Podcast Summary
16z Crypto Report 2023: Signals of a Healthy and Thriving Ecosystem: The 16z Crypto Report for 2023 showcases the continued growth and development of the crypto industry, emphasizing key metrics like developer activity, transaction volume, and user numbers, indicating a healthy ecosystem and providing an outside perspective for newcomers.
The 16z Crypto Report for 2023 highlights the continued growth and development of the crypto industry, despite any negative narratives or market conditions. The report focuses on fundamental metrics such as developer activity, transaction volume, and user numbers, which are all increasing and signaling a healthy and thriving ecosystem. The report is intended to provide an outside perspective on crypto for those who may not be familiar with the industry. Additionally, Gnosis Safe, a trusted wallet infrastructure used by Bankless, was discussed as a core primitive for building in the world of account abstraction and smart contract wallets. The guest for this episode is Eddie Lasser, a multidisciplinary expert with a background in psychology, philosophy, and computer science, who will help explain these metrics and the state of crypto in a way that is accessible to a broader audience. The 16z team has produced multiple reports of this kind, indicating the importance of tracking and understanding the crypto industry's progress.
Discussing the current state of crypto and future trends with Eddie Lazarin: Stay informed about crypto trends and utilize tools like Kraken, Bankless, and Ambire for a seamless user experience and investment insights.
The crypto industry is constantly evolving, and it's important to stay informed about the latest trends and opportunities. In this episode, the hosts discussed the current state of crypto and what to look forward to in 2024 with the help of Eddie Lazarin, the CTO of a16z crypto. Kraken, a leading crypto exchange, was highlighted for its customer-focused approach, offering a seamless user experience for both beginners and experienced traders. The Bankless token hub was introduced as a one-stop shop for crypto research and investment insights, allowing users to learn from experts and fellow investors. Lastly, Ambire, a smart contract wallet, was praised for its ability to work across various chains and ecosystems, offering users the benefits of self-custody with added security features. Overall, the discussion emphasized the importance of staying informed and utilizing the right tools to navigate the crypto market.
Understanding the Long-Term Health of the Crypto Ecosystem: The 2023 Crypto Ecosystem Report by Messari examines the health of the crypto industry by analyzing technological progress and macro factors, providing context for long-term tech investors.
The 2023 Crypto Ecosystem Report, produced by Messari, offers a valuable perspective on the current state of the crypto industry by examining the health and vitality of the ecosystem as a whole, rather than focusing on the week-to-week developments. The report highlights that crypto's social media-driven nature contributes to its short-term focus, but in 2023, the industry is experiencing a unique time due to macro and regulatory factors. The report aims to help long-term tech investors understand the technological progress of crypto by analyzing specific milestones and providing context through open datasets. The report also includes the State of Crypto Index, which measures industry vitality through various metrics such as active developers, contracts deployed, and NFT buyers. Producing a report like this involves a significant effort, with a focus on collecting data from public open source datasets. The process includes doing more legwork each year to ensure comprehensive analysis.
Crypto market chaos with underlying order: Price volatility fuels interest, new ideas, and projects, creating cycles in crypto market
Despite the apparent chaos in the crypto market, there is an underlying order. This order can be observed through various indicators, including price, interest, new ideas, startups, and projects. These indicators are interconnected, with each one influencing the other in a cycle. The financial cycles and product cycles in crypto may seem chaotic on the surface, but when viewed from a long-term perspective, they exhibit a certain level of order. For instance, price volatility can lead to increased interest, which in turn can lead to new ideas and eventually new projects. These projects can then catalyze future price growth. The crypto market has undergone four such cycles, with the latest one peaking at $3 trillion in market capitalization. As we move forward, it's important to keep this pattern in mind and use appropriate metrics to understand the various dimensions of the crypto space.
Understanding the Significance of Product Cycles in Crypto: Product cycles, including investments of time, attention, and human resources, have similar growth rates to price cycles in crypto, highlighting their importance in the ecosystem.
The crypto market is driven by various types of investments beyond just financial investments. While price cycles are commonly discussed, this report highlights the importance of considering product cycles, which include investments of time, attention, and human resources from users and developers. These non-financial investments have shown similar compound annual growth rates to the price cycle, indicating their significance in the crypto ecosystem. The report uses metrics like social media activity, developer activity, and funding activity to measure these product cycles. By recognizing and analyzing these different types of investments, we can gain a more comprehensive understanding of the crypto market and its trends.
Developers are key builders in crypto ecosystems: Developers play a crucial role in crypto ecosystems by building infrastructure and applications, and their stickiness is driven by the sense of ownership and control they have over their projects.
Developer activity and interest is a key indicator of the health and potential growth of crypto ecosystems. This is because developers are the talent inflows, producing applications that will be used by a larger audience. The metaphor of a city can be applied to crypto ecosystems, with developers acting as settlers investing their time and resources to build infrastructure and businesses. Crypto's distinct property as a platform is that developers have the ability to fundamentally control the space, making it an attractive and sticky industry for them. Developers tend to be quite sticky in crypto, with a significant increase in active developers during bull markets and a high retention rate. This could be due to the sense of ownership and control developers have over the projects they work on in the crypto space.
Growing 'city network' in crypto space: The increasing number of developers and verified smart contracts in crypto space signals a thriving ecosystem with potential for sustainable economic growth
The crypto space, particularly for software engineers, exhibits a unique level of dedication and commitment, akin to programming language communities, with the increasing number of verified smart contracts indicating a robust pipeline of new projects and businesses. The speaker suggests viewing these numbers as indicators of a growing "city network," with the number of developers representing entrepreneurs and the number of verified smart contracts representing new businesses, both essential for sustainable economic growth. These trends suggest a promising future for the crypto industry.
Innovation continues in crypto despite bear market: The number of developers, new businesses, and new smart contracts indicate a thriving crypto ecosystem, despite the current bear market. Price is just one metric and can be misleading.
Despite the current crypto bear market, innovation and the building of new products in the crypto space continue unabated. The number of developers and new businesses in the space, as well as the number of new verified smart contracts being opened, indicate that the crypto ecosystem is far from dead. Price is just one metric, and it can be misleading when looking at the overall health of a crypto network. The price crash in 2019, for example, led many to believe that crypto was dead, but this was not the case as innovation continued to thrive beneath the surface. The slide showing logos of companies founded from 1999 to the present day serves as a reminder that innovation happens regardless of financial upswings and downswings. The crypto space is no different, and the current bear market should not deter new entrants or discourage those already in the space from continuing to build and innovate.
The best time for NFTs might be during their infancy: Despite recent declines, NFTs are still in their infancy and ongoing experimentation could lead to future growth.
The best time to start a company or invest in technology might not be during periods of economic prosperity, but rather when the technology is finally ready. This was evident during the dawn of the mobile computing era when various photo, video, and web applications were founded, as the technology had reached a point where it was ready for mass adoption. This concept can also be applied to the current NFT market. Despite the recent decline in NFT sales and royalties, the number of NFT buyers has not decreased as drastically as one might expect. NFTs are still in their infancy, and there is ongoing experimentation to determine the best royalty models for linking secondary sales to creators. The evidence suggests that NFT creator royalties have shrunk, but there is potential for growth as the market continues to evolve. In summary, it's important to look beyond current market trends and consider the underlying technology and its potential for long-term growth.
Ethereum's Scaling Progress and Energy Consumption: Ethereum's energy consumption is minimal, surpassed one billion transactions, and scaled through roll-ups, paving the way for innovation and growth in the blockchain ecosystem
The Ethereum network is making significant strides in scaling and reducing transaction fees, which is a crucial step towards unlocking the potential for a wider range of applications and experimentation in the blockchain space. The report highlights that Ethereum now consumes only 0.001% of the energy compared to platforms like YouTube, and the number of unique transactions has surpassed one billion. Moreover, the adoption of scaling technologies like roll-ups has increased Ethereum's layer 1 block space usage from 0% to 7% within a year. These developments are essential evidence that Ethereum is scaling and paving the way for other blockchain solutions to do the same. The scalability of the network is essential to encourage wasteful experimentation, complex applications, and goofy product ideas, which are necessary for driving innovation and growth in the blockchain ecosystem.
Crypto's Broadband Moment: Cheap Block Space Fueling Innovation: Affordable block space fuels crypto innovation, enabling new applications and ideas, but further developments like user experiences, frameworks, and interoperability are needed for full potential.
The crypto industry is experiencing a "broadband moment," where the widespread availability of cheap block space is enabling new applications and innovations, much like how broadband infrastructure revolutionized the internet in the late 1990s and early 2000s. This moment is crucial for the development of the crypto ecosystem, as it allows developers to experiment with new ideas without worrying about the cost of block space. However, there are still other necessary developments, such as improved user experiences, developer frameworks, and interoperability solutions, that need to unfold for the crypto industry to reach its full potential. The conversation also touched on topics like the declining US leadership in crypto and the importance of education and resources for newcomers to the space. Overall, the crypto industry is at a precipice of significant growth, and the availability of cheap block space is a critical prerequisite for this development.
Arbitrum's popularity among gaming and social dapps: Arbitrum's layer 2 solution on Ethereum offers faster speeds and lower gas fees, attracting gaming and social dapps. Phantom wallet's expansion to Ethereum and Polygon brings millions of users and optimizes NFT management, while Arbitrum Nitro makes it 10 times faster.
Ethereum's layer 2 solution, Arbitrum, is attracting gaming and social dapps, offering faster transaction speeds and lower gas fees. Arbitrum, now 10 times faster with its recent migration to Arbitrum Nitro, is becoming a popular choice for developers. Phantom wallet, the number one wallet on Solana, is expanding to Ethereum and Polygon, bringing millions of users and a beloved UX. Phantom will offer staking features and optimize NFT management. Web 3 gaming is gaining traction, with good games taking long to develop, but offering exciting possibilities for composable and interconnected game logic. The Phantom wallet and Arbitrum are steps towards making web 3 development more secure, fast, cheap, and friction free.
Exploring the Future of Web 3 Games: Incremental Progress and Challenges: Web 3 games are progressing towards on-chain integration, with opportunities for incremental steps like on-chain skin marketplaces. Despite challenges, a significant portion of gamers have positive attitudes towards NFTs.
The future of web 3 games is promising but still in its early stages. While fully on-chain games with all components built on blockchains are an exciting vision, they are not yet ready to be widely implemented due to various technical and development challenges. However, there are opportunities for incremental progress, such as implementing on-chain skin marketplaces, which could bring benefits like more liquid markets, competitive pricing, safer systems, and less fraud. Despite the current skepticism from some gaming communities towards NFTs, the survey results suggest that a significant portion of gamers have neutral or positive attitudes towards them, as long as financialization is not forced upon them. As the industry continues to evolve, we can expect to see more projects experimenting with various degrees of on-chain integration, gradually moving towards the maximal articulation of the vision.
US losing lead in Web 3 sector: The US is experiencing a decrease in crypto developers and traffic from top crypto websites, indicating a loss of leadership in the Web 3 sector. Clearer and more supportive regulation is necessary to maintain the US's position, and some crypto entrepreneurs feel unwelcome due to increasing regulatory pressure.
The US is currently losing its lead in the Web 3 sector, as indicated by a decrease in the percentage of crypto developers and traffic from top crypto websites in the country. This trend could be due to several factors, including the rest of the world rapidly advancing in this technology or increased regulatory pressure in the US. Regardless of the cause, it's clear that clearer and more supportive regulation around crypto in the US is necessary to maintain its position as a leader in this field. Additionally, there's a growing sentiment among crypto entrepreneurs that they may not be welcome in the US due to increasing regulatory pressure. The discussion also touched upon the potential benefits of blockchain technology for gamers, specifically in the area of secure and direct ownership of in-game assets. However, the centralization of gaming platforms is currently hindering the innovation and implementation of such features. Competition from new platforms that embrace blockchain technology may be the driving force for change in this area.
US shift from indifferent to skeptical towards tech: The US's skepticism towards tech, including crypto, stems from its transformative and disruptive potential, missed opportunity for US leadership, and fear of power dynamics shift
The US approach towards technology, particularly crypto, has shifted from being indifferent or even supportive in the 90s to being more aggressive and skeptical in the present day. This change can be attributed to the increasing recognition of tech as a transformative and disruptive force, as seen in the case of web 2 and its impact on industries like journalism and politics. The US's stance towards crypto is not a loss for the technology itself, but rather a missed opportunity for the US to lead in its development. The rest of the world sees the potential benefits and global nature of crypto, unlike the US's current centric bias. The fear and skepticism towards tech, including crypto and AI, from existing power structures are a response to their growing awareness of its potential to disrupt established structures and power dynamics.
Introducing the State of Crypto Index: A Comprehensive View of the Crypto Space: The State of Crypto Index provides a more holistic perspective on the crypto industry by tracking key indicators like active developers, interested developers, contract deployments, library downloads, and academic publications, allowing users to customize the index based on their perspective.
The crypto space is more than just its price. The recent report introduces the State of Crypto Index, which focuses on key indicators for ongoing innovation and adoption. This index includes metrics like active developers, interested developers, contract deployments, library downloads, academic publications, and more. These metrics are weighted based on their perceived importance, allowing users to customize the index to their perspective. The innovation side of the index is more stable and steady, while the adoption side is more volatile. The index is updated monthly and provides a more comprehensive view of the crypto space beyond just its price. The creators of the index welcome feedback and suggestions for additional metrics. Overall, the index serves as a reminder that the crypto industry is multifaceted and constantly evolving.
Crypto product landscape evolves with NFTs, creator economy, gaming, and decentralized social networks: Despite the bear market, crypto expert Eddie sees a healthy and chaotic ecosystem as each effort in NFTs, creator economy, gaming, and decentralized social networks unfolds, with potential for L1 block space consumption to increase beyond 7%
The crypto space has evolved significantly since its early days, with a multidimensional product landscape that includes NFTs, creator economy, gaming, and decentralized social networks. Eddie, a crypto expert, expressed confidence in the current state of crypto products despite the bear market, stating that there's a strong sense of uncertainty and doubt in the past. He believes that each of these efforts needs to unfold, and the complexity of the space has gone up in a positive way, leading to a healthy and chaotic ecosystem. The future holds promising developments, such as the potential increase in the percentage of block space consumption on L1, which could go way beyond 7%. Overall, the crypto product world is more robust and diverse than ever before, and the bear market is not as daunting as it once was.
Shifting focus from casino to computer in crypto: In 2023, crypto may prioritize UX, infrastructure, and programming, evolving wallets as key management systems, and moving beyond financial transactions.
The future of crypto in 2023 and beyond may involve a shift away from the casino aspect and more towards the computer side. This means improvements in user experience, infrastructure, and programming models. Additionally, the metaphor of a crypto wallet as a wallet may evolve to better reflect its true identity function as a key management system. The financial cycle will likely continue to influence the narrative of crypto, but as more mainstream applications emerge, the perception of crypto may change and become less financially focused. Overall, the future of crypto holds potential for radical improvements and new uses beyond just financial transactions. Remember, crypto is still a risky frontier, but it's an exciting journey worth taking.
