Leading crypto VC firm Andreessen Horowitz (a16z) released a report providing an annual overview of the current trends and status of the crypto industry. The paper reiterated the firm’s bullish views on Web3, forecasting further long-term growth of the sector, and weighed in on the dominant position claimed by Ethereum among layer-one blockchains.
“web3 is better”
a16z summarized the report in a few comments, mainly on the state of Web3 and Ethereum. The VC giant attributed the recent sell-off in the market as a possible sign of a seasonal downturn, while the crypto-powered Web could be one of the best of the 3 decades.
The company argued that Web3 offers more reasonable economic terms than Web2 giants like Meta. According to its data, in 2021, primary sales of Ethereum-based NFTs as well as secondary sales on OpenSee received a total of $3.9 billion from royalties paid to creators – the reward Meta has given its creators until 2022. Four times more than that.
Although YouTube and Spotify each paid $15 billion and $7 billion respectively to their creators by 2021, the report noted that each artist on Spotify and each channel on YouTube only received $636 and $2.47. In contrast, by classifying the NFT collection as a Web3 producer, the firm stated that there were a total of 22,400 Web3 creators, and “Web3 paid $174,000 per creator.”
In addition to crediting DeFi as a disruptor to the traditional finance industry, a16z sees Flowcarbon, Helium and Flowcarbon as strong candidates to solve critical real-world issues by leveraging DLT’s power in privacy, transparency, and decentralization. Identified blockchain projects like The Spruce.
Ethereum Remains Dominant But Faces Challenges
Another notable factor, as highlighted in the report, is the leadership of Ethereum ahead of other layer-one blockchains such as Solana, Phantom, etc. With approximately 4,000 monthly active developers, the second largest blockchain by market cap has the most builders ahead of its primary competitor Solana which has only 1,000.
However, the report noted that Ethereum’s emphasis on decentralization over scaling has made other networks more attractive to users, with lower fees and better performance.
“It’s too early,
a16z analyzed the current size of such users and compared Web3 to early commercial use of the Internet, which is roughly between 7 million and 50 million. It says:
“By 2005 the Internet reached 1 billion users – incidentally, Web 2 began to take shape amid the founding of future giants such as Facebook and YouTube.”
Seeing blockchain as “one hit product” in the 90s and 2000s such as PC and broadband and mobile phones in the last decade, the firm predicted that there would be “many winners” in the race.
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