Andreessen Horowitz's 2023 State of Crypto Report: 3 Timely Opportunities You Can't Miss

Andreessen Horowitz (a16z if you're in the know) manages about $50 billion of investor assets, making it one of the world's heftiest venture capital funds.

Venture capital behemoth Andreessen Horowitz (a16z) has just dropped its annual State Of Crypto report, and it’s packed with insights on the latest trends and opportunities in the crypto world. I’ve combed through the report and picked out a few key takeaways that might be useful for investors.

1. Crypto activity is booming, and Solana (SOL) is leading the pack.

According to a16z, there were more monthly active crypto addresses in September than ever before. Over 220 million wallet addresses interacted with a blockchain at least once during that month, which is more than three times the number of active addresses a year earlier.

While one address doesn’t necessarily equate to one user (since many people create multiple addresses for different purposes), the uptick in activity is still significant. In fact, the growth in the number of active wallet addresses (shown in orange on the chart) over the past few years has been comparable to the surge in internet use (green) during the 1990s.

Now, let’s zoom in on a specific blockchain that’s been attracting a lot of attention: Solana. A large portion of these active addresses were attributed to Solana, with over 100 million crypto addresses interacting with the blockchain in September alone. This makes Solana the most used blockchain by that metric.

But that’s not all. Solana’s developer community is also expanding rapidly. A16z collected data from thousands of crypto projects, and 11.2% of founders said they are either building on, or would like to build on, Solana.

For context, that was second only to Ethereum (20.8%), and more than twice the builder interest that Solana had last year.

2. Stablecoins are crypto’s “killer app”, and ether (ETH) could benefit.

A16z also highlighted the impressive growth of stablecoins, which are cryptocurrencies designed to track the price of regular currencies like the US dollar. According to the report, a staggering $8.5 trillion worth of stablecoin transactions were processed in the second quarter.

To put that into perspective, that’s more than double the transaction volume handled by Visa and over 20 times the volume processed by PayPal during the same period.

And here’s why stablecoins have become so popular: they offer a fast and cheap way to send money across borders, compared to traditional methods like wire transfers. An international wire transfer costs about $44, according to the report, while a similar stablecoin maneuver now costs just $1 on the Ethereum blockchain and less than one cent on Coinbase’s Base blockchain.

Currently, Tether’s USDT token has the largest share of the stablecoin market, followed by Circle’s USDC. These projects typically buy dollars and other securities, such as US Treasuries, to back their stablecoins one-for-one with the greenback.

And they buy a lot of them: stablecoins are now the 20th biggest holder of US debt securities, according to the report. So, rather than being a “threat” to the dollar, they’re actually helping to support its status as the global reserve currency.

Now, Ethereum still dominates the stablecoin market – both through its own blockchain and the “Layer 2” blockchains that help it handle the heavy workload. Think of these Layer 2 blockchains as extra lanes on the Ethereum highway, designed to speed up the traffic.

These Layer 2 networks process transactions on their own blockchains and then settle them back on Ethereum. They combine the security of Ethereum with the speed and cost efficiency of Layer 2 blockchains.

With most stablecoin projects running on Ethereum (for its security) and consuming ether for transaction fees, increased stablecoin usage could lead to more demand for ether. And ether could be getting scarcer, too.

3. DeFi and AI are crypto’s next frontier, with Near Protocol (NEAR) attracting developer interest.

Decentralized finance (DeFi) remains the biggest arena for crypto innovation, attracting the most developer activity (24.8%) and daily crypto usage (34%). Currently, about $169 billion is locked inside thousands of DeFi protocols. To give you an idea of how quickly DeFi has grown, there were only a few billion dollars locked in DeFi protocols in