Crypto Assets Status: Balancing Optimism and Reality

The latest annual "Crypto Assets Status" report released by a16z has attracted widespread attention. Although the report conveys an optimistic message, we still need to supplement some background and data to fully understand the market situation.

Crypto Assets Adoption Status

The report begins by stating that "Crypto Assets activities and usage have reached a historical high" and demonstrates the correlation between the growth of monthly active crypto addresses and the number of internet users.

However, it is worth noting that an address does not always correspond to a user. In fact, an address may not represent a real user at all. To better understand the driving factors behind address activity, we need to delve into the calculation method of this metric.

The definition of monthly active addresses is: the sum of the daily number of unique addresses that participate as senders or receivers in successful transactions on the network. This means that a simple transfer between wallets can activate two addresses. Data shows that transfers between wallets are one of the most common types of transactions.

It is worth noting that the growth of on-chain addresses such as Solana and Base is closely related to activities involving meme coins. Active meme coin traders typically have multiple wallets. Users rarely handle all transactions with just one wallet. Additionally, there are practices such as sandwich trading and front-running bots. On the Pumpdotfun platform alone, an average of 25,000 new tokens are issued daily, each counted as an active address.

As a better indicator, we can pay attention to the monthly visits of CoinMarketCap and CoinGecko. Currently, CoinMarketCap has a monthly visit count of 73.96 million, while CoinGecko has 22.8 million.

Objectively speaking, some blockchains have indeed successfully attracted new users, but we have not yet entered the golden age of Web3 popularization. On the contrary, long-term users seem to have built a more comprehensive infrastructure. Given the current decentralization of liquidity and user experience, this is inevitable. However, the overall number of retail investors does not seem to have increased significantly.

The data on mobile encryption wallet users in the report appears optimistic, but it is necessary to consider the dominance of mobile devices in certain countries. For example, 86% of internet traffic in Nigeria comes from mobile devices, 79% in India, and 57% in Argentina.

In other words, users in emerging countries are the main user group of mobile devices. As mobile wallets become more user-friendly and feature-rich, their market share is increasing. Furthermore, users often need to install multiple different wallets in the current encryption environment.

This trend reflects the broader adoption of Crypto Assets in emerging countries - the mission driven by Web3 and DeFi is gradually being realized.

Killer Applications of Crypto Assets

The report identifies stablecoins as one of the most obvious "killer applications" of Crypto Assets, and this view is undeniable.

Stablecoin transfers are faster and cheaper. Many countries have established relevant legal frameworks, and many businesses have started to pay income tax using stablecoins. As the legal framework improves, more and more users will turn to using stablecoins as a substitute for traditional remittance methods, which is a reasonable development trend.

The fact that the trading volume of stablecoins exceeds that of Visa is indeed noteworthy. However, it is important to note that stablecoins are primarily used for large transfers. For everyday purchases such as coffee, people still rely on traditional payment methods like Visa.

While it cannot be denied that stablecoins are a killer application, the emphasis on stablecoins in the annual report still leaves one somewhat disappointed. A few years ago, we would mention DeFi here, which was indeed a groundbreaking innovation. And now... just stablecoins? It seems we have failed to launch a more innovative killer application this year.

Infrastructure

Infrastructure is crucial for the next generation of dApps and high-load applications such as games, consumer applications, social applications, etc. (.

The improvement of infrastructure has made this technology more advanced, but everyday users have yet to feel significant benefits. Although there are several games ), almost none are fully on-chain because it is unnecessary ( and some local consumer applications, the transaction capacity does not seem to be the main issue. For example, in games, the main use case is the tokenization of in-game assets and the open market for these assets - these tasks do not require ultra-high TPS.

We should remain optimistic about advancements in infrastructure, as they create opportunities for Web3 innovation and new use cases that we have yet to imagine. However, considering that the most popular application this year might be Hamster Kombat, I hold a cautious attitude towards the development prospects of the dApp field.

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DeFi Development

The DeFi section starts with a strong statement that "DeFi is still very popular - and it is still growing." This is accurate for 2023, although we have not yet reached the levels of 2022.

In 2022, the total value locked in DeFi approached $180 billion. Currently, this figure is only about half of what it was then. Despite Ethereum's price reaching an all-time high in 2022, even accounting for price differences, we have yet to return to that level.

The growth of the industry is mainly attributed to new areas such as liquid staking, re-staking, and RWA. Institutional capital has finally started to flow into DeFi.

Check Lido), one of the leading applications in DeFi in terms of TVL('s monthly active users) MAU( statistics - Currently, the number of monthly users is close to 6,000.

What does this mean? In my opinion, the recent growth of DeFi can be attributed to several core factors: the increase in average deposit value and overall market capitalization compared to 2023.

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The Integration of AI and Crypto Assets

Artificial intelligence and Crypto Assets together have tremendous potential, providing a decentralized economy that can drive more affordable, community-centered advancements in the field of AI.

The correlation between AI and Crypto Assets can be attributed to their nature: both are emerging, promising, and possess significant speculative value and cutting-edge technology.

Web3 is at the forefront of technological innovation and has quickly begun to attract the interest of AI users ) and vice versa (. These two industries share similar user groups and interests, both belonging to the frontier exploration domain.

Decentralized computing use cases, such as innovative methods for internet sharing and collaborative AI agents, have great potential.

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Summary

In 2024, the development of Crypto Assets is marked by significant behind-the-scenes advancements. However, these innovations have not yet garnered the attention of a broader Web2 audience, as they are often highly technical or designed for specific users like institutional investors ).

For newcomers to Crypto Assets focused on quick profits, these advancements may not be very appealing. This is why many are drawn to the meme coin craze and prediction markets.

In 2024, people's enthusiasm for airdrops and points programs gradually waned. Users now view them as an additional form of APR, which has driven liquidity rotation among more risk-seeking passive investors following the token generation event (TGE). Similarly, with the arrival of reality, the excitement around GameFi has also gradually cooled. While some games have successfully attracted users, none have reached the level of success of mainstream AAA titles. This is completely normal - innovation takes time to mature.

In other words, are we still optimistic about the industry's prospects? Yes, very optimistic. But are we in the golden age of Web3? Not yet. The industry still needs time to develop and refine in order to truly realize its potential.