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The a16zcrypto's latest 'State of Crypto Report' examines the emergence of cryptocurrency as a popular policy subject, the numerous technological advancements made to blockchain networks, and the most current developments among cryptocurrency developers and consumers.
The key takeaways from the report are listed below:
Crypto Activity Is at an All-Time High
The number of monthly active crypto addresses has never been higher. This number has more than tripled since the end of last year, with 220 million addresses interacting with a blockchain at least once in September.
The report shows the listing of Ethereum and Bitcoin exchange-traded products (ETPs) was one element that could have increased public interest in cryptocurrencies this year.
As ETPs like this increase investor accessibility, the number of Americans who own cryptocurrency may increase.
The Ethereum and Bitcoin ETPs' combined on-chain holdings total $65 billion.
Although these products are often referred to as ETFs, they are registered as ETPs using SEC Form S-1, indicating that the underlying portfolios are not securities.
The SEC's ETP approvals mark significant turning points in crypto policy.
Many legislators anticipate that momentum will increase with the approval of bipartisan crypto legislation, regardless of which party takes power in November.
More and more politicians and policymakers from both parties are expressing support for cryptocurrency.
Ahead of the US Election, Cryptocurrency Emerges as a Significant Political Concern
This election season, cryptocurrency has entered the public conversation.
This year, the industry has also sparked other noteworthy policy moves. With 208 Republicans and 71 Democrats voting in favour, the Financial Innovation and Technology for the 21st Century (FIT21) Act was enacted by the House of Representatives on a bipartisan basis at the federal level.
The law may give cryptocurrency businesses much-needed regulatory clarification, pending Senate consideration and passage.
The EU and the UK have led public engagement with crypto policy and regulation.
Several European authorities have sent far more requests for feedback than the US Securities and Exchange Commission, for instance.
The first complete legislative framework pertaining to cryptocurrency to be enacted is the European Union's Markets in Crypto Act (MiCA), which is expected to take effect fully by the end of the year.
Now, There Is a Product-Market Fit For Stablecoins
With many proposals now circulating in Congress, stablecoins, which have grown to be one of the most well-liked cryptocurrency products, are among the most hotly debated legislative issues.
One of the tailwinds, at least in the US, is the understanding that stablecoins may strengthen the US dollar's standing overseas even as the greenback's status as the world's reserve currency declines.
The next greatest denomination, 0.20 percent in euros, is dwarfed by the fact that almost 99 percent of stablecoins are now valued in USD.
- Infrastructure Upgrades Cut Transaction Costs & Improve Capacity:
The report shows that the development of underlying infrastructure is one factor contributing to the popularity and ease of use of stablecoins. Blockchain capacity is increasing, for starters.
The emergence of Ethereum L2 networks and other high-throughput blockchains has allowed them to handle almost 50 times as many transactions per second as they did just four years ago.
More astonishingly, after being implemented in March 2024, Ethereum's largest update of the year, "Dencun," also known as "protodanksharding" or EIP-4844, dramatically decreased costs for L2 networks.
Since then, even while the value of L2s denominated in ETH has continued to increase, L2s' fees on Ethereum have drastically decreased. Put another way, blockchain networks are simultaneously becoming more and more well-liked.
DeFi Still Widely Used & Growing
Only decentralised finance, or DeFi, draws more builders than blockchain infrastructure.
DeFi also has the highest cryptocurrency usage rate, accounting for 34 per cent of daily active addresses.
Decentralised exchanges, or DEXs, have risen to 10 per cent of spot cryptocurrency trading activity since DeFi's introduction in the summer of 2020. This was only the case in centralised exchanges four years prior.
Thousands of DeFi protocols currently contain over $169 billion. Among the most popular DeFi subcategories are lending and staking.
Some of AI's Most Urgent Problems Could Be Resolved via Cryptocurrency
Artificial intelligence (AI) is one of the most popular developments in tech and cryptocurrency this year.
One of the topics that cryptocurrency influencers discuss the most on social media is artificial intelligence.
Even more unexpectedly, a significant overlap exists between chatgpt.com visitors and visits to popular cryptocurrency websites, suggesting a close relationship between AI and cryptocurrency users.
The prospects for decentralisation offered by blockchain networks are nearly the exact opposite of the centralisation-related problems with AI. Crypto initiatives are already attempting to address some of these issues today.
New Onchain Applications Boost Scalable Infrastructure
Numerous additional prospective crypto consumer apps become feasible as transaction prices decrease and blockchain capacity increases.
Consider NFTs as an example.
When cryptocurrency transactions were significantly more costly a few years ago, people exchanged NFTs for billions of dollars on secondary markets.
Since then, that activity has decreased, and new consumer behaviour has emerged in its stead: minting inexpensive NFT collections on social media platforms like Rodeo and Zora.
This is a major change for the NFT market, which was almost unthinkable prior to a sharp drop in transaction costs.
To summarise, the report questioned - What does that leave us with?
Over the past year, cryptocurrency has advanced significantly in several areas, including consumer acceptance, technology, and regulation.
Significant bipartisan crypto legislation was passed, and policy breakthroughs, such as the unexpected approval and listing of Ethereum and Bitcoin ETPs, occurred.
The State of Crypto 2024 report tells us that significant advancements in the infrastructure occurred, from scaling enhancements to the emergence of Ethereum L2s and other high-throughput blockchains.
Additionally, new applications were being developed and utilised, ranging from expanding established categories like stablecoins to investigating more recent ones like artificial intelligence, social networking, and gaming.
The report says it needs to be clarified if we have reached the fifth wave of the price-innovation cycle, which is our framework for comprehending the fluctuations of the several market cycles in cryptocurrency.
The report showed that, in any case, there is no denying that the cryptocurrency business has advanced significantly in the last 12 months.
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