Every six months or so, I write an internal reflection on the current state and future development direction of cryptocurrencies. I believe it is worth sharing my recent reflection with the public.
This article is divided into three parts: what’s working, what else is happening, and what I’m looking forward to. I have tried to base most of my analysis on data, but it is undeniable that my views have inadvertently leaked out. I hope this is an interesting article. If the feedback is positive or the feedback is productive, I will consider sharing more of these internal reflections in the future.
What’s Working:
The good news is that many things are working and progressing smoothly. The development of these things, many of which I call “big ideas” because they can effectively change the status quo, should create new opportunities as secondary effects of their success.
To clarify, I use the term “what’s working” to refer to projects or trends that show sustainable product-market fit, expanding the size of the crypto market, or both.
So, what factors currently seem to be working or growing? I have listed 10 factors that I believe are showing signs of “what’s working” (not an exhaustive list):
1. Stablecoins
2. Bitcoin as an alternative asset
3. Farcaster, an early but growing social network
4. Asset creation
5. Community-created and trained AI models
6. Solana
7. Ethereum
8. Zora
9. Coinbase
10. On-chain exchanges
11. Bonus: Blackbird
#1: Stablecoins
The supply of on-chain stablecoins has seen a net inflow of around $25 billion so far this year. Overall, the inflow has been positive since November 2023. The permissionless global use of the US dollar continues to have strong product-market fit.
#2: Bitcoin as an Alternative Asset
Less than 12 Bitcoin spot ETFs were approved in January. As of early June, the value of Bitcoin spot ETFs exceeded $80 billion.
#3: Farcaster
Farcaster is a social network built on an open protocol stack and is experiencing meaningful growth. The turning point happened at the end of January when Frames was launched. Frames are like mini-apps that allow people to share and interact directly within the Farcaster client’s social messaging stream.
#4: Asset Creation
The number of newly created tokens continues to increase. One way to track this trend is by looking at the number of new tokens appearing on decentralized exchanges (DEX). The activity seems to be primarily driven by asset creation on Base and Solana. Especially on Solana, over 10,000 new tokens are being created daily in the past few weeks.
#5: Community-Created and Trained AI Models
We are moving towards a world with abundant low-cost, high-variety LLM (large language models) opportunities. In that world, where does value accrue? I believe value comes from scarce resources, and in a world with abundant computing, content, and tools, the question becomes: what is scarce? One answer is taste and attention. We are starting to see crypto play a role by tightly integrating finance with taste and attention activities. Specifically, community-created and trained AI models have some productive outputs that can reward participants. We are beginning to see some of these models appearing in meaningful ways, such as Botto.
#6: Solana
The daily active addresses interacting with Solana are 2-3 times higher than the same period last year, roughly aligning with the peak activity period in 2021. The number of monthly active addresses has increased 3-4 times during the same period and reached an all-time high in May 2024.
#7: Ethereum
The Ethereum ecosystem has also made significant progress. The monthly active addresses of Ethereum itself have seen significant growth, with the average over the past 30 days increasing by about 30% compared to the peak in 2021.
#8: Zora
Zora Chain, also known as Zora Network, has been live for nearly a year. During this time, the network has been searching for a foothold. The number of weekly active users has grown by about 60% this year, recently surpassing a new high of 250,000. The chain’s profit margin has also reached about 34%, meaning that Zora can retain about one-third of the ETH spent on transaction fees by users.
#9: Coinbase
Coinbase has had a strong start this year. It is the custodian for 8 out of 11 Bitcoin spot ETFs. The exchange business continues to make progress, with trading volume reaching a high of $157 billion, the highest since November 2021.
#10: On-Chain Exchanges
On major Ethereum chains, the number of unique users (traders) on Uniswap has increased by about twice in the past six months. We see the growth of on-chain exchanges not only on Ethereum but also on Solana, with Orca and Raydium experiencing significant growth.
#11 (Bonus): Blackbird
Blackbird is a loyalty and rewards program for the restaurant industry built on crypto. When users check-in at restaurants associated with Blackbird, the application mints an NFT for them, which represents the digital artifact of their visit. Blackbird has seen a growing user base, and the quality of its artworks has been improving.
In conclusion, these factors indicate that certain things are working and working in meaningful ways. The development trajectories of Solana, Ethereum, and other projects show promising signs.