The recently published 2024 crypto market overview by a16z crypto presents a bullish perspective on the industry’s future. This article highlights the key takeaways from the report, focusing on user adoption, the role of stablecoins, infrastructure advancements, DeFi growth, and the exciting convergence of AI and crypto.
Table Content:
Monthly active addresses across blockchains. Source: a16z
Surging Crypto Adoption and Network Performance
User activity and network performance have reached record highs. As of September, 220 million unique wallet addresses interacted with blockchains, a threefold increase compared to the same period in 2023. Solana leads in activity with 100 million addresses, followed by NEAR (31 million), Coinbase’s Layer-2 network Base (22 million), Tron (14 million), and Bitcoin (11 million). Among EVM-compatible blockchains, Binance’s BNB Chain ranks second to Base with 10 million active addresses, while Ethereum boasts 6 million. The surge in Solana and Base activity is largely attributed to memecoin activity.
Estimated number of real crypto usersEstimated number of real crypto users. Source: a16z
Considering the pseudonymous nature of crypto, where a single user can operate multiple wallets, a16z estimates the monthly active user base to be between 30-60 million. This represents only 14-27% of the 220 million active addresses in September and 5-10% of the 617 million global crypto holders (as per Crypto.com’s June report), highlighting the significant potential for converting holders into active users.
The Expanding Role of Stablecoins
Despite a decline in overall crypto trading volume, stablecoin usage and applications continue to rise. Offering fast transaction speeds and regulatory clarity, stablecoins have evolved beyond mere trading tools to become viable alternatives for traditional remittance.
Share of stablecoin usage increasing significantly. Source: a16z
In high-inflation countries like Argentina, stablecoins serve as a substitute for national currency. They also facilitate indirect investment in government bonds amidst rising interest rates. With a Q2 2024 trading volume of $8.5 trillion (double that of Visa) across 1.1 billion transactions, stablecoins demonstrate their growing prominence in payments, albeit focused on larger transactions while Visa dominates daily retail payments.
Exponential Growth in Infrastructure
The widespread adoption of stablecoins is underpinned by significant infrastructure development. Current blockchains can process 50 times more transactions than four years ago, thanks to Ethereum Layer-2 scaling and high-throughput Layer-1 blockchains.
Blockchain transactions per second. Source: a16z
a16z also highlights the potential of Zero-Knowledge (ZK) technology, enabling cost-effective verifiable computation on blockchains. While ZK Virtual Machines (zkVMs) are still developing, blockchain infrastructure remains a focal point for innovation, laying the groundwork for applications demanding rapid transaction processing, such as on-chain gaming and social media.
Continued DeFi Growth
DeFi attracts a significant portion of builders, with 34% of daily active addresses engaging in DeFi activities. DEX trading now exceeds 10% of total crypto trading volume.
DeFi accounts for a large share of users. Source: a16z
Over $169 billion is locked in various DeFi protocols, primarily in staking, lending, and Real-World Asset (RWA) protocols, driven by institutional investment. While leading projects like Lido have relatively low monthly user counts, recent DeFi growth is fueled by on-chain value and large capital inflows. a16z remains optimistic about DeFi’s potential as a decentralized alternative to the centralized financial system.
The Synergistic Convergence of AI and Crypto
AI and crypto present a powerful combination, potentially fostering a decentralized economy that drives community-led advancements in AI. The significant overlap in user bases between platforms like ChatGPT and leading crypto websites suggests a strong connection.
Crypto x AI. Source: a16z
Currently, 34% of crypto projects utilize AI, predominantly in blockchain infrastructure, DeFi, and DePIN. The shared characteristics of novelty, opportunity, advanced technology, and speculative potential, coupled with similar user demographics, make this convergence a logical progression. Furthermore, blockchain’s decentralization offers solutions to AI’s centralization challenges, with projects like Gensyn, Story, Near, Starling Labs, and Grass tackling issues like access to AI compute, IP tracking, and data verification.
Conclusion: A Promising Future for Crypto
The a16z crypto report paints a picture of a vibrant and evolving crypto landscape. Strong user adoption, the growing utility of stablecoins, continuous infrastructure improvements, the maturation of DeFi, and the exciting possibilities of AI integration all point towards a promising future for the industry. While challenges remain, the report highlights the significant progress made and the immense potential that lies ahead.
