Working in the crypto industry has both upsides and downsides alike. In terms of upsides, it is an extremely fun, fast, and exciting place to be in. And in terms of downsides, there is this apparent uncertainty about the future. But as long as you keep yourself updated with the latest trends in the industry, you should be good.
And the best way to do that is to read reports. LinkedIn posts and articles are good for building perspectives. However, reports are more data-oriented. They would help you analyze and make smarter bets for the future. Out of multiple outlets providing well-researched reports, one notable player is a16z.
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Andreessen and Horowitz, or a16z, is a venture capital firm based out of silicon valley for the uninitiated. Lately, they have been investing actively in crypto and web3 space. And if people are trusting them with their money, I think it is fair to assume that the data they would have gathered will have substantial credibility.
So in this post, I would talk about the key takeaways from one of their reports called ‘State of Crypto.’ The report is 57 pages long and can be downloaded from here.
Price Innovation Cycle:
This is an exciting hypothesis I came across in this report. As per the ‘price-innovation cycle,’ the entire industry (not specific to crypto) cuts through the cycles of
This is when the price of a specific asset class outperforms its peers and gains the attention of enthusiasts across the board. Think of it like this. If BTC were trading at $1000, would you be as interested in it as today? All the technological revolution remains the same. But masses won’t have been there.
Any movement in prices creates interest where developers notice this space; enthusiasts start talking about it on Social media.
Ideas and Innovation:
This, in turn, leads to the creation of an idea repository. People start figuring out the problems in this space and develop solutions around them.
Startups and Projects:
This finally paves the way for businesses to be centered around these new technologies. People go all-in with an aim to make these innovations mainstream.
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The report states that we are in the middle of the fourth price innovation cycle. This constant feedback loop has propelled the industry ever since the advent of Bitcoin.
Web3 and its potential:
The report highlights the critical problems with the existing avatar of the internet. The current internet is either digital authoritarianism (Eg. China, North Korea) or Oligopoly by big tech (Google, Meta).
And as the growth has stagnated over a period of time, these organizations have moved from a model of ‘attract’ to ‘extract.’
As a result, users tend to make the least out of the value chain. Refer to the image below:
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Web3 uses innovative models of token economy to safeguard the interests of everyone in the ecosystem, which is why you would see such a stark difference, in the earnings and share, between the creator’s economy powered by web2 and web3 (refer to the image below).
This can be attributed to the early mover advantage and the immense network effects of the significant community that backs up Ethereum.
However, with that being said, Ethereum faces tough competition from multiple L1s out there like Solana, Avalanche, Fantom, and BNB Smart Chain. These chains have tried to find a product-market fit in a space where the end consumer does not care about decentralization.
Therefore, they can provide Blockchains that handle transactions faster and at lower prices.
Will the narrative stick to decentralization? Only time will tell.
What’s Your PoV?
The report also touches upon a few other areas like the state of L2s, NFTs, Metaverse, DeFi, and Stablecoins. It is definitely worth reading if you are looking forward to planning your next moves in this bear market.
For now, keep calm and believe in the Blockchain tech!