State of Crypto 2023: Key Takeaways and Must-Know Trends


This month, Andreseen Horowitz (a16z), a venture capital firm, released its second annual “State of Crypto” report. We covered their inaugural edition; since then, we’re still deep into the crypto winter.

Despite the high-profile bankrupties and frauds throughout the last year, the report still paints a bright future for crypto.

Overall, they observe steady progress of the industry and celebrate milestones like “The Merge”.

a16z also released a new tool: the State of Crypto Index. It tracks the crypto market’s health from a technological, rather than financial, perspective.

It is based on 14 metrics like mass adoption, crypto mentions in research papers and job search interest. In other words, it ignores short-term price fluctuations and focuses on key indicators that will drive long-term value.

The 60-page deck goes through many charts and statistics to back up their claims. If you only have five minutes, here are the highlights.

This article was written by a Financial Horse Contributor.

Recap: What is Web3?

Web3 is a term used to describe the next evolution of the internet. It combines the best features of the two eras that precede it.

Web1 began in 1990. It introduced open decentralised protocols that enabled email and the web. Web2 began in 2005. This is the age that birthed future tech giants like Google and Facebook. It introduced more advanced internet functionality at the cost of centralising power and network value to Big Tech.

Web3 aims to return the Internet to the decentralised ethos of Web1 while retaining the functionalities of Web2. Blockchains like Bitcoin and Ethereum covers the decentralised aspect.

Innovations like smart contracts, decentralised finance (DeFi), and decentralised autonomous organizations (DAOs) provide functionality. This makes possible things like community governance and users benefiting from network ownership.

In short, a16z writes: “Web1 and web2 democratized information and publishing. Web3 democratizes ownership.”

The number of active crypto addresses hit an all-time high

One positive sign is the growing increase in active addresses, pointing to steady web3 adoption.

There were 15M active addresses in March 2023, an all-time high. This is twice the number of addresses in March 2021, at the peak of crypto asset prices.

This is an indication that crypto is not pure speculation, and people joining today are organically engaging with blockchains and web3 applications, like DeFi and web3 games.

The number of monthly active developers has risen steadily since 2020

It’s still early days in crypto, and there are many more innovations and “killer apps” to be created. That’s why the ecosystem of developers is so important.

There were 30K monthly active developers in the crypto industry in March 2023. This is lower than the all-time high in early 2022, but a 60% increase since the start of the bull run in 2020.

The growing number of active developers show there many were attracted to the industry by the hype, but stuck around through the crypto winter.

Layer 2s make up ~7% of all Ethereum fees, up from 1.5% a year ago

Layer 2 blockchains are technology built on top of an existing blockchain system like Ethereum. The primary goal of these protocols is to make the underlying blockchain cheaper and quicker.

This year, Layer 2s made up around 7% of total fees paid on Ethereum. This is over four times higher than the amount paid last year. This is a healthy sign that more apps are building on them. As blockchains become more scalable and cheaper, it unlocks more use cases (e.g. payments) and capable of mass adoption.

The slide below shows the various methods used to scale blockchains.

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Ethereum’s “Merge” in Sep 2022 was a monumental infrastructure upgrade

It’s possible the only thing crypto evangelists are happy to be down 99.9% is Ethereum energy consumption.

Since Ethereum fully transitioned to a new Proof of Stake consensus mechanism on 15 September 2022, energy consumption has dropped off a cliff.

In the past, Ethereum consumed an amount of energy comparable to whole countries. Now, it consumes 0.001% of the energy that YouTube consumes annually. a16z calls it “one of the most momentous events in the history of open source development”.

It’s hard to comprehend the complexity of the project – it’s been compared to changing an airplane engine mid-flight. It’s a massive achievement that they managed to pull off the upgrade so seamlessly.


a16z concludes the report with optimism.

Zooming out, the crypto market is progressing across key indicators like developer and funding activity. Look past the short-term volatility and there is a steady increase in price, interest, innovation and startups/projects.

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