Ethereum’s popularity “a double-edged sword” – a16z’s state of crypto report

Venture capital fund giant Andreessen Horowitz (a16z) pointed out that the development and demand on Ethereum is “unmatched” despite the network’s high transaction fees.

The company warns, however, that its “popularity is also a double-edged sword,” as Ethereum prioritizes decentralization over scaling, causing competing blockchains to steal shares. market with “promises of better performance and lower fees”.

The comments came via a blog post featuring a16z’s 2022 “State of Crypto” report, with company data scientist Daren Matsuoka, protocol design and engineering lead Eddy Lazzarin, general partner Chris Dixon and chief content officer Robert Hackett all working together to deliver five key takeaways from the study.

Outside of Ethereum, the report focuses on topics like Web3 development, crypto adoption rates, decentralized finance (DeFi), and stablecoins.

According to data from the report, Ethereum leads the competition in builder interest, as the network has around 4,000 active monthly developers, compared to 1,000 for second-placed Solana. Bitcoin and Cardano are next at around 500 and 400 each, respectively.

Analysts noted that “Ethereum’s lead has a lot to do with its early start and the health of its community,” but highlighted the importance of development continuing to rise on the network despite high transaction costs:

“Ethereum’s overwhelming mindshare helps explain why its users have been willing to pay over $15 million in fees per day on average just to use the blockchain – remarkable for such a young project.”

Ethereum demand can also be seen in the report’s estimated transaction fees paid on a blockchain over a seven-day average, calculated as of May 12. The data shows that Ethereum is worth $15.24 million. To provide contrast, BNB Chain, Avalanche, Fantom, Polygon, and Solana are around $2.5 million in combined fees.

Tier 1 transaction fee: a16z

The report notes that Layer 2 scaling solutions are battling to lower Ethereum fees and speed up transactions while highlighting that long-awaited upgrades are coming to Ethereum to make the network more efficient and profitable. .

However, the “long-awaited” upgrades cannot happen soon enough, and a16z also pointed out in the report that on a 30-day average to May 12, active addresses and transactions on competing blockchains, including Solana, BNB Chain and Polygon are already well ahead of Ethereum.

Related: Ethereum Analytics Firm Nansen Acquires DeFi Tracker Ape Board

The data shows that Ethereum has 5.5 million active addresses which account for 1.1 million daily transactions, while Solana has 15.4 million active addresses and 15.3 million daily transactions. BNB Chain ranks third with 9.4 million and 5 million, while Polygon totaled around 2.6 million and 3.4 million. Analysts concluded that this would not be a winner-takes-all situation:

“Blockchains are the flagship of a new wave of computing, just like PCs and broadband were in the 90s and 2000s, and like cell phones were in the last decade. There are a lot of room for innovation, and we believe there will be many winners.

Among other key points in the report, the total value of the locked DeFi sector of around $113 billion would make it the 31st largest bank in the United States, estimates that Web3 adoption could reach 1 billion users. by 2031 and that NFTs have generated $3.9 billion in creator revenue so far.

Amanda J. Marsh