Andreessen Horowitz (a16z) recently released its 2024 report on the state of crypto, highlighting the continued growth and impact of blockchain technology. The report provides an overview of the significant trends in the space, from surging crypto usage to the convergence of artificial intelligence (AI) and blockchain. Below are the key takeaways from the report, which paint a picture of an industry poised for further innovation and adoption.
1. Crypto Activity and Usage Reach All-Time Highs
2024 has seen unprecedented levels of crypto activity, driven by a surge in user engagement and transaction volume. The growth is fueled by the increasing use of stablecoins, decentralised finance (DeFi), and blockchain applications in various sectors. Crypto's widespread appeal is evidenced by more consumers and businesses using blockchain technology for financial transactions, smart contracts, and digital assets.
Ethereum’s Layer 2 (L2) networks and other scalable blockchains have also contributed to this expansion by significantly increasing transaction capacity and reducing fees. As more users tap into crypto’s potential, usage is expected to continue its upward trajectory.
Source: Andreesen Horowitz
2. Crypto Takes Center Stage in U.S. Politics
As the 2024 U.S. elections approach, crypto has emerged as a key political issue. Lawmakers and regulators are increasingly focusing on crypto’s role in the financial system, and the topic is generating considerable debate across both political parties. With major legislative milestones in the past year, such as the approval of Bitcoin and Ethereum exchange-traded products (ETPs) and the passage of bipartisan crypto regulations, the industry is now firmly in the spotlight.
The regulatory landscape remains a focal point, and the outcome of the U.S. election could have far-reaching implications for the future of blockchain technology and digital assets.
Source: Andreesen Horowitz
3. Stablecoins Secure Their Place in the Market
Stablecoins, a class of cryptocurrencies pegged to traditional assets like the U.S. dollar, have found solid product-market fit. Their popularity is soaring due to their ability to facilitate low-cost, nigh-instantaneous transactions without the volatility typically associated with other cryptocurrencies like Bitcoin. Stablecoins amounted to an eye-watering USD $8.5 trillion worth of transaction volume across 1.1 billion transactions in the second quarter of 2024 ending 30 June alone.
The ease of use and practicality of stablecoins make them an appealing solution for global remittances, cross-border payments, and everyday transactions. They’re increasingly being adopted by businesses and consumers as a viable alternative to traditional payment systems.
4. Infrastructure Upgrades Reduce Costs and Boost Efficiency
Blockchain infrastructure has undergone significant improvements, increasing capacity and drastically reducing transaction costs. Ethereum’s 2024 "Dencun" upgrade, also known as EIP-4844 or protodanksharding, has been a game-changer. By enhancing Layer 2 networks, this upgrade has lowered fees, making Ethereum transactions more accessible while maintaining high throughput.
In addition to Ethereum, zero-knowledge (ZK) proofs are playing an essential role in scaling and enhancing privacy on blockchains. As ZK proofs become more cost-effective and widely adopted, they are unlocking new possibilities for blockchain interoperability and application development.
Source: Andreesen Horowitz
5. DeFi Continues to Grow
With more than USD $169 billion locked up in various protocols, DeFi remains one of the most important sectors in the crypto space. Since DeFi’s rise in 2020, decentralised exchanges (DEXs) have grown to account for 10% of global spot crypto trading, a notable shift from centralised exchanges’ dominance just four years ago.
Ethereum’s transition to proof-of-stake in 2022 has further boosted DeFi’s growth by reducing energy consumption and increasing network security. The percentage of staked Ether has nearly tripled in two years, further solidifying DeFi’s presence in the crypto ecosystem.
6. Crypto Tackles AI’s Centralisation Challenges
Artificial intelligence has been a hot topic in 2024, and crypto is seen as a solution to some of AI’s biggest challenges, particularly around centralisation. As the cost of training advanced AI models skyrockets, only a few large tech companies have the resources to develop cutting-edge AI systems. Blockchain, with its decentralised nature, offers a potential solution to this issue.
Crypto projects like Gensyn and Story are already leveraging blockchain to democratise AI resources and track intellectual property. By combining the decentralisation of blockchain with AI’s capabilities, these projects aim to create a more equitable and transparent technological landscape.
7. Scalable Infrastructure Unlocks New Onchain Applications
As transaction fees decrease and blockchain networks become more scalable, new on-chain applications are emerging. One notable shift is in the non-fungible token (NFT) market. While NFTs were once known for high-value sales, the lower transaction costs have led to a rise in affordable, community-driven NFT collections on platforms like Zora and Rodeo.
Source: Andreesen Horowitz
Additionally, social networks and prediction markets are gaining traction on the blockchain. Social-related projects make up over 10% of new crypto developments in 2024, while crypto-based prediction markets, despite facing regulatory challenges in the U.S., are becoming more popular in other parts of the world.
Conclusion
a16z’s report makes it clear that crypto has experienced significant growth in terms of scale and usage. The continued rise of stablecoins, DeFi, and scalable blockchain technology, combined with crypto’s potential to address AI’s challenges, sets the stage for further innovation.
Written by Steven Pettigrove and Luke Higgins
Picture: Snoop Frog contemplates the State of Crypto
Comments