Crypto Investing
19 May 2022

What’s the “State of Crypto” Like? The 2022 Report That Says It All

Ananda Banerjee

Is it a bird? Is it a plane? No, it’s crypto!

A recent “State of Crypto” report released by Andreessen Horowitz offers us some interesting things about emerging trends.

Decentralized buzzwords, financial instruments, developer tools, innovative projects, and more—crypto is a collection of opportunities at the moment. Clearer crypto trends are surfacing as we move deeper into 2022, and this report unearths them.

The Crypto Market Has Grown in Phases

The crypto market is growing in cycles. These cycles may appear chaotic at first but have resulted in consistent growth in the long run.

Here are some year-end growth metrics for 2021 (as compared to the previous year) from the report that reaffirm our faith in crypto:

  • Broader crypto market cap is up by 271% (Incentives on the high)
  • Developer activity up by 69% (An increase in BUIDL trends)
  • Startup activity grew by 62.5% (New age of Ownership, revisited)
  • Social media presence rose by 83% (Going viral basically)

The growth is driven by a feedback loop of interest and innovation.

And crypto isn’t rising alone. It’s lifting every facilitator, project, trend, and possibility.

To put it in crypto, “Sabka Saath, Sabka Vikas!”

Ethereum is Popular but Faces Competition

The blockchain buffet is all set. There are salads, appetizers, and the main course. Yet, moving into 2022, Ethereum continues to take the lead—in terms of usability, user growth, and demand for block space.

As a general-purpose blockchain of choice, Ethereum has managed to attract the largest number of developers ever since its inception. The increased developer flow into an ecosystem means increased transactions and better value. Simple math, ain’t it?

Avalanche, Bitcoin, and Binance Smart Chain are also trying to match up to Ethererum on that front. Even Bitcoin is trying to up its smart contract game!

Rollups are the Future

Awesome as they may be, Layer-1 (L1) blockchains like Ethereum need support. More so with millions migrating to decentralized ecosystems. That’s where Layer-2 (L2) solutions come in, piggybacking on the best tech out there: ZK and Optimistic Rollups.

(Polygon is a well-known L2 project in case you’re wondering.)

Optimistic Rollups

What do we know about them?

1. They are the cheapest when adopted fully; and

2. They’re easy to implement.

ZK Rollups

Their deal is this:

1. They’re great at being accurate, but

2. Programming them can be hard.

Built and deployed outside the mainnet, L2 scaling solutions pay the L1 chain’s gas fees—primarily for the security they borrow.

That’s why almost every L2 solution is trying to get Ethereum’s high fees down. Looking for known faces? Loopring is one of the L2 projects that is actively trying to make life better for users with an average transaction gas fee of $0.34.

Crypto is “DeFi”ant

The Terra debacle didn’t exactly go as planned for the DeFi folks. Yet, as per the insights gathered across 2021 in the report, the crypto community seems bullish on DeFi. Especially with lending and token exchanges as the preferred use cases.

Here’s why the report says that:

  • Over 1.7 billion individuals, worldwide, do not have bank accounts.
  • Global remittances go up to $650 billion, annually, and the equivalent fee per transaction is higher than 5%.
  • Almost 1 billion individuals among the unbanked have access to a mobile phone.

All of that makes DeFi a much-needed financial instrument.

Ethereum still holds the crown, though, as far as DeFi TVL (Total Value Locked) is concerned. On Ethereum’s heels are:

  1. Polygon
  2. Solana
  3. Avalance

Two L2 blockchains in the top 3!

Note: At the onset of 2022, DeFi had a cumulative asset value akin to US’s 31st largest bank.

Stablecoins are Still Important

Do we have something like a digital dollar or digital rupee, only decentralized?

Say hello to stablecoins. They allow you to make use of some very reliable DeFi-powered solutions, saving you from extreme losses to an extent. As of today, the top stablecoin projects include:

  • Tether (USDT),
  • USD Coin (USDC), and
  • Binance USD (BUSD).

Note: UST or Terra USD’s fall does not establish a failure of stablecoins. It took a rather sophisticated attack on Terra’s ecosystem for the meltdown. And anyway, UST is one type of stablecoin—an algorithmic one. And that variety comes with its very specific drawbacks.

Web 3.0 or Web for Thee, Creators?

Are you a Web 3.0 creator? If yes, this era is all yours! That’s one of the things the report says.

Web 3.0, as the name suggests, is an advance on earlier versions. It builds on their tenets but keeps “ownership” intact. Data from the report shows that in 2021, primary sales of ETH-based NFTs and the royalties from secondary sales on OpenSea yielded four times the amount Meta set aside for creators through 2022.

Besides, building on Web 3.0 means you can cater directly to consumers. No intermediaries. No facilitators.

This means that when you put up a video, it reaches millions of viewers directly. And the compensation, kudos, and criticism? All yours.

Before we conclude, here are some facts from the report to help understand Web 3.0 better:

  • It’s a collaborative space: The real and the virtual work together toward a common goal.
  • The common goal is growth, period.
  • It offers users, investors, creators, and builders an equal playing field (ideally at least).
  • As compared to Web 2.0, it promises a higher compensation for stakeholders.
  • No dependency on a single point of failure.

An ideal Web 3.0 ecosystem will take time to build. Once we get there, though, expect it to be open, participatory, distributed, and resilient.

Creator Economy on an Upturn: Led by NFT, Gaming, and Web 3.0

The NFT love isn’t waning anytime soon. The weekly sales volume has been consistent, sitting close to $1,200,000,000 on 25 April 2022. However, one trend that’s obvious is this: sellers are outpacing buyers now.

And when it comes to creator compensation, Web 3.0 is the place to be. Reason: Web 2.0 big techs have a way higher Take Rate. That’s the percentage that the platform takes out of the creator’s compensation.

Existing take rates:

  • Facebook | Twitter | Instagram: 100%
  • YouTube: 45%
  • App Store: 30%
  • OpenSea (Web 3.0 NFT marketplace): 2.5%

Not much to choose from if you are a creator, right?

NFTs alone are doing a lot in the Web 3.0 space. Here are some of the areas they are penetrating quick and deep:

  • Direct monetizing
  • Scope for royalty-based payouts
  • Over 22,000 creators in the space
  • DAO governance toolkits
  • Ticketing
  • Metaverse land sales with value reaching $2 overall

Last but not least, gaming in Web 3.0 is colossal in 2022. Look at these facts from the report, if you don’t believe us:

  • Game-related NFT sales comprised 20% of all the NFT sales in 2021.
  • Almost 50% of wallet activities are driven by games and relevant transactions.
  • 50+ blockchain games have at least 1K unique users at this point.

The Time is “DAO”

Decentralized Autonomous Organizations are, and will continue to be, the game changers of crypto. Over time, every company should aim to switch over to the DAO setup, or at least fail trying.

What makes us say that? How DAOs are doing right now—that’s what. This is what the report says about them:

  • As of April 2022, DAOs have a cumulative treasury value of over $10 billion.
  • Uniswap leads when it comes to DAO value locking, with a project holding of over $2 billion.
  • Up till now (April 2022), DAOs have taken over 56k token-driven decisions.

The Road Ahead

Each of the crypto trends discussed above—Web 3.0, NFTs, DAOs, L1 blockchains, and more—managed to stay on top for the better part of 2021. They look poised for a home run, through 2022 and beyond.

We all are counting on crypto to keep making a real-world impact. As we speak, here are some firms doing exactly that (again, according to the report):

Spruce: Brings decentralized and ownership-driven digital identities, sans intermediaries like Google and Facebook.
Sound: Presents a decentralized music streaming app that connects fans directly to their favorite musicians.
Flowcarbon: Ever heard of decentralized carbon credits? That’s what this one is about.

Want to read the report? Click here.

For a more condensed version than our article, you could also check out this Twitter thread by our founder Ashish Singhal.

Regardless of what you choose, better days are coming for crypto. The writing is on the wall.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

writer

Ananda Banerjee

Content Writer

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