The Silicon Valley venture capital firm Andreessen Horowitz (a16z) released a report on Tuesday covering the current state of crypto adoption. It highlights Ethereum as the leading blockchain network for developer support but contains very little mention of Bitcoin’s growth.
The Potential of Web 3
The VC firm broke boiled down its report into five key takeaways about the current state of crypto. It began by suggesting that the industry is in the middle of its fourth ‘price innovation’ cycle.
The cycle theory posits that developer activity and innovation blossom in the aftermath of the crypto bull market. With the Federal Reserve tightening monetary policy, the crypto market has indeed receded into what many predict will be a sustained bear market.
Secondly, the report argues that web 2 is a more welcoming environment for its content creators than web 3 platforms. Whereas Facebook takes nearly 100% of revenue from its content creators, NFT platforms like OpenSea only charge 2.5% fees on NFT sales.
“Web 2” is a term for the status quo internet. Though it holds immense functionality, its control focuses on a handful of corporate giants. By contrast “web 3” is a crypto term for a potentially decentralized internet using blockchain technology.
However, making web 3 extra functional requires smart contracts – self-executing code that powers decentralized apps. Bitcoin’s programming language isn’t very welcoming to smart contracts, leaving the majority of crypto developers working on Ethereum.
According to a16z’s numbers, Ethereum has nearly 4000 monthly active developers, versus Bitcoin’s mere 500. Even Solana has a larger developer pool at nearly 1000, despite a much shorter lifespan than Bitcoin.
No Mention of Bitcoin?
Though it isn’t welcoming to smart contracts, the report still contained remarkably little mention of Bitcoin. The cryptocurrency is still the leading digital asset by market cap, and currently boasts of total market dominance above 44%.
Twitter co-founder Jack Dorsey – a staunch Bitcoin supporter – called out a16z for overpromoting “web 3” over Bitcoin in December. He insinuated that the decentralized internet would ultimately end up centralized under the VC firm itself. In response, a16z general partner Marc Andreessen blocked the billionaire.
Bitcoin’s applications are relatively limited to simple financial functions, such are transactions and value storage. However, Ethereum co-founder Vitalik Buterin recently admitted that finance is still the most important application of blockchain we have discovered thus far.