#14: How Web3 is Revolutionizing Finance, Technology, and User Control: Key Insights from the 2024 State of Crypto Report
Spoiler: It paints a rather optimistic picture of Web3’s progress
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Welcome to another edition of 'Web3What? by Joachim'! This week we are taking a helicopter tour of the Web3 space and making a few deep-dives by investigating the 2024 edition of the State of Crypto from a16z. If you haven’t read my previous articles, this is a good place to start!
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As the article below deals with digital assets, please note that this is not financial nor legal advice and for educational purposes only.
If you’re following other Web3 channels, you might already have heard about the “State of Crypto” report, but given it’s reputation and references in Web3 I thought I would cover it as well.
Each year, Andreessen Horowitz (a16z), a leading venture capital firm, publishes its "State of Crypto" report (hereby referred to as ‘report’) to provide insights into the evolving landscape of blockchain technology and Web3.
The recently released report offers a snapshot of the evolving Web3 landscape, marked by unprecedented growth in usage and innovative advancements in blockchain infrastructure. Here are the major takeaways from the report, designed to provide insights for those curious about Web3, its key applications, and the emerging trends in the space.
1. Massive Growth in Active Users
A major highlight of the report is the surge in crypto engagement, with monthly active blockchain addresses hitting 220 million in September 2024, tripling since late 2023. This rise underscores the increasing global adoption and utility of crypto technologies beyond traditional users. The report attributes this spike to improved user experiences, especially as blockchain ecosystems streamline onboarding and interaction processes, helping more users feel comfortable engaging with digital assets and applications.
2. Stablecoins as a Key "Killer App"
The report designates stablecoins as one of the industry’s leading applications, emphasizing their significant role in real-world financial transactions. Stablecoins reached a staggering $8.5 trillion in transaction volume during Q2 2024, exceeding Visa's reported transaction volume, showcasing stablecoins' utility as a stable, digital medium of exchange. This growth reflects stablecoins’ appeal for users seeking to leverage crypto without exposure to the high volatility associated with assets like Bitcoin or Ethereum. Stablecoins have thus evolved into a primary tool for peer-to-peer transfers, remittances, and DeFi applications, where consistency in value is essential.
3. Infrastructure Improvements: Scalability and Reduced Costs
Blockchain infrastructure has undergone major improvements, enhancing scalability and efficiency. The report highlights that, thanks to Layer-2 solutions like Ethereum's roll-ups, blockchains are now processing 50 times more transactions per second compared to just a few years ago. This boost in processing power has reduced transaction costs and increased network capacity, making blockchain systems more accessible and practical for everyday use. Lower transaction fees are a pivotal factor in making decentralized finance (DeFi) and other blockchain-based applications viable alternatives to traditional financial systems.
4. AI and Crypto Convergence
The intersection of AI and blockchain is another key area explored in the report. In 2024, applications that merge AI and Web3 technology saw considerable growth, as they open new avenues for personalized experiences in decentralized systems. This includes using AI for intelligent contract automation and more nuanced data analysis within decentralized applications (dApps), enhancing functionalities and expanding the potential of blockchain platforms. The combination of AI's analytical prowess and blockchain's transparent, decentralized infrastructure could transform various sectors, including supply chain management, finance, and digital identity verification (see #13: How Web3 provides identification of the future).
5. Political Relevance of Crypto in the U.S.
Interestingly, the report delves into the increasing political relevance of crypto, especially as the U.S. heads into the 2024 presidential election. States like Pennsylvania and Wisconsin have seen significant spikes in crypto-related search interest, suggesting that Web3 topics might play a role in influencing swing state voters. This shift could indicate the mainstreaming of crypto in political discourse, possibly affecting regulatory approaches and future legislation. Policymakers are more attentive to constituents' views on crypto, which could result in regulatory frameworks that support innovation while addressing concerns about security and financial stability.
6. A New “Builder Energy” Dashboard
A particularly unique feature of this year's report is a16z’s “Builder Energy” dashboard, a tool designed to measure the vibrancy of the developer community working on Web3 projects. This dashboard aggregates data on developer activity, new project launches, and ecosystem participation, providing a holistic view of the Web3 building momentum. The high builder energy across various Web3 ecosystems indicates that developers are continuously experimenting, innovating, and creating applications that bring tangible value to users, highlighting a vibrant ecosystem that thrives on community-driven innovation.
7. DePIN – Decentralized Physical Infrastructure Networks
Decentralized Physical Infrastructure Networks (DePIN) are an emerging concept covered in the report. DePINs use blockchain technology to create decentralized networks for physical infrastructure, such as networking equipment and IoT devices. These networks allow individuals and entities to contribute resources like internet bandwidth or data storage, creating shared, decentralized systems that compensate participants for their contributions. The development of DePIN applications signals a new direction for Web3, one that extends beyond digital applications and into physical-world infrastructure.
Key Challenges Ahead
While the 2024 State of Crypto report paints an optimistic picture of Web3’s progress, it also notes several challenges. Regulatory uncertainty continues to be a significant hurdle, especially in jurisdictions where crypto policies are still evolving such as the US. Security remains another major concern, as high-profile hacks and breaches have raised questions about the safety of blockchain-based applications. Additionally, education around Web3 and blockchain remains critical, as mainstream audiences often find the technical aspects of crypto daunting. Addressing these challenges is essential for sustaining long-term growth and adoption.
What’s Next for Web3?
Looking forward, a16z’s report anticipates that Web3 will continue to evolve with more advanced use cases emerging across finance, media, and decentralized autonomous organizations (DAOs). The convergence with AI could unlock unprecedented capabilities, while infrastructure improvements will keep lowering entry barriers, making blockchain technology more accessible and efficient. As these trends unfold, Web3's potential to transform various aspects of daily life—from how we manage assets to how we access information and communicate—is becoming clearer.
In summary, the 2024 State of Crypto report from a16z highlights the dynamic growth and maturing infrastructure of the Web3 space, painting a picture of a future where blockchain technology is increasingly embedded in everyday life. As user interest, developer engagement, and regulatory attention grow, Web3’s trajectory seems set to redefine how we interact with digital and physical realms alike, merging innovation with practical applications that drive real-world value. For those curious about Web3, this report provides both a current snapshot and a hopeful vision of where crypto and blockchain technology might lead next.
Thank you for joining me in this weeks issue of "Web3What? by Joachim", enjoy your week and you'll soon hear about more Web3 takes from me again.
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This newsletter is provided for informational purposes only. It does not offer or is intended to offer legal, tax, investment, financial, or other advice. Please do your own research and consult with your own legal, tax, investment, or financial advisors before engaging in any transaction. I may own some of the tokens mentioned in this newsletter. Some of the links in this newsletter may be affiliate or referral links.