that crypto payments are revolutionizing the way we think about commerce, with digital currencies changing the game for businesses and individuals alike.

Analysts at Andreessen Horowitz are at the forefront of this revolution, providing valuable insights and expertise to help shape the future of crypto.

Crypto's price-innovation cycles are a real phenomenon, folks. According to Andreessen Horowitz, these cycles have been observable in crypto since 2009, with a new wave of developer talent flooding into the space after each downturn.

The team at a16z believes we're currently in the winter of the fourth cycle, where fresh talent will assemble and carry us into a new bull market eventually. This cycle is characterized by a wave of new innovations that lead to the next breakout.

In a recent report, analysts at Andreessen Horowitz wrote that we're in the middle of the fourth 'price-innovation' cycle. They point out that prices are a leading indicator in crypto, driving interest, ideas, and activity, which in turn drives innovation.

The price-innovation cycle has been the engine that has propelled the industry through multiple distinct waves since Bitcoin's inception in 2009. It's a feedback loop that's hard to ignore.

This year, Andreessen Horowitz has shifted its focus away from price metrics, which they claim are no longer the best way to measure crypto "health". They've introduced new metrics, such as "startups/projects", defined as funding activity, which includes the number of funding rounds involving crypto companies.

The numbers for 2021 have noticeably changed since last year's report, which is weird, but it may be because the 2022 report used a different definition of startup activity.

Short-term data forecasting can be misleading, as seen in a16z's claim that the number of NFT buyers is rising again based on only two months of data in 2023.

This limited data is not sufficient to make broad predictions about market trajectory, yet it's a common practice in the industry.

CryptoSlam's data plots provide a more granular view, showing a clear spike in unique buyers of NFTs in February, but the corresponding change in total sales was minimal, potentially indicating wash trading.

A closer look at the data with an additional full month of information reveals that the April numbers do not support a16z's bullish thesis on NFT user interest.

With too little information, it's difficult to make accurate predictions, and it's essential to be cautious when relying on short-term data for forecasting.

Andreessen Horowitz, commonly referred to as a16z, has been at the forefront of the crypto revolution.

Analysts at a16z wrote a blog post announcing the firm's inaugural "State of Crypto" research report, highlighting the growing importance of digital currencies in commerce, corporates, and culture.

Their research aims to provide a comprehensive understanding of the crypto landscape, offering insights into the current state of the industry and its future prospects.

a16z's recent "State of Crypto" research report highlights a significant development in the world of decentralized autonomous organizations (DAOs). DAOs can now pay taxes, a feat that analysts at Andreessen Horowitz consider a notable achievement.

This is a major breakthrough, as it shows that DAOs have figured out how to form an LLC and navigate the complexities of tax law. Analysts at Andreessen Horowitz, the firm behind the report, seem to view this as a positive step forward for DAOs.

However, the report also notes that DAOs have been struggling with regulatory issues, including commodities regulations. The CFTC has been cracking down on unincorporated associations that try to dodge these regulations, and DAOs have been caught in the crossfire.

a16z has a habit of grouping failed crypto projects into a "bad crypto" bucket, while surviving ones get a free pass into the "good crypto" bucket.

The "bad" bucket points to failures of centralization and opacity, downplaying the role of individual bad actors.

The "good" bucket boasts about "code-enforced rules" and "resilience", but we've seen numerous instances of supposedly code-enforced rules being ignored or going horribly wrong.

Solana, backed by a16z, suffered eleven major outages in 2022, with a sunflower farming game DDoSing the network for several days.

The chart's "interest" metric is based on "social media activity", defined as "crypto-related mentions on Twitter".

I'm a bit offended that my own tweets are likely being counted as "crypto-related mentions", but it's clear that this metric is skewed by bots and other factors.

The historical numbers for 2021 got a boost in the 2023 report, with around 2,000 funded projects in 2021 becoming around 3,000 in the 2023 report.

Andreessen Horowitz's target audience is the lay public, as they aim to convince retail investors and members of the general public to buy into crypto.

Their primary goal for the last five years has been to get retail investors on board, and this has proven extremely lucrative for venture capital firms like Andreessen Horowitz.

Retail investors have been a crucial part of the crypto world's growth, and convincing them to invest has been a key focus for firms like Andreessen Horowitz.

Andreessen Horowitz wouldn't publish a report if they didn't intend people to read and be influenced by it, which means their reputation is behind the report's claims.

They chose to highlight the good news in big text and downplay the bad news in smaller text, likely hoping readers would ignore the not-so-rosy details.

a16z claims to want to take away its own revenue stream, but it's hard to believe when you consider its business model relies on accruing value to itself and its investors.

Andreessen Horowitz is a venture capital firm that has backed some of the largest Big Tech firms, which is a stark contrast to its claim of wanting a community-governed web3 where value accrues to network participants.

The firm's entire business model is built on making money, which makes its claims of wanting to disrupt its own revenue stream seem suspicious.

It's worth noting that a16z's data scientists might be wondering where their life went wrong, especially when they're forced to fudge numbers to make their claims look more convincing.

The slide on royalties is a perfect example of this, where they claim artists averaged $174,000 in sales and royalties, but it's likely an egregious misuse of mean vs. median.

This kind of manipulation of numbers is a clear indication that a16z is more interested in making money than in truly disrupting the status quo.

A16z makes a compelling case that the focus should be on the technology behind crypto, not just the price fluctuations. This is evident in their slide deck, where they begin to emphasize the importance of the tech. They even use the popular crypto meme "in it for the tech" to drive this point home.

The firm chooses to plot company inception against the S&P 500, rather than the Bitcoin price. This is a reasonable assumption, as it would be unusual to plot the emergence of a company like Docusign against the Bitcoin price.

Downturns in the stock market might impact many companies' ability to raise funding, but downturns in the crypto market directly affect crypto companies' ability to attract new users and build a successful product. This is a key distinction that A16z highlights in their analysis.

The crypto market is known for its dramatic swings, which can be seen in the chart comparing the S&P 500 to the crypto market. This volatility can be both a blessing and a curse for crypto companies, as it can lead to rapid growth or devastating losses.