2023 State of Crypto Report Q&A

Eddie, Hey Darren. Okay, so we've seen lots of people tweeting various insights and takeaways from the report, but I want to know what your top takeaways are. What's the single most interesting or surprising statistic or trend you came across this year? Chris, do you want to take this one to start? Yeah, I mean, I think the key kind of message to takeaway is a lot of really interesting work progress made on infrastructure side around particularly around the Ethereum ecosystem and layer 2s. I think a lot of the basic framework came from work we did a couple of years ago where we tried to look at kind of to separate kind of the fundamental and the way we kind of think about it is all technology markets have kind of different ways they progress and there's a lot of focus on financial markets. This could be crypto and on crypto, there's also a stream of kind of other kinds of tech and then there's sort of the fundamental progress of the technology of the user, kind of applications infrastructure and so the core idea with this report which we've been doing that for a couple of years is to really kind of look at the fundamentals and to take what kind of appears to be a chaotic process and try to understand it and sort of see the kind of overall logic. And so things like the number of developers and number of applications, the progress of the infrastructure, you know, a lot of computing waves, the key metric is the price of performance or Moore's Law and semi-conductors and an equivalent in the blockchain space would be kind of the cost, the cost, gas costs, or block space costs for secure high quality transactions. And so, you know, there's a lot of data in there. I won't go through it all at Darren Dedy, talk about some of the details but which I think show, you know, kind of nice progress on a lot of dimensions there. That's great. Yeah, so you're seeing a lot of improvement when it comes to price and performance in Web 3, particularly with respect to how blockchain is performed. Eddie looks like you want to jump in. There's a ton of things I could pick obviously I'm a little biased. I like a lot of the statistics in the report. It could definitely choose many trends. Maybe one to highlight is like NFT buyers. I thought that one's really neat is that NFT buyers has decreased since the recent highs, like last year, but they're down a lot less than I think you'd think and down much less than volume, which indicates that maybe there's some new interesting patterns that we started to see unfolding in terms of how people buy them and what exactly they do with them. We've seen a little bit of a trend. There's now more a little more anecdotal but around more patronage style models where people are purchasing NFTs and primary sales and using them as part of a way to support a creator directly, like with basically minimal to zero as your mediaries. I think it's a really cool pattern. It's a little subtle in the data but we already have a little bit. Another one I'd point out if I can do two is that ZK slide we have and we show incredible advancements in the pace of proving speeds, proof sizes and verification speeds. These all make it a lot easier to try to experiment with and incorporate two key benefits ZK technology which is scaling through succinctness and privacy. It'll just open up a lot of space for people to start to experiment with them since now they're finally becoming economically easy to do and fast. We got a lot of feedback on that zero knowledge slide so we're definitely going to spend some time on that but I want to linger on something he raised at the outset about the number of NFT buyers which has decreased since the highs in early 2022 but has actually jumped up in recent months and actually appears to be possibly starting something of a rebound. I want to tease that apart a little bit, Eddie. What's going on there? Why this difference all of a sudden? Yeah well the key point and this is a theme of the whole report right is if you zoom out despite the volatility as Chris was alluding to there it seems to be an underlying order on the product cycle but also an underlying trend of maybe smoother growth trend if you squint a little bit where these technologies come in they pop there's chaos and then there is adoption right that comes slowly after. NFT buyers slide demonstrates this really clearly there's basically no activity in 2020 and it only begins in early 2021 where we've stabilized now is still radically above where we were right so that's kind of the big picture trend where the excitement is coming in the more recently like manifold open additions and a variety of other projects I've been making it really easy for creators to experiment not just with new features and new ways that NFTs can be incorporated into their projects but also with just the process of minting them and distributing them we've seen a lot of contention on the royalty side that's a fascinating other topics and we should probably unpack some other time but despite the royalty piece primary sales and direct relationships with consumers are being experimented with and that's that's great that's exactly what we want to see just for people who don't know you referenced open additions maybe you could just elaborate on that I'll let Darren say a little bit more on open additions but it's a way to create mints that often end up being like a little cheaper a little more in the moment and related directly to a current effort by a creator Darren do you have any thoughts about open additions yeah I'd say the big the big point to make is that it creates a much more accessible experience for people compared to limited additions which often you know the best ones just increase in price to a point where it's pricing out 99% of potential buyers and so it's a a cool way to kind of bring more people into the space and kind of drive those organic use cases as opposed to you know the speculative ones that's interesting yeah so it sounds like maybe instead of the big ticket item the high price sort of one-off sale NFT is now giving away a little bit to something a little bit more open and accessible to to broader audiences yeah and I'd also tie this in with what's happening in L2's because it's not a coincidence that you know if most NFT if transaction fees are very high which is absolutely the norm of what we saw throughout a lot of the late 2021 early 2022 period if transaction fees are really high you're not going to be able to do much with very low price NFTs or things that do that experiment with all kinds of new features that maybe mutate state on chain which is expensive if gas fees come down and there's more high quality block space at a low price then you can have cheaper NFTs you don't have to justify the expensive a transaction by arguing that it's an investment or some speculative behavior instead you can do all the cool kinds of things all the kind of computer behaviors where NFTs are their own programs NFTs have interesting interactions with other kinds of online objects like that's a really cool behavior and that requires very low transaction fees which requires scaling which we're seeing in L2's so it all kind of comes together in my mind L2's is a huge meaty topic that we're going to also get into but before we do that Darren I want to make sure to ask you as well what is the most exciting or perhaps surprising finding that you came across in this year's report? Yeah maybe I'll just kind of expand on what Eddie and Chris have been saying you know state of crypto really is an opportunity for us to bring together a lot of the kind of data analysis that we already do as part of our our day jobs and when we were thinking about bringing together all of this data we decided that it would make sense to kind of segment the market into kind of metrics that reflect the growth and activity on the supply side so this is things like you know that are representative of the builders that are building products the research the kind of development that is happening in the industry and that's you know looking at things like active developers and contract employers academic publications job search interests and we really kind of created that bucket that represents the kind of KPIs for the supply side which we call innovation indicators we also kind of wanted to show metrics that represent the demand side of the market which we call adoption indicators and that's things like active addresses transactions mobile wallet users and we brought all of this data together and we kind of segmented it into those two different sides of the market and then when we were creating some some kind of abstractions on on top of that to show kind of the growth of those two categories and we'll get more into this for sure in detail but one of the big takeaways was that despite the fact that the demand side has shown kind of signs of volatility throughout history it goes up and down it fluctuates a lot you know over the long term it does does grow but the path there is very volatile the the flip side to that is the supply side which has shown pretty consistent steady growth over time which I think speaks to kind of how we view these market cycles in crypto and I think you know all of this data work can kind of be distilled into a single takeaway which is the innovation side of the market continues to grow in a way that looks very healthy builders continue to build the adoption side you know we're less certain on the trajectory of that but those two things kind of come together to form the market and I think taking all of these data sources aggregating it in this way really allowed us to paint a really nice picture using data for what's happening in in the market. So you said a lot of interesting things there let's back up a little bit and just kind of double click on that framing you mentioned so on the one hand you've got all this stuff that's being built and then on the other hand you've got how it's being used meanwhile when it comes to crypto overlaid on top of all this there are like massive crazy price swings in either direction. Let's let's dive a little bit more into that into that relationship between how prices and how innovation what's being built factors into the adoption of this technology. Yeah I can kind of quickly say you know this is this is this is stuff that we've been thinking about in writing about for a long time we've called it in the past the the price innovation cycle and the core idea there is that prices are a leading indicator for innovation in the space the way that works is prices you know if the prices rise that generates a lot of interest that interest leads to kind of new startup ideas that people pursue they go build cool stuff that improves the overall industry which then results in an increase in prices which kind of happens which which restarts the cycle and you know that if you look at the data there's kind of different different ways to slice it but that kind of cycle that we've seen has held true throughout the four major cycles in crypto since Bitcoin's inception and it's something that we can track and see in real time using the data and I think it kind of speaks to what you know you were talking about and what I was referring to earlier which is you know people come in as a result of these price swings but then when they come in they continue to stick around and build and improve the infrastructure that's kind of where we're at in the cycle now you know adoption can kind of swing based on prices and interests and all of these things but the the steady beat of builders that we've seen throughout history has kind of continued to demonstrate that builders are here they're going to continue to build and you know I think there's a bright future ahead of us when it comes to what will will be able to to make Kelly agree so yeah oh Eddie come on good now go on I'm just I love hearing yeah it sounds like it sounds like development activity has sustained somewhat I mean is that a surprising result for you or was this kind of what you would expect to see this is kind of the pattern we've seen it's not it's not a new pattern you zoom back far enough I know this time we didn't really emphasize the zooming into the first wave and the second wave but if you go into these prior cycles in crypto this is a sustained pattern and in fact this is not just some crypto thing this is a property that's true of technology and technological revolutions in general they they they aren't some like straight up into the right graphs they unfold over time they require specific new technologies to unfold new infrastructure to be rolled out all kinds of application ideas to be experimented with lessons from those reincorporated into the infrastructure and and so on and so forth that's just how these things play out so it's a little unsurprising that people come in they try new things they stick around so I'm glad to see it that's great yeah we've got some questions drilling and so I figure I will raise one of them we've got some person asking here when do we feel that we can show use cases that become mainstream and actually make sense for everyone you know situations where blockchain is actually into