a16z State of Crypto Report 2022 - A Summary

How is the crypto industry right now? How far have we come, and what’s next?

The recent a16z State of Crypto 2022 report details a number of themes and information that they believe are crucial in the current space.

I have distilled them into simple, bite-sized points here for time-starved readers like yourself.

1. Why does Web3 matter?

Why do we even need Web3 in the first place?

Web2 has given rise to a monopoly of networks that are extractive against us.

Web3 gives people property rights to own a piece of the internet, and not be owned by the oligopolies of big tech in Web2.

In contrast to Web2 where the tech giants own the platform, here in Web3 there are aligned interests between owners and the platform towards its growth.

2. “Price-innovation” cycle

Crypto markets are seasonal, just like any other market.

But there are also nuanced differences. In crypto, prices are a leading indicator, whereas in traditional markets prices are typically a lagging indicator.

Prices drive greater interest, which in turn drives ideas and innovation.

Advances made by builders in crypto winters will eventually pay off and re-trigger optimism when prices inevitably increase and more users come on board.

3. Web3 is much better for creators

There are drastically lower take rates in Web3 platforms vs big tech in Web2.

For example, Web3 paid out $174,000 per creator on average, multitudes higher than big tech.

There is a big opportunity for creators, especially with a very small number of Web3 creators currently.

3. Crypto’s real world impact

DeFi, for example, offers a shot at financial inclusion for the unbanked and underserved.

This expands capital access to otherwise unavailable markets.

Other areas like DAOs and NFTs similarly offer social, cultural, financial and technological innovations.

4. Multi chains and ecosystems

Ethereum has by far the largest number of developers, and has the greatest demand of block space - as reflected by transaction fees.

But its high demand has also introduced other challenger blockchains that claim higher speeds and lower fees.

With the rise of these other blockchains, this brings about a multi chain future with bridges and Layer 2s.

Layer 2s are separate blockchains that extend the base layer and inherit its security guarantees. L2 roll ups pay for Ethereum security - currently contributing to about 1.5% of all fees paid in Ethereum.

5. NFTs

It is still early days despite several categories of NFTs beyond PFPs (such as Art and music, Gaming, Utility, Virtual worlds).

We do observe NFTs starting to gain some mainstream adoption.

What’s more exciting is also the innovation happening in the NFT space: including airdrops, commercial rights, IRL activations, memberships and much more.

6. What’s next for Web3?

We are still very early.

I am excited to see many more experiments with DAOs, social tokens, decentralised social networks, web3 media and other new emerging categories and their real world value.

As users earn new tokens through games and NFTs, they are also likely to save them through DeFi protocols. This causes a spillover effect to DeFi usage and creating a robust ecosystem.

Finally, I am also excited to see many more games to be launched, from creators at top game studios currently, bringing greater mainstream adoption.

Which of these themes resonated with you the most?

What is something new you learned?

Feel free to drop me a DM and send your feedback, suggestions or takeaways over!

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