a16z's Annual Crypto Report: Crypto Activity Reaches Record High, Becomes Key Topic in U.S. Election
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a16z's Annual Crypto Report: Crypto Activity Reaches Record High, Becomes Key Topic in U.S. Election
DeFi remains popular and continues to grow.
Navigating Web3 tides with focused insightsAuthors: Daren Matsuoka, Robert Hackett & Eddy Lazzarin
Translation: TechFlow
Two years ago, when we first launched our annual State of Crypto Report, global interest in crypto was still relatively low. Exchange-traded products (ETPs) for Bitcoin and Ethereum had not yet been approved by the U.S. Securities and Exchange Commission (SEC), and Ethereum had not yet transitioned to its energy-efficient proof-of-stake mechanism. Layer 2 (L2) networks designed to improve transaction capacity and reduce costs were barely in use, and where they existed, fees were far higher than today.
Now, as we release the 2024 State of Crypto Report, the landscape has changed dramatically. The report details how crypto has become a major policy topic, the latest advances in blockchain technology, and emerging trends among developers and users. It also includes:
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In-depth analysis of key applications such as stablecoins, considered one of crypto’s “killer apps”;
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Exploration of how crypto intersects with other technological trends like artificial intelligence, social networks, and gaming;
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New data on crypto interest in U.S. swing states ahead of the presidential election, and more.
The 2024 report also reveals that crypto activity has reached all-time highs. It analyzes the maturation of blockchain infrastructure, particularly amid recent scaling upgrades that have drastically reduced on-chain transaction costs, alongside the rise of Ethereum L2s and other high-throughput blockchains.
This year, we’re launching a new tool: the a16z Crypto Builder Energy Dashboard. For the first time, we’re publicly sharing our unique vantage point in the crypto ecosystem by visualizing the distribution of “builder energy.” The dashboard aggregates and anonymizes thousands of data points from our investment team’s research, our CSX startup accelerator program, and other industry tracking tools. With this tool, anyone can explore what builders in crypto are working on—the blockchains they use, the types of applications they build, the technologies they adopt, and their geographic locations. We plan to update this data annually as part of our State of Crypto series.
Next, here are some highlights from the 2024 State of Crypto Report.
7 Key Takeaways:
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Crypto activity and usage have reached all-time highs
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Crypto has become a significant political issue in the U.S. election cycle
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Stablecoins have achieved product-market fit
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Infrastructure improvements have increased capacity and drastically reduced transaction costs
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DeFi remains popular and continues to grow
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Crypto may help solve some urgent challenges facing AI
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More scalable infrastructure is enabling new on-chain applications
1. Crypto Activity and Usage Reach All-Time Highs
The number of monthly active crypto addresses has hit unprecedented levels. In September alone, 220 million addresses interacted with a blockchain at least once—a more than threefold increase since the end of 2023. (Note: Active addresses, as a metric, are more susceptible to manipulation than others. See related material for details.)
The surge in activity is largely driven by Solana, which accounts for approximately 100 million active addresses. This is followed by NEAR (31 million), Coinbase’s popular L2 network Base (22 million), Tron (14 million), and Bitcoin (11 million). Among EVM-compatible chains, BNB Chain by Binance ranks second after Base with 10 million active addresses, followed by Ethereum (6 million). (Note: Active addresses across EVM chains are calculated using deduplicated public keys to arrive at the total of 220 million.)
These trends are mirrored in our Builder Energy Dashboard. Solana saw the largest year-over-year increase in builder interest, with the share of founders indicating they are building or interested in building on Solana rising from 5.1% last year to 11.2% this year. Base ranked second, increasing from 7.8% to 10.7%, followed by Bitcoin, which rose from 2.6% to 4.2%.
In absolute terms, Ethereum remains the most popular blockchain for builders, capturing 20.8% of interest, followed by Solana and Base. Other notable chains include Polygon (7.9%), Optimism (6.7%), Arbitrum (6.2%), Avalanche (4.2%), and Bitcoin (4.2%).
Meanwhile, mobile crypto wallet users hit a record high of 29 million in June 2024. While the U.S. still accounts for the largest share of monthly mobile wallet users at 12%, its proportion of total users has declined in recent years due to growing global adoption and more projects geo-restricting the U.S. to maintain compliance.
Crypto’s influence is expanding globally. After the U.S., the countries with the highest mobile wallet usage include Nigeria (which has pursued regulatory clarity through initiatives like regulatory sandboxes and seen strong growth in bill payments and retail purchases), India (due to large population and high smartphone penetration), and Argentina (where residents increasingly turn to crypto, especially stablecoins, amid currency depreciation). While active addresses and monthly mobile wallet users are easy to measure, the actual number of active crypto users remains difficult to determine. Using multiple methodologies, we estimate there are between 30 million and 60 million monthly active crypto users worldwide—only about 5% to 10% of the estimated 617 million global crypto holders as of June 2024 according to Crypto.com. (For more on our estimation methodology, see related material.)
This gap highlights the vast potential to engage and re-engage passive crypto holders. As major infrastructure improvements enable entirely new, compelling applications and consumer experiences, more inactive holders could transition into active on-chain participants.
2. Crypto Becomes a Major Political Issue Ahead of the U.S. Election
In this election cycle, crypto has emerged as a central topic in national discourse.
To understand this shift, we measured crypto interest in swing states. Two key battleground states expected to be fiercely contested in November—Pennsylvania and Wisconsin—have risen to fourth and fifth place, respectively, in Google Trends’ cryptocurrency search interest since the last election in 2020. Michigan ranks eighth in crypto search interest, while Georgia holds steady. Meanwhile, interest has declined in Arizona and Nevada since 2020.
The launch of Bitcoin and Ethereum exchange-traded products (ETPs) this year may be a key driver behind heightened public interest. As these ETPs offer broader access to investors, the number of Americans holding crypto could grow. Currently, Bitcoin and Ethereum ETPs already hold $65 billion in on-chain assets. (Note: Though commonly referred to as ETFs, these products are technically registered under SEC Form S-1 as ETPs, indicating their underlying asset baskets do not contain securities.)
SEC approval of ETPs marks a major milestone in crypto policy. Regardless of which party wins in November, many politicians expect bipartisan crypto legislation will further accelerate this momentum. An increasing number of policymakers and elected officials across both parties now express positive views on crypto.
This year, the industry also made other significant policy strides. At the federal level, the House passed the Financial Innovation and Technology for the 21st Century (FIT21) Act with bipartisan support—208 Republicans and 71 Democrats voted in favor. If passed by the Senate, the bill could provide much-needed regulatory clarity for crypto entrepreneurs.
Equally important, at the state level, Wyoming enacted the Decentralized Unincorporated Nonprofit Association (DUNA) Act, granting legal status to decentralized autonomous organizations (DAOs) and allowing blockchain networks to operate legally without compromising decentralization.
The European Union and the United Kingdom have been the most proactive in engaging the public on crypto policy and regulation. European institutions, collectively, have issued more requests for comment than the SEC. Moreover, the EU’s Markets in Crypto-Assets (MiCA) regulation became the first comprehensive crypto policy framework to pass into law and is expected to be fully implemented by year-end.
Stablecoins, one of the most widely used crypto products today, are a focal point of policy discussions, with several related bills under consideration in Congress. A key factor driving this conversation in the U.S. is the recognition that stablecoins could reinforce the dollar’s international role even as its dominance as a global reserve currency declines. Currently, over 99% of stablecoins are denominated in U.S. dollars—far surpassing the euro, the second-most-used denomination, at just 0.20%.
Beyond strengthening the dollar globally, stablecoins could also bolster America’s domestic financial foundation. Despite being only a decade old, stablecoins have become one of the top 20 holders of U.S. Treasury securities—outpacing nations like Germany.
While some countries are exploring central bank digital currencies (CBDCs), the U.S. faces a mature opportunity with stablecoins. Against this backdrop—and amid growing commentary from prominent political figures—we expect more countries to begin seriously formulating their own crypto policies and strategies.
3. Stablecoins Achieve Product-Market Fit
Thanks to their fast, low-cost global payment capabilities, stablecoins have become one of crypto’s most compelling “killer apps.” As New York Congressman Ritchie Torres wrote in a column for the New York Daily News in September, “The widespread use of dollar-backed stablecoins—powered by the ubiquity of smartphones and secured by blockchain cryptography—could become the largest experiment in financial empowerment in human history.”
Major scaling upgrades have slashed the cost of executing crypto transactions, especially stablecoin transfers, by over 99% in some cases. On Ethereum, the average fee to send USDC—a popular dollar-pegged stablecoin—has dropped from $12 in 2021 to $1 this month. Sending USDC on Coinbase’s popular L2 network Base costs less than a cent on average. (Note: These figures may not include certain initial setup or withdrawal costs.)
Compared to the average $44 cost of an international wire transfer, stablecoin fees are remarkably low.
Stablecoins have dramatically simplified value transfer. In Q2 2024, stablecoin transaction volume reached $8.5 trillion across 1.1 billion transactions—more than double Visa’s $3.9 trillion during the same period. That stablecoins can now rival established payment services like Visa, PayPal, ACH, and Fedwire underscores their practical utility.
Stablecoins are more than just a passing trend. Even during periods of crypto market volatility, stablecoin usage shows little correlation with market cycles. In fact, even as spot crypto trading volumes decline, the number of monthly sending addresses for stablecoins continues to rise. In other words, people aren’t using stablecoins solely for trading.
All this activity is reflected in usage statistics. Stablecoins account for nearly one-third—32%—of daily crypto usage, second only to decentralized finance (DeFi) at 34%, measured by share of daily active addresses. The remainder of crypto usage spans infrastructure (e.g., bridges, oracles, MEV, account abstraction), token transfers, and emerging application areas like gaming, NFTs, and social networks.
4. Infrastructure Improvements Boost Capacity and Slash Transaction Costs
Part of the reason stablecoins are so popular and accessible is the advancement of underlying infrastructure. First, blockchain throughput continues to grow. Thanks to the rise of Ethereum L2s and other high-throughput blockchains, transactions per second across blockchains are now more than 50 times higher than four years ago.
Even more striking is Ethereum’s major upgrade in March 2024, known as Dencun, also called “protodanksharding” or EIP-4844. This upgrade significantly reduced fees for L2 networks. Since then, despite rising value on L2s, the fees paid by L2s on Ethereum have plummeted. In short, blockchain networks are becoming both more popular and more efficient.
A similar trend is evident with zero-knowledge (ZK) proofs, a technology critical to scalability, privacy, and interoperability in blockchains. Even as the monthly cost of verifying ZK proofs on Ethereum decreases, the value locked in ZK rollups continues to grow. In other words, ZK proofs are becoming cheaper while growing in popularity. (Here, we use zero-knowledge as a broad term referring to cryptographic techniques that succinctly prove computations executed on rollups are correct.)
ZK technology holds great promise, offering developers a path toward cheap and verifiable blockchain computation. However, ZK-based virtual machines (zkVMs) still lag behind traditional computers in performance—a humbling reminder of the work ahead.
With these infrastructure improvements, it’s easy to see why blockchain infrastructure remains one of the most popular areas for developers—and why L2s are one of the five hottest development subcategories we track.
5. DeFi Remains Popular and Is Growing
The only area attracting more developer attention than blockchain infrastructure is decentralized finance (DeFi), which also dominates in terms of usage share, accounting for 34% of daily active addresses. Since the DeFi summer of 2020, decentralized exchanges (DEXs) have grown to capture 10% of spot crypto trading activity—trading that occurred exclusively on centralized exchanges just four years ago.
Today, more than $169 billion is locked across thousands of DeFi protocols. Staking and lending are among the main DeFi subcategories.
It has been over two years since Ethereum completed its transition to proof-of-stake, drastically reducing the network’s energy consumption and environmental impact. Since then, Ethereum’s staking ratio has risen from 11% to 29%, greatly enhancing network security.
Though still early, DeFi offers a viable alternative to the growing centralization and concentration of power within the U.S. financial system. Since 1990, the number of banks in the U.S. has declined by two-thirds, with assets increasingly concentrated in a few large institutions.
6. Crypto May Help Solve Some Urgent Challenges Facing AI
Artificial intelligence is one of the biggest trends this year, drawing attention not only across tech but also within the crypto space.
On social media, AI is a frequent topic among crypto thought leaders. More surprisingly, there is substantial overlap between users visiting chatgpt.com and those visiting top crypto websites, highlighting the close connection between AI and crypto user bases.
Crypto developers are also closely engaged with AI. According to our Builder Energy Dashboard, approximately 34% of crypto projects report using AI—an increase from 27% a year ago. Blockchain infrastructure projects are the most common adopters of AI technologies.
Given that the cost of training cutting-edge AI models has quadrupled annually over the past decade, we believe AI could lead to further concentration of power on the internet. Without intervention, only the largest tech companies may be able to afford training the latest AI models.
The centralization challenge posed by AI stands in stark contrast to the decentralization opportunities offered by blockchain networks. Crypto projects are already addressing these issues—for example, Gensyn democratizes access to AI compute, Story tracks intellectual property to compensate creators, Near runs AI on open-source, user-owned protocols, and Starling Labs helps verify the authenticity and provenance of digital media.
In the coming years, the convergence of crypto and AI is likely to deepen.
7. More Efficient Infrastructure Enables New On-Chain Applications
As transaction costs fall and blockchain capacity expands, many previously impractical consumer-facing crypto applications are now feasible.
Take NFTs, for example. Just a few years ago, high crypto transaction fees coexisted with billions of dollars in secondary market NFT trading. Today, that fervor has cooled, replaced by a new trend: creating low-cost NFT collections on social apps like Zora and Rodeo. This represents a major shift in the NFT market—one that would have been unimaginable before transaction fees dropped so dramatically.
Social networks are another case in point. Although they currently represent a small fraction of daily on-chain activity, they are attracting significant developer attention: according to our Builder Energy Dashboard, 10.3% of crypto projects in 2024 are focused on social. Indeed, social-related projects like Farcaster have become one of the hottest developer subcategories this year.
As developers and consumers explore new social experiences, on-chain gaming is pushing blockchain scalability to its limits. For instance, Proof Of Play’s pirate-themed RPG Pirate Nation uses rollups that consistently rank among the highest gas-consuming applications on Ethereum.
As the November election approaches, prediction markets—though still illegal in the U.S. if based on crypto—are rapidly evolving. Kalshi, a non-crypto prediction market registered with the Commodity Futures Trading Commission, won a lower court ruling last month in a federal lawsuit over its election contracts. (Currently, registered exchanges are allowed to offer traditional futures contracts based on elections.)
New consumer behaviors are emerging. All these novel experiences would have been impossible when blockchain infrastructure was clunky and transaction costs were high. As blockchain technology continues to improve along the classic price-performance curve, we expect many more such applications to flourish.
So where do we stand now? Over the past year, crypto has made remarkable progress in policy, technology, and consumer adoption. On the policy front, milestones include the surprise approval and launch of Bitcoin and Ethereum ETPs, as well as the passage of significant bipartisan crypto legislation. Infrastructure has also improved substantially, from enhanced scalability to the rise of Ethereum L2s and other high-throughput blockchains. Additionally, new applications are being developed and adopted—from the continued growth of mainstream products like stablecoins to experimentation in emerging areas like AI, social networks, and gaming.
Whether we’ve entered the fifth wave of the price-innovation cycle—a framework that helps us understand the ebbs and flows of the crypto market—remains to be seen. Regardless, the industry has undeniably advanced over the past year. As ChatGPT demonstrated, just one breakthrough product can transform an entire industry.
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