It’s the end of the year! Well, almost! At last, the chance to look forward to a bunch of reviews to help us wade through the events of the last 365 days. The helpfulness of a year-in review varies wildly depending on the industries in which you participate, and the interests that you nurture. This is crypto, and yearly reviews can become wholly obsolete next week. This is, in fact, a great thing, showcasing how much progress continues to be made within Web3.

Speaking of reviews, I love going back to publications like the Messari Annuals of the years gone by. It feels amazing to revisit a snapshot in time, where it was all vibes and ambition, ideas that were waiting to be put in motion. I love seeing the sheer amount of progress that we’ve made since. Also, there's always the fun mini-game of looking at how many of the ‘top names’ in the space have found themselves either incarcerated, disgraced or in some limbo in between. Crypto loves a good success story, but the whole community will really sink its teeth into unmitigated disasters. I, too, am among these people. Nothing pairs better with my morning coffee than the worst actors in our space being found out after f-ing around.

This, however, is not the topic of today’s post. With the ink just barely drying on A16Z’s new report on the State of Crypto in 2024, this is what everyone is talking about. There are plenty of conclusions here that will interest you irrespective of your investment (both $ and emotionally) in this market. Let’s break it down, point by point.

Crypto usage is at all-time high levels, but only 5-10% of wallets are ‘active users.’

This means that 90% of the crypto being held is just sitting there. Doing nothing. No yield, no liquidity loops. This is, imo, the most actionable part of this report. What are we, as companies and services in the crypto space, doing to encourage people to actually use their crypto?

It has taken a gargantuan amount of education to get people here into the space, and to part with their hard-earned money to get a foot in the door of Web3. And now we’ve just left 90% of our users just…there? It’s like having a Ferrari that stays parked in the garage. We, as an industry, need to make more racetracks that can nudge these supercar owners to leave the house. I want every HODLer to hear that V12 switching up into ever-higher gears, and for them to feel this massive movement that they’re a part of.

Love it or hate it, crypto is an election issue now.

Crypto’s initial use case was a money system outside the money system. In 2024, this is no longer the case. The cypherpunks of yesterday who gave crypto social validation through use cases are the VC funds and power brokers donating to campaigns and trying to influence policy. Just like Facebook and Amazon, venture funds (like author of this article, A16Z) are the new establishment. The scope of the industry is now so huge that, should anything go astray, it becomes America’s problem.

I think this will lead to increased levels sanitisation of the industry, no doubt because the punk rockers of the past now have nest eggs to protect. It’s the tech industry version of ‘you get more conservative as you get older.’ It’s only a matter of time before concepts like ‘censorship-resistant’ and ‘permissionless’ get eroded from the Web3 lexicon entirely.

Stablecoins are vital, and alternatives to Tether USD are more abundant and reliable than ever before.

We need stablecoins. We need them to book profits. We need them to put out holdings into context. But, for the longest time, stablecoins were problematic. Among the key events that brought this market back down to earth after the exuberant summer of 2021 was the collapse of TerraUSD, an algorithmic stablecoin. This isn’t the only suspicious player, with Binance’s BUSD biting the dust earlier this year too. And, who can forget the elephant in the room - USDT. The real value held in reserve held by Tether, the company behind USDT, is shrouded in mystery. We have no idea of this company’s solvency, and how far away we are from another TerraUSD situation. 2024, however, showed us that this part of the market is improving

USDC is now the new darling of the Web3 space, in big part thanks to the memecoin cycle on Solana. Circle is the company behind this stablecoin they have really invested into their infra to claim this position. The Cardano community is clamouring to get USDC onto their blockchain too, and I believe this sort of enthusiasm is what will push us towards a multi-chain future.

De-Fi is here to stay (despite all the challenges that the bear market is throwing at us)

As we established at the beginning of this list, not that many people actually use crypto. But the ones that do? They LOVE de-fi.

Centralized exchanges like Binance, Coinbase and Newton are old news. A necessary evil to enter into the crypto world. But once you’re there, off to the DEX’s you should go. Especially when one looks at how few of the assets listed on these platforms have outperformed bitcoin in the last year. A trading experience where you retain control of your funds at all times, while getting much larger gains? It’s obvious why a lot of the on-chain attention is occurring within De-Fi.

Memecoins have been the lifeblood of this bear market, and as we approach bitcoin’s ATH they don’t seem to be done yet. The communities being built and engaged here are something special. And Murad’s talk about the dynamics of memecoins in Singapore seems to have injected even more optimism into this space.

Crypto & AI are here, sort of.

At this point many of us have used some sort of AI tools beyond ChatGPT. Generative AI and LLMs aside, this is just the tip of the iceberg. We have no idea how drastically it will change our relationship with tech, and more downstream, crypto. Discussions such as distributing the significant compute demands of an AI model over many users seems like a very crypto-facing solution. Projects like Render Token have already started doing things here. And then we have everyone’s favourite crypto x AI mystique - Bittensor and the TAO token. We see the “made with Bittensor watermark, but can anyone explain what this network even is? With enough interest it’s something I might have a go at.

And then, the most audacious cross-pollination of these ideas yet - AI Agents. It’s not something out of the Matrix, and any ideas popping into your head about rogue AIs wreaking havoc on the blockchain are premature. The vibes are, undoubtedly sci-fi af. When given $50,000, an AI Agent launched their own meme coin called Goatseus Maximus (great name, ngl) and shilled it to a multimillion dollar valuation. This agent was trained on made-up lore about the Gospel of Goatse, and it got memed into a permanent space in crypto culture. Or not. Many claims in the articles seem to be dubious. It’s been Community-Noted to high heaven on X so I’ll probably respond to it once the dust settles. Irrespective, it only further obscures the discussion on AI and how it will disrupt us, the disruptors.

Prediction Markets and Memecoin booms are a sign of a maturing ecosystem (!?)

One of the many criticisms used to cudgel the crypto industry is the ‘enterprise-readiness’ of the tech we are putting in place. Yes, we know blockchains can’t handle the transaction throughput of Visa. And we know that we need to get a lot closer to their TPS threshold if we are going to put the global economy on the blockchain. But look at how far we’ve come!

From thousands of dollars in transaction fees to send an NFT, we are now down to double digits. Layer-2 scaling solutions on Ethereum have pushed these fees down my orders of magnitude more. Solana, vehemently against L2s, offer an attractive native fee structure on its main chain. We have so many assets worth cents, or even fractions of cents - and now its become worthwhile to transact with them. As the first major mover, Polymarket was a breakthrough that changed the game and brought us prediction markets. Now we have a million copies, but they’re all attracting audiences of their own. It’s a good idea, with many clones. The pattern extends to memecoin launchpads like Pump.fun.

The ‘serious intellectuals’ among us might find these use cases frivolous. But the internet has always been a whimsical place - we are just expressing ourselves in new ways, enabled by new tech. People are making serious money, building communities that are facilitating real-world action, and making friends rooted in shared ideals and a sense of purposes. The permissionless builders are finding use cases outside the crypto bubble, and this is what I want to see more of.

Final Thoughts

This report was by no means exhaustive, having shied away from talking about some major moves in the Web3/crypto space. DePIN (decentralised physical infrastructure), chain abstraction and modular infra are all the rage right now, and the Bitcoin community has rallied around the discussion of making the network more 'smart' like Ethereum. While some of these ideas are nascent, they're still worth talking about, so I think that it was a bit of a missed opportunity.

However, the future for the crypto space is as bright as ever. Bitcoin is still under its all-time high, despite the halving occurring almost half a year ago. Jerome Powell and his team have masterfully navigated the spirally inflation crisis, and looser monetary policy is all but assured over the 12-18 months. The S&P500 is at all time highs, and the election is mere weeks away.

It would appear that the crypto rocketship is fuelling up at the launchpad. Just when will this market pop off? And, when it eventually does, will you be ready?