[Wenggou Original] Additional analysis behind the optimism: a16z's 2024 annual crypto report

When a16z released its annual “State of Crypto” report, it quickly went viral across major media outlets, X accounts, and Telegram communities, all sharing its impressive charts. The highlights from its report convey a unified message: “We are optimistic,” but today I wanted to share some additional context and data highlights to complement this impressive report. This way, everyone can understand the market more broadly.

Part I: Cryptocurrency Adoption

The first thing that catches your eye is: “Cryptocurrency activity and usage hit all-time highs.” The report actually starts with this sentence, showing the growing correlation between monthly active cryptocurrency addresses and internet users.

But it’s important to understand that an address doesn’t always correspond to a person. In fact, an address may not represent a person at all. To better understand what drives address activity, let’s leverage Artemis analytics and ask a simple question: How is this metric calculated?

*Monthly Active Addresses: The daily sum of the number of unique addresses active as senders or receivers in the network. Only addresses active in successful transactions are counted.

This way, one wallet-to-wallet transaction can activate both addresses. What does Artemis show us? Wallet-to-wallet transactions are one of the most popular types of transactions.

It is worth noting that the growth of Solana and Base addresses is closely related to memecoin related activity. Active memecoin traders usually have multiple wallets. Users rarely use only one wallet for everything. In addition, there are sandwichers, sniper bots, etc. On Pumpdotfun alone, an average of 25,000 new tokens are issued every day, each of which counts as an active address.

As a better indicator, I prefer to look at the monthly traffic of CoinMarketCap and Coingecko . Here are the data for February 2023. The current visits to CoinMarketCap are 73.96 million and Coingecko are 22.8 million.

You might argue, “ Wow, we don’t use CMC or Coingecko nowadays; smart people use DEXScreener. ” Well, DEXScreener has 13 million visits per month, and DEXTools has 6 million visits.

Objectively speaking, some blockchains have successfully attracted new users, but I don’t think we are in the golden age of Web3 popularization. Instead, long-term users seem to have developed a more comprehensive infrastructure. This is inevitable given the current fragmentation of liquidity and user experience. However, the number of overall retail investors does not seem to be increasing.

The next chart from the a16z report focuses on mobile crypto wallet users, which seems pretty optimistic until you consider that mobile devices account for:

• Nigeria accounts for 86% of web traffic
• India accounts for 79%
• Argentina 57%

In other words, users in emerging countries are frequent users of mobile devices. As mobile wallets become more user-friendly and feature-rich, their market share is growing. In addition, users usually need to install several different wallets in the current blockchain environment.

In this way, I prefer to emphasize the wider adoption of cryptocurrencies in emerging countries — which is the mission that Web3 and DeFi have been driving from the beginning — and which is finally becoming a reality.

Part 2: Cryptocurrency’s Killer App

In their report, a16z identified stablecoins as one of the most obvious “killer apps” for cryptocurrency, and I have no problem with that statement.

Stablecoins are faster and cheaper to transfer. Many countries now have the legal framework in place, and many businesses pay their income taxes in stablecoins. It makes sense that as the legal framework improves, more and more users will turn to stablecoins as an alternative to traditional remittance methods.

The fact that stablecoin transactions have surpassed Visa transactions is remarkable. However, it is worth noting that stablecoins are mainly used for large transfers. For daily purchases such as buying coffee, people still rely on Visa cards.

While I can’t deny that stablecoins are a killer app, it’s a little disappointing and frustrating to see such a strong emphasis on stablecoins in the annual report. A few years ago, we would have mentioned DeFi here, which was truly a breakthrough. And now…stablecoins? It seems we haven’t been able to come up with a better killer app this year.

Part III: Infrastructure

Of course, infrastructure is critical for the next generation of dApps and high-load applications such as games, consumer applications, social applications, etc.

Improvements in infrastructure have made the technology more advanced, but everyday users have yet to see significant benefits. While there are several games (almost none of which are fully on-chain, as there is no need) and some native consumer applications, transaction capabilities do not seem to be a major issue. In games, for example, the main use case is the tokenization of in-game assets and open markets for these assets — tasks that do not require ultra-high TPS.

Don’t get me wrong: I’m very optimistic about infrastructure advances because they create opportunities for Web3 innovation and new use cases we haven’t yet imagined. However, I’m more pessimistic about the dApp space, given that the most popular app of the year may be Hamster Kombat.

Part 4: DeFi

The DeFi section starts with a strong statement: “DeFi is still popular — and growing.” This is accurate for 2023, although we are not yet at the levels we were in 2022.

In 2022, DeFi had a cumulative total locked value of nearly $180 billion. Now, it’s half that amount. While 2022 marked an all-time high for Ethereum, we’re not back to those levels yet, even accounting for the price difference.

The growth of the industry is mainly due to new areas such as liquidity staking, re-staking, and RWA.Institutional capital has finally begun to flow into DeFi.

Looking at the MAU stats for Lido (one of DeFi’s super apps in terms of TVL) — it’s currently sitting at nearly 6,000 monthly users.

What does this mean? In my opinion, DeFi’s recent growth can be attributed to a few core factors: average deposit value and overall market capitalization growth compared to 2023.

Part 5: AI x Crypto

Together, AI and cryptocurrencies have tremendous potential, providing decentralized economies that can drive more affordable, community-centric advancements in AI.

The chart above caught my attention the most. In my opinion, the correlation between AI and crypto traffic can be attributed to their nature: both are new, promising, and have significant speculative value and cutting-edge technologies.

Web3 is at the forefront of technological innovation and is quickly beginning to attract interest from AI users (and vice versa). The two industries share similar demographics and user interests, and neither is conservative.

Decentralized computing use cases like Aethir or Compute Labs, the internet sharing approach proposed by Grass, and collaborative AI agents by Theoriq. In my opinion, all of these innovations are great and have great potential.

Summarize

The growth of cryptocurrency in 2024 has been marked by significant developments happening behind the scenes. However, these innovations have yet to gain traction with the wider Web2 audience as they are often highly technical or designed for specific users, such as institutional investors.

For cryptocurrency newbies focused on quick profits, these advances may not be appealing. That’s why many are drawn to the memecoin craze and prediction markets.

In 2024, optimism around airdrops and points programs faded. Users now view them as a form of additional APR, which drove liquidity rotation from more risk-seeking passive investors after the TGE. Similarly, the excitement around GameFi faded as reality set in. While some games successfully attracted users, none reached the same heights of success as Baldur's Gate 3 or Elden Ring. This is completely normal - innovations take time to mature. In other words, is it still optimistic? Yes, it is optimistic. But are we in the golden age of Web3? Absolutely not.