Introduction: The Ups and Downs of Crypto

Throughout its short history, cryptocurrency has been pronounced dead multiple times, only to bounce back stronger than before. And yes, I am aware of the long list of scams that also grew over the years... Many people make the mistake of viewing crypto solely as a financial asset, overlooking the groundbreaking technology that underpins it.

The importance of separating financial and product cycle

While it is true that the prices of cryptocurrencies tend to fluctuate greatly, this is not necessarily an accurate reflection of the development of the underlying technology. Although the value of cryptocurrencies is often viewed as the most visible aspect of these digital assets, it is important to recognize that the technology behind them is much more than just price speculation. In fact, the pace of innovation in the blockchain space is quite stable, with a steady stream of new ideas and approaches being developed by a growing community of active developers. By focusing on the technology itself, rather than simply on the price of the cryptocurrencies that are powered by it, we can gain a deeper understanding of the true potential and vitality of this exciting and rapidly evolving ecosystem.

The importance of technological progress

Crypto is not just about its price, but also about its technological capabilities. The blockchain technology that underlies most cryptocurrencies has the potential to revolutionize many industries, such as finance, supply chain management, and healthcare. For instance, blockchain technology can enable more efficient and secure transactions, improve traceability and transparency in supply chains, and enhance the privacy and security of medical records. Moreover, cryptocurrencies can facilitate cross-border transactions and financial inclusion, especially for the unbanked and underbanked populations. Therefore, it's crucial to recognize the potential of crypto beyond its financial aspects and explore its various use cases in different domains.

What the nerds are doing on the weekend, is what regular people going to do on weekdays in the future. - Chris Dixon

Key Indicator 1: Developer Activity as a key factor of Blockchain Technology Growth

The influx of developers into the crypto space can be compared to cities attracting entrepreneurs with incentives to establish businesses. The commitment of these developers, who are less volatile than the financial side of crypto, speaks to their dedication to the technology's mission.

Key Indicator 2: Number of verified deployed smart contracts

Examining Git Repos provides insight into crypto development, but it could be misleading due to spam. A more reliable metric is the number of verified smart contracts, which are peer-reviewed and consistently utilized.

Good Products get built regardless of financial upswings or downswings

In 2009, companies like Uber, Airbnb, WhatsApp, Zoom, and Instagram were founded because the technology was ready. The same is true for crypto. The blockchain technology behind cryptocurrencies has been around for over a decade, but it is only now that it is starting to gain mainstream attention. This attention is not just from investors, but also from businesses and governments. The reason for this is the numerous technological advancements currently being deployed in the crypto space. For example, Roll-Ups, which are a type of Layer 2 solution, can help reduce congestion on the Ethereum network. Layer 2 solutions in general can help increase the scalability of blockchain networks. Moreover, Account Abstraction, a new feature being developed for Ethereum, can help reduce gas costs for transactions and make increase the user experience significantly. Finally, The Ethereum Merge, which is set to take place in 2022, will change the way Ethereum operates by moving from Proof-of-Work to Proof-of-Stake. This last milestone decreased the environmental footprint massively and Ethereum is now only consumes 0.001% of the energy YouTube uses annually

Are NFTs dead?

Despite previous fluctuations, NFT buyers are on the rise again, with nearly 1.4 million wallets purchasing NFTs a few months back. This is a clear signal that the NFT market has not lost steam, and it is still an attractive investment opportunity.

What is more, major brands like Reddit, Adidas, and Nike are also exploring NFT opportunities. This is a significant development in the NFT world, as it shows that these brands are not merely joining the hype, but are taking a more strategic approach. By exploring NFT opportunities, they are able to tap into a new revenue stream and engage with their customers in exciting new ways. This is particularly relevant in today's world, where digital engagement is becoming increasingly important.

Furthermore, the NFT market is not limited to art and collectibles. There are also opportunities to create NFTs in the gaming and music industries, among others. This opens up a whole new world of possibilities for creators, developers, and investors alike. As the market continues to evolve, we can expect to see even more exciting developments and opportunities arise.

The Rise of Rollups

Scalability is one of the most important factors for the success of blockchain technology. It is essential for blockchain networks to be able to handle a large volume of transactions and users without experiencing slow processing times or network congestion. Rollups are a promising solution to this challenge, as they allow for more efficient and secure processing of transactions on the Ethereum network. In fact, rollups have already gained significant traction, accounting for 7% of Ethereum's block space, which is a major milestone for the crypto industry. This development is being compared to the Internet's broadband era, which marked a turning point in the history of the Internet, paving the way for new innovations and technologies. It is clear that the growth of rollups will play a critical role in the future success of blockchain technology and will continue to drive innovation in the crypto industry.

Conclusion

Crypto is far from dead; it is continuously evolving and expanding as a technology. By focusing on the indicators of growth, such as developer activity and the deployment of verified smart contracts, it becomes clear that the future of crypto is bright. Innovations like NFTs and Rollups are just the beginning of what's to come in this dynamic and transformative space.

This article is my personal summary of a16z State of Crypto 2023 Report. If you are interested to dive deeper into the report, check the slides below.