It’s the end of time (hmm, end of the year, sorry).
A lot has happened in the crypto industry, so today we’re going to do an insightful TLDR of the state of crypto in 2023.
This article will be composed of three parts, released separately, and will aim to sum up the different evolutions that involved the crypto industry this year. We will explore blockchain activity and dive deep onto some on-chain data. And we will end by picturing the differents factors that will impact the market next year and which narratives to look for in crypto in 2024.
For part 1, we are going to review DeFi and the evolution of developers, as well as do an on-chain market volume recap. We will see how creators and users have never been so close, thanks to Web3, and how that benefits them.
Blockchains Have Never Been More Popular
From high prices in 2021 to the steepest fall of 2022, crypto prices have stabilized in 2023. The industry appears to be finding its balance, with reduced speculation and better engagements from users in Web3 dApps. There is a noticeable increase in monthly active addresses (unique addresses performing on-chain transactions monthly), surpassing previous records.
In the last month alone, 15 million sending addresses were observed, more than double the number from two years ago when prices were still at elevated levels. One potential explanation for this surge is the growing array of opportunities to interact with blockchains and Web3 dApps. From decentralized finance (DeFi) to Web3 games (700 were introduced last year), a wide range of applications that generate addresses for users to interact with has emerged.
Through the rise of Layer 2 solutions, such as Optimism, Arbitrum and Shibarium, fees have never been lower with that much activity on chain. Notably, the total number of blockchain transactions has grown by over 50% in the past two years.
Activity across the whole crypto ecosystem seems to be on the rise again after falling from the highs of 2021. As speculation cooled, it seems more organic uses have emerged across various sectors, including lending, remittances, art, collectibles, and on-chain gaming.
Still, the promise of crypto to transform the economics of the internet remains. In recent months, we’ve seen an uptick in both NFT buyers and DEX volume. In fact, Uniswap, a decentralized exchange, has seen a higher trading volume than Coinbase, the largest centralized exchange in the U.S., for two consecutive months.
The Total Value Locked (TVL) Across DeFi Protocols Crossed $50B
The total value locked (TVL) across all decentralized finance (DeFi) protocols has increased from $35 billion in mid-October to $50 billion today.
A 43% increase in 10 weeks!
Why This Matters
Rising asset prices + more money being invested into DeFi protocols = higher TVL. That’s Crypto Math 101.
How Users and Creators Benefit from Web3
The answer is through lower “take rates” (the share of revenue that platform owners take from users). In crypto, users genuinely own their digital assets and can, more importantly, bring these assets to any platform they want.
The easier it is for people to switch platforms, the more competition can heat up, and the fewer chances platforms have to extract from users (or suddenly change the rules on them). Low platform pricing power often leads to lower take rates.
In the last two years, NFT marketplaces have paid out nearly $2 billion worth of royalties in secondary sales to creators. Compare that to Web2, where Meta, for instance, marked $1 billion for creators throughout 2022. This comparison is even more surprising when you consider that Meta’s platforms (Facebook, Instagram, WhatsApp, and others) have around 3.74 billion monthly users compared to the estimated tens of millions of Web3 users today.
It’s worth noting that Web3 take rates are, if anything, trending downward over time. While Web3 creator royalties are in a state of flux as best practices and technologies evolve in the space, we expect even more innovation and experimentation here.
The Number of Active Developers in the Crypto Industry Has Held Steady
Prices can be misleading, particularly without looking under the hood of the tech and its growing ecosystem of builders. So let’s take a look at what devs were up to this year while building their blockchain stuff.
Notably, there was sustained development across crypto. There are nearly 30K monthly active developers in the crypto industry today. A steady increase of 60% since the start of the bull run in 2020 indicates that developers who may have been attracted to rising prices are sticking around.
Nearly 50K unique addresses deployed smart contracts last month – a 40% rise just this year. More of these contracts were verified, and more core developer libraries were used to interact with them than were ever tracked.
The Market Cap for Altcoins Hit $700B
What happened? The market cap for all altcoins (aka crypto tokens NOT named Bitcoin) just hit $700B, according to data from TradingView.
For about 2 years, the altcoin market was stuck between $430B and $650B. It’s been one long yoyo session.
But for the first time in 18 months, it’s out of that range.
Why this matters: It could be an early sign of Altcoin Season. Crypto investors love the altcoin season more than Mariah Carey loves Christmas.
We’ve already had a small taste of it too.
A handful of memecoins and BRC-20 tokens have seen big gains recently:
So we can say that a LOT happened this year on chain. Next time, we will dig into the nitty-gritty and sum up the technical evolutions that blockchain devs are working on, including POS vs. POW, zero-knowledge tech stack, and more exciting digital nice-sounding words.
Contributor: @risjo_xyz
Source: State of Crypto Index
