Stagnation, progress and downside: Analyzing the crypto sector’s push for revival

– Developers are moving away from contributing to the US crypto ecosystem.

– Rollout of smart contracts and active addresses across all blockchains have reached their respective ATHs.

Since Bitcoin [BTC] rallied many other assets to reach their respective All-Time Highs (ATH) in 2021, the cryptocurrency landscape has been characterized by its dynamism and volatility, with constant ups and downs.

Although there has been a concerted effort to drive the industry forward, it has also been changes in trendsdevelopment, participation and regulatory hurdles that never seem to go away.

In between all these The State of Crypto index increased 11.54% in the last 30 days. But in the last year, the index fell by 5.86%.

Compiled by a16z, the state of the crypto index refers to the percentage change that reflects the development, innovation and contributing parameters of the entire crypto economy.

Source: a16z

For the uneducated, the venture capital firm has been providing this data since 2016. According to the latest release, it was obvious that the sector has experienced growth in the past month. And possibly the whole of 2023. But there were also disadvantages which certainly hampered the rate of growth.

Struggling with regulatory fever, attracting more developers

Based on the report, the US approach to regulation has been an obstacle. For a while, the regulatory bodies, led by US SEC, has given crypto firms a hard time. Because of this, such as Ripple [XRP] had to fight tooth and claw to keep pace with progress. Exchanges, stablecoins and promoters of the regulatory body labeled “values” have not been left out.

Well, some might say that the crackdown has been justified, especially with the way several institutions in the sector fell in 2022. Examples include the infamous Sam Bankman-Fried joint FTXCelsius [USDC]and crypto hedge fund Three Arrows Capital (3AC).

For some, “extreme market conditions” were the cause of their downfall. Others, however, could not escape the glaring cases of mismanagement. But as regulation forces its way into crypto organizations, a16z noted that the country was losing its lead in terms of developers and traffic.

Source: Electric Capital, Similar web

Nevertheless, the waning interest in the US has not negatively affected the ecosystem. Although there have been some drawbacks, active and interested developers have maintained a good level of interaction.

Active developers refers to the number of developers engaged in publicly building in crypto. This metric measures the speed of public GitHub repositories. However, interested developers are those related to open source projects in the crypto ecosystem.

As of February 2023, active developers were 28,240. On the other hand, interested developers were 55,760. This figure suggests that developers’ interest in engaging in technological advancements in this area remained visible.

Source: a16z

ZKs, Optimists top drivers for participation

Consequently, the developers involved have driven the number of confirmed smart contracts to an all-time high. Smart contracts are self-executing programs used to automate the execution of an agreement on the blockchain.

At the time the report was released, the confirmed smart contracts were 33,870. This means that the number of crypto applications already deployed has surpassed all previous years. Interestingly, these programs were not alone in reaching new heights.

Active addresses also followed in the same footsteps. In crypto, an active address is a participant in successful transactions. Therefore, active addresses are the number of senders and receivers over a particular blockchain.

However, this a16z data cumulated the calculation across multiple blockchains. And at the time of writing, there were over 15 million active addresses. But there are reasons why participation increased. A notable part is the way several promising avenues have been involved in driving traction and user adoption.

Source: a16z

For example Ethereum [ETH] blockchain has seen the introduction of optimistic rollup scaling projects such as Arbitration [ARB]and Optimism [OP]. The zero knowledge [ZK] some are not left out either. In this case, Polygon [MATIC], zkSyncand StarkNet [STRK] have shown what they can offer.

This has always proven to be a positive development for Ethereum. The blockchain also recorded a significant increase in transaction fees. In addition to the activation of input withdrawal is also expected to drive more adoption for the second largest blockchain by market capitalization.

NFT bulls may be headed for…

Still on Ethereum. Remember, the blockchain was one of the main drivers and beneficiaries of NFTs in the bull market of 2021. Yes, floor prices and sales volumes shrank, but NFT royalties have risen to $1.9 billion across all chains.

Moreso, some of the biggest web2 brands are now exploring the digital collectibles space and web3. Because of this, and the development of new marketplaces such as Obscuritythe number of NFT traders that recovered from the remarkable decline recorded in 2022.

Source: a16z

Apparently, Bitcoin has also been involved in this aspect with the development of Ordinal inscriptions. However, as it stands now, the crypto sector is not entirely exempt from challenges, especially considering adverse regulatory conditions.

In fact, some of these have pushed users to reduce their exposure to centralized devices. In turn, that has driven the volume of decentralized exchanges (DEXs) to increase. Politicians are conflicted about crafting bipartisan bills while enforcing regulatory actions.

However, progress has been made. And with more builders entering the crypto space, there is a possibility that it creates more opportunities. Meanwhile, there’s no denying that NFT and DeFi activity was subdued. Despite that, there appear to be early signs that the chaos may soon turn into a comfortable market cycle