0:00

Although we are still hoping to see

0:02

really mainstream key

0:05

applications that reach

0:07

the total average user, we've seen

0:10

a lot of the prerequisites

0:12

for that snap into place and things

0:14

have gotten a lot better, a lot

0:16

cheaper, a lot faster. And I think

0:18

all those things together is what paints

0:21

this optimistic picture. Welcome

0:26

to Bankless, where today we explore the state of

0:28

crypto for the year 2024. This

0:31

is Ryan Sean Adams. I'm here with David Hoffman,

0:33

and we are here to help you become more

0:35

bankless. So, bankless listener, what is

0:37

the state of going bankless? How many

0:39

people are in crypto? How are we

0:41

doing? How many builders are in this

0:43

space? What are overall the big trends?

0:45

What products are getting used? All of

0:47

these questions and the answers to those

0:49

questions are contained in the report that

0:52

we're about to go through in today's

0:54

episode. We have two guests from A16Z.

0:56

Every year they put together a fantastic

0:58

report. They chart the data sets over

1:00

time and we get into that data.

1:02

There's a lot of visuals accompanying today's

1:04

episode, so make sure you tune in

1:06

via YouTube or the Spotify video feed

1:08

so you can follow along with us.

1:11

First, before we get into the episode, a message from

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can get there at banklist.cc.b3. This is

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one of my favorite episodes that we do every

2:26

single year because it's just a good checkpoint for

2:28

how well we doing. How are we doing? What

2:30

are the themes of the industry? What are the

2:32

trends of the industry? Some of these trends are

2:35

new, of course, like crypto AI. I think this

2:37

is the first time AI is in the crypto

2:39

report out of A16Z, but some trends are always

2:41

the same, like active users of blockchains, developer mindshare

2:44

of blockchains. So we start

2:46

broad. We get pretty granular, get pretty detailed. A16Z

2:48

is as deep in the weeds

2:50

as anyone. But then we also

2:52

zoom back out and we kind of ask for

2:55

a grade for how well 2024 went. And

2:57

I will leave that to the

2:59

suspense of the listener. So let's go ahead and

3:02

get right into the episode. But first, a moment

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get started. Bankless Nation, it's once again

5:32

time for the state of crypto report

5:34

out of A16Z. We have returning

5:37

back to Bankless, Eddie Lazzarin, the chief technology

5:39

officer for A16Z Crypto. Eddie, welcome back to

5:41

the show. Thank you. Great to be here.

5:43

And getting tapped in for some extra support,

5:45

Darren Matsuoka, data scientist also at A16Z Crypto.

5:47

Darren, welcome to the show for the first

5:49

time. Thank you. It's great to be here.

5:52

So there's a lot of content in here

5:54

and we're going to try and go through

5:56

most of it, if not all of it,

5:58

but just kind of zooming in. all the

6:00

way out and doing a vibe check before

6:02

we get and dive in deeper into some

6:04

of the more granular details. State of crypto

6:06

2024 vibe check. How

6:08

would you guys summarize the vibe of this year?

6:11

Eddie, let's start with you. I'd

6:13

say cautiously optimistic, a little

6:16

opaque for outsiders. There's

6:18

no one's clear signal that I think has

6:20

come to the surface. But for

6:22

those of us tracking how things have developed

6:24

and evolved in the industry, definitely positive. Der,

6:26

anything to add? Yeah, I mean, I think

6:29

this report is kind of coming out at

6:31

a good, interesting time. I mean, obviously, we're

6:33

just a few weeks out from the election.

6:35

We'll talk a little bit about some of

6:37

the policy stuff that's in the report. Also,

6:40

there are just a lot of narratives in

6:42

the crypto industry right now that I think

6:44

has created some noise. And I think what

6:46

we want to do with this report is

6:48

to really take a step

6:50

back, look at all the data

6:53

that we have and kind of

6:55

paint crypto hopefully in the right

6:57

light based on everything that's going

6:59

on. And who would you guys

7:01

say that this is the target audience

7:03

for this report? Who is the marginal person

7:05

that you're hoping actually opens up this report

7:07

and learn something? Because I mean, me and

7:09

Ryan, we understand data like this. We look

7:12

for data like this every single week. But

7:15

I think we're trying to get a new audience to

7:17

read this report. Who's the target audience here?

7:20

That's a great question. I think in

7:22

our minds that first, there's so much in the report

7:24

that I hope everybody can pick and choose and find

7:26

something that's interesting to them that they think captures the

7:28

last year. But I'd say in crypto,

7:31

we have so much

7:33

going on, so much is transparent, but

7:36

so much is hard to understand that

7:38

I think the target audience for us

7:40

is really mainstream people

7:42

who kind of want a big

7:44

picture view of what's happening in

7:47

crypto, but also regulators, also influencers,

7:49

whoever's looking at the space and

7:51

trying to get that wide picture.

7:54

Entrepreneurs are usually so specialized in their area and

7:56

they're familiar with everything that's going on day to

7:59

day, week to week. week, that's like where they

8:01

live. But sometimes it's really valuable to take a

8:03

step back and look at everything that's really happened.

8:05

It's really easy. I think you'll, I think you

8:08

guys would agree that like, it's

8:10

really easy to take for granted

8:12

how much progress actually happens when

8:14

you look year over year. Sometimes

8:17

it's in areas you didn't expect. Sometimes

8:19

it's exactly what you're hoping for. Sometimes it's

8:21

faster, sometimes it's slower. This year, the last

8:23

year, 18 months, I'd say, there's

8:27

been pretty remarkable progress in infrastructure.

8:29

That is why I think like

8:31

the top line in my mind

8:34

is that cryptoactivity from a variety

8:36

of different angles is at

8:38

an all-time high. Depending how

8:40

you measure it, and I can say more about different

8:42

ways we get to that, but

8:44

that's only possible with meaningful

8:47

infrastructural improvements across the space.

8:49

And we have really, really seen that. Although

8:52

we are still hoping to see really

8:55

mainstream key applications

8:57

that reach the

8:59

total average user, which will

9:02

be great, we've seen a lot

9:04

of the prerequisites for that snap into

9:06

place. And things have gotten a lot

9:09

better, a lot cheaper, a lot faster.

9:11

And I think all those

9:13

things together is what paints this

9:15

optimistic picture. So while we're still on

9:17

the vibe check here, before we get

9:19

into some of the slides specifically, so

9:21

you said, Eddie, you're cautiously optimistic, cryptoactivity

9:23

at an all-time high. Let's just go

9:25

back to the 2023 version of this

9:27

report. And can we just talk about

9:29

the vibe in 2023 and the difs?

9:33

As I recall, I think we were still

9:35

sort of recovering from

9:38

a pretty brutal

9:40

bear market. What

9:42

was the state of 2023, if you could

9:44

kind of summarize that and then just maybe

9:47

talk about the dif and what's different this

9:49

year? Yeah, I think it's hard

9:51

to say, it's so hard to time travel

9:54

yourself into the past. But I

9:56

think with 2023, we saw a bunch

9:58

of interesting technical and improvements on the horizon. Right.

10:00

That's what we were hoping for. I remember in

10:03

2023, much awaited in an Ethereum

10:07

world, EIP 4844, people really, really

10:09

wanted to see that the merge

10:11

had gone well. And so some

10:13

key obstacles were out of the

10:16

way. You know, if you recall, I think 2023 is

10:18

the last time we heard people

10:20

really explicitly complaining about, for example,

10:22

Ethereum's energy usage. Like that, that

10:24

sure went away. Like, have you

10:26

heard anybody? No one talks about

10:29

this. Right. No one talks

10:31

about that. Right. And why? Because the

10:33

problem was totally and completely solved and

10:36

probably won't come back or

10:38

definitely won't come back. So

10:40

I think we were definitely recovering from

10:42

the bear market. There were some interesting

10:45

trends and developments. But I think what

10:47

was top of mind was upcoming infrastructural

10:49

improvements and some new experimentation. In

10:52

early 2024, those improvements have

10:54

really landed, not just 4844

10:57

and the growth

10:59

of L2s and things like that in Ethereum

11:01

world, but also new

11:03

next generation of blockchains and their

11:05

integration to the rest of crypto

11:07

with bridges, with stablecoins,

11:11

better DAP infrastructure. All of

11:13

those things have led to a proliferation

11:15

of very high quality block space. So

11:18

the way I think about right now is

11:20

that unlike last year, we have

11:22

that block space and there's a little bit about that

11:24

in the report. And we're just

11:26

waiting for people to figure out what to

11:28

do with it. We're back in a period,

11:30

in my mind, we're back in a period

11:33

of experimentation. You can launch

11:35

a DAP for hundreds

11:38

of dollars and see what

11:40

happens. Obviously, there's development effort and

11:42

auditing and all these things that

11:44

are complicated, but at

11:46

least on the gas side, the

11:48

block space side, there are very, very

11:51

easy ways and straightforward ways to get

11:53

a new DAP into your user's hands

11:56

for pennies on the dollar. And

11:58

that allows for experimentation. experimentation, experimentation

12:00

leads to new apps. So it's

12:03

really a matter of time in

12:05

my mind until we find all

12:07

the interesting ways that entrepreneurs will

12:09

and developers will consume that

12:11

glut of high quality block space across blockchains.

12:13

Yeah, it's definitely an exciting time. If I

12:16

recall 2023 was, you know, partially that

12:19

the state of crypto was us telling the world,

12:21

hey, we're still building, it's not dead yet. We're

12:23

still doing stuff over here. And now

12:25

maybe 2024 is we're beginning to see the

12:27

fruits of that labor as an infrastructure focus.

12:29

I mean, Dixon, Chris Dixon in the past

12:32

has called this kind of like the high

12:34

bandwidth era of crypto where we get really

12:36

cheap block space. So let's start at maybe

12:38

the beginning of this report which is a

12:40

perfect place to start in the foundation and

12:43

zoom out and let's get the high

12:45

level story of how big crypto is

12:47

today. And I think one of these

12:50

slides here, you've got a

12:52

plot of internet users versus

12:55

monthly active crypto addresses

12:58

and internet users from kind of the early

13:00

nineties and it shows sort of a chart

13:02

up and that's the line in green. If

13:05

folks are following with us on YouTube or Spotify video

13:08

and then we've got in orange,

13:10

monthly active crypto addresses. This

13:12

of course is in log scale. If it

13:15

was linear scale, it's just like, wouldn't look

13:17

as pretty would it Darren? So

13:20

can you tell us what we're seeing here?

13:22

I'm gonna just maybe read the description before

13:24

you illustrate this. Monthly active addresses hidden all

13:27

time high of 220

13:29

million with growth reminiscent

13:31

of early internet adoption.

13:34

And for folks who can't see this on their screen, though,

13:36

encourage you to go check out the video. We

13:38

look kind of neck and neck in crypto, at

13:40

least in terms of active addresses with the early

13:43

internet. Is that what this is showing? Yes,

13:45

that's exactly what it's showing. And I

13:47

think this is a very good starting point, right? I

13:49

think if you zoom out, right? Which is what this

13:51

attempts to do here. I

13:54

think it does show that we've continued

13:56

to make progress. There are people using

13:58

these blockchains growth looks reminiscent

14:00

of some of the early days of

14:02

the internet. Now, I'll be the first

14:04

to tell you that monthly active addresses

14:06

is probably not the best measure of

14:08

real crypto users. And in fact, in

14:10

the coming slides, we do our best

14:12

to unpack what's behind those addresses. We've

14:14

also published a separate write up that

14:16

kind of goes into this topic in

14:18

great detail. Eddie and I have spent

14:20

a lot of time kind of trying

14:22

to kind of filter out bots and

14:25

come up with the real number of

14:27

crypto users. But I think from a

14:29

starting point and a zoomed out view,

14:31

you know, this this trend line does

14:33

look very similar to the early days

14:35

of the internet. Monthly

14:37

on-chain usage is an intentionally strict measure

14:39

of crypto adoption. And I think there's

14:41

a lot to be excited about with

14:43

the overall trends here. OK, yeah. So

14:45

the Internet usage user

14:48

proxy versus monthly crypto addresses, of

14:50

course, like we're all crypto users here.

14:52

I bet people listening have multiple addresses.

14:56

But I guess this is active crypto

14:58

addresses. Maybe you could get into kind

15:00

of the subtleties of this data point.

15:02

Is this really measuring human beings or

15:05

is this sort of, you know, like a

15:07

proxy that's a little bit distant from that?

15:09

Yeah, I think it's really important to understand

15:11

that this is a proxy. This

15:13

is not a number of human beings. Two hundred twenty

15:15

is a number of addresses, not

15:17

a number of human beings. Right. There's

15:20

a lot to unpack here. And like Darren mentioned,

15:22

we have a post where we get into some

15:24

of the nuances of how to interpret the different

15:26

cuts that we use to try to get at

15:29

overall activity and also to get at users. The

15:31

way I think about these monthly active

15:33

addresses now, they're just a measure of

15:35

activity, of course, in crypto, sometimes

15:38

like other spaces, but especially in

15:40

crypto, there can be incentive programs

15:43

that encourage the spinning up of

15:45

many addresses. One person could control

15:47

hundreds or thousands of addresses. Now, of

15:49

course, those incentive programs come and go

15:52

and the infrastructure capacity to absorb

15:54

those extra addresses is continuing

15:57

to grow. So I

15:59

will. I wouldn't say that we should

16:01

totally discount the number of active addresses, but

16:04

if that number is growing and other key

16:06

indicators of genuine human use are growing with

16:08

it, we can use them together to kind

16:11

of get a view of how we're doing

16:13

as an industry. Very good. There's

16:16

this one space that's highlighted on the

16:18

graph too, which is the one billion

16:20

mark. Okay. And

16:23

in 2005, we had one billion internet users.

16:25

And I guess if we plot this back to

16:28

the early 90s, I guess people have always asked

16:30

this question, what year is it in internet terms?

16:32

And according to this chart, it looks like it's

16:34

1998 in crypto that year. So

16:37

we're a few years away

16:40

from hitting 2005, which would be our

16:42

one billion user mark, but we're right

16:44

on track for that. One

16:46

other way of measuring usage, and I don't know if

16:48

you guys think this counts, is the number

16:51

of people that just hold crypto assets,

16:53

which is different. What you're measuring

16:55

is kind of active users on chain, right?

16:58

Another way to sort of measure

17:00

usage, if you consider holding crypto,

17:02

using crypto is the number of

17:05

people who actually hold crypto. Is that relevant,

17:07

a relevant data set that you guys have

17:10

looked at? Why did you do on chain

17:12

addresses rather than just users holding crypto? Well,

17:14

so actually, there is another slide where we

17:16

do have the number of users just holding

17:18

crypto. I think that should be slide eight

17:20

or so, but I want to make sure

17:22

we have really clear is

17:24

that when we hit

17:26

a billion active addresses, we will still

17:29

be well shy of a

17:31

billion active users. Right. That

17:33

is it. Those are different numbers. And

17:35

it's a little bit tempting, I know, to try to

17:38

look at these lines and say like, oh, this is

17:40

like we're replaying history, history rhymes and so on. I

17:43

totally get it. Although I'd say

17:46

there's reasons to believe that the adoption patterns

17:48

will be quite different. Right.

17:51

On the one hand, crypto industry

17:53

adoption should be a lot easier

17:56

because it's just software. Right. We

17:58

don't fundamentally need to lay cables. and so

18:01

on, which was necessary for internet adoption. On

18:03

the other hand- We already have the internet. We can

18:06

adopt via the internet. Exactly right.

18:09

But then on the other

18:11

hand, there have been meaningful

18:13

regulatory headwinds and additionally, there

18:15

are competing internet services that

18:18

already offer some of the things

18:20

that crypto services want to offer.

18:23

So I think it's very nuanced and the

18:26

purpose of the trend line is just

18:28

to show what does very

18:30

rapid growth look like? What does very

18:32

rapid growth of web scale technologies look

18:34

like? So we can kind of measure

18:37

ourselves and get a sense of if

18:39

there are huge meaningful differences. Regarding

18:41

the number of crypto owners, this

18:44

slide here for those watching

18:46

shows the number of estimated

18:48

global owners, monthly active

18:51

addresses and monthly mobile

18:53

app users, which are

18:55

all sort of declining in size, right?

18:57

Yeah. This is fascinating. So

19:00

this is showing 617 million estimated

19:03

global crypto owners. So that's the ownership metric

19:05

that I was talking about and it's a

19:07

super set of these other metrics. Yeah,

19:10

exactly right. And like for crypto

19:12

owners, right? These are not monthly

19:14

active users. This is a different

19:16

set. These are just people that

19:19

passively hold crypto. They

19:21

may have never used- We can call them

19:23

dormant users. Yeah, dormant users. They may have

19:25

never used the blockchain, right? In

19:27

fact, the likely pattern, I

19:30

think if we wanted to sketch like

19:32

a median user, it would be someone

19:34

who has a crypto exchange account of

19:36

some type or a

19:38

simple crypto wallet and they received some

19:40

somewhere or they purchased it. Maybe someone

19:42

paid them. Maybe they're just

19:45

holding some crypto assets and that's it.

19:49

They're not necessarily using the blockchain. They're not

19:51

necessarily connecting to dApps, other things

19:53

like that. Yeah, and that's the

19:56

kind of biggest slice of people who

19:58

we have a sense have- with

20:00

crypto in some sense, no matter

20:02

how simple it is. I

20:05

think if I'm a startup builder in

20:07

crypto with a goal to get people

20:09

on chain, this makes me very bullish.

20:12

If there's 5% to 10% of

20:14

crypto holders, people who already have

20:16

a crossover the chasm to

20:19

own a crypto asset, but they have

20:21

not yet got on chain, that to

20:23

me screams like an opportunity for my

20:26

startup, my project, my protocol. Yeah, it's

20:28

like converting a funnel, right? I

20:30

mean, you're converting people from the top of funnel

20:32

down funnel. Absolutely. And actually,

20:34

if you look at the there's another data point here,

20:36

which is not on this slide, which

20:39

is just the total number of Internet

20:41

users. And it's something like five plus

20:43

billion. But if you look at the

20:45

just total growth opportunity on a percentage

20:47

basis of bringing people

20:49

on chain, meaning converting the existing

20:51

crypto owners into active crypto users,

20:54

that opportunity is actually bigger than growing

20:57

the whole pie of people who just

20:59

simply buy and hold crypto. Right.

21:02

And so I think this data really

21:04

presents the opportunity for the industry to

21:06

re-engage some of these passive holders, you

21:08

know, that only five to 10% and

21:11

actually kind of see how do we bring

21:13

people on chain. I think

21:15

this is one of the most surprising data

21:17

points in the report for me and presents,

21:19

I think, what the real opportunity

21:21

is for for our industry. Whenever

21:24

when I got into crypto,

21:26

it has always been a heavily

21:28

desktop dominated industry. And we've

21:30

always known that whenever, however,

21:32

mass adoption happens, it's going to

21:35

happen through mobile. And in

21:37

this report on slide seven, you

21:39

guys have a mobile wallet usage

21:42

actually dominated by Nigeria, India

21:44

and Argentina. And

21:46

so I think it's pretty interesting to see the

21:48

developing countries leading the charge on maybe mobile

21:50

wallets, but also kind of just like using

21:52

crypto as a whole. Darren, what

21:55

would you say this slide tells us about just the

21:57

adoption of crypto? Totally.

21:59

I mean, I think crypto. crypto has

22:01

become increasingly global. You can see it

22:03

right here in the geographic trends on

22:05

mobile wallet users. The US once had

22:07

a majority share. It's now less than

22:09

15%. You

22:11

mentioned Nigeria, India, Argentina, some

22:14

of these emerging markets really are capturing

22:16

a majority of usage from the data

22:19

that we can capture, which I just

22:21

think goes to show that crypto is

22:23

global. It has become more global. It's

22:25

continuing to become more global. And I

22:28

think that's actually something you'd be really excited about.

22:31

It doesn't really have any data here in the slide. But is there

22:33

anything that you can say about the

22:35

differences of the way that different

22:37

parts of the globe are using crypto? The

22:39

United States is using crypto in this

22:42

one fashion. And maybe Nigeria, India, Argentina

22:44

are using crypto in a different fashion.

22:46

Is there any data that you can

22:49

pull out here? Totally. We do actually

22:51

have a slide on Argentina specifically where

22:53

we show a pretty stark negative correlation

22:56

between the purchasing power of the Argentine

22:58

peso and the country's stablecoin trading, which

23:01

indicates that these people are turning

23:03

to stablecoins to protect their assets

23:05

in a environment of rampant inflation.

23:08

And I think you see that

23:10

throughout many countries that really

23:15

need crypto and stablecoins as a

23:17

way to protect themselves

23:20

from inflation and political uncertainty.

23:23

Yeah, that's slide 19. But

23:25

yeah, I'd say, so to totally

23:28

agree with that point, it's hard to know

23:30

exactly. I do know some sort

23:33

of anecdotal things that

23:35

I've seen little slices of data to support. But I've

23:38

heard that internationally, mobile

23:41

wallet use is much, much, much more

23:43

common than desktop use. And

23:45

that the international payments and remittances

23:47

as well as stablecoin holdings use

23:50

cases are very, very popular. And

23:53

this makes sense. I was just talking to

23:55

someone who runs a remittance business that

23:58

is a business that helps

24:00

facilitate payments. between small businesses

24:02

in Latin America. And

24:04

they were explaining to me that a bunch

24:06

of their customers, and keep in mind,

24:08

this remittance business is not a crypto-specific

24:11

business. They were telling me that a

24:13

lot of their customers are coming and demanding to make

24:16

stable coin payments with Tron,

24:19

right, USDT Tron payments. And

24:21

what's very funny about that is that Tron, as

24:23

we know, and USDT have been around for quite

24:25

a while, but they're far from

24:27

the best in terms

24:29

of gas costs. Transmitting

24:32

some stable coin on Tron costs

24:34

at least a couple of dollars,

24:37

but these small businesses saw that

24:39

as a massive savings compared to

24:41

their other options. So

24:43

it just makes me really excited because

24:45

as we have even better technological options

24:47

than that, and better

24:49

stable coin regulation, and all

24:51

these other things that would really increase

24:53

the quality of that experience, I can

24:55

only imagine how even smaller and smaller

24:57

businesses, even larger businesses, and even more

24:59

sophisticated use cases become something

25:01

that becomes very attractive to international

25:04

users. Okay, so the summary

25:06

to the question of how big is

25:08

crypto today is, it's pretty darn big.

25:12

But also, it's very early, right? So Darren,

25:14

you were saying there's about 5 billion people

25:16

around the world who are online. Of that,

25:18

we have 617 million who own crypto assets,

25:24

and only 5 to 10% of those

25:26

who own crypto assets are on chain.

25:29

So we gave you the numbers, the

25:31

total active addresses, 220 million. But

25:34

if you try to distill that down to actual real

25:36

life people, you get somewhere in the range of

25:38

30 to 60 million estimated

25:41

monthly active users. So 617 million of

25:44

the 5 billion own crypto, 30

25:48

to 60 million are actually on chain, 27

25:51

million or so are monthly

25:53

mobile wallet users. To me, this represents

25:55

tremendous upside opportunity. It's interesting to see

25:58

how large crypto is and yet how

26:00

early we are at the same time.

26:02

Let's let's swing back to the U.S.

26:04

We're talking about this from a global

26:07

perspective and let's talk about politics in

26:09

the U.S. Another question this report seeks

26:12

to answer is how big of a

26:14

political issue is crypto? Actually, where should

26:16

we start this conversation? Should we look

26:18

at the swing states? I mean, it's

26:20

election season. We are just one month

26:22

out from an election at the time

26:25

of recording presidential election, of course, in

26:27

the U.S. And this is

26:29

the title of the slide. Crypto interest

26:31

is rising in several swing states. Pennsylvania

26:33

and Wisconsin see top five biggest jumps.

26:35

Now, there are those out there, guys,

26:37

who say, nope, like the average American

26:39

voter does not care about crypto. All

26:42

right. They don't like this. Just, you

26:44

know, geek stuff. They're worried about other

26:46

things. What what data sets

26:48

have you uncovered in your report?

26:50

What does the data say about,

26:52

you know, how big of a

26:54

political issue crypto actually is in the U.S.? Yeah,

26:57

I mean, I think it is a huge political

26:59

issue now. You know,

27:01

we see major politicians now talking

27:03

about crypto as a key issue

27:05

in their campaigns. You know, we're

27:07

a few weeks out from the

27:09

election. And and I don't

27:11

think it's a surprise that all of this

27:14

political support comes in an election year. As

27:17

we know, this is shaping up to be a

27:19

very tight race that will likely be decided by

27:21

a handful of counties in

27:23

a handful of swing states. And so

27:25

we wanted to look at some data

27:27

on those states. We pulled

27:30

Google Trends data where we looked

27:32

at crypto related search interest over

27:34

a basket of terms from 2020

27:36

to 2024, specifically the change in

27:38

rank. And

27:42

we looked at all 50 states

27:45

and pulled out the ones

27:47

that had the most increase in interest and

27:49

the ones that had the most decrease in

27:51

interest from 2020, which

27:53

was, of course, the the last election.

27:55

And we found that Pennsylvania and Wisconsin

27:57

were top five biggest.

28:00

changes in this relative search

28:02

interest. Michigan was a top

28:04

10 state, which,

28:06

you know, I think, you know, just speaks

28:08

to the fact that there are crypto supporters

28:11

in these states. And, you know,

28:13

may, may this may be why we're

28:16

getting this. These were

28:18

we're seeing these tailwinds on the

28:20

policy side of things this year. Yeah,

28:22

importantly, in these swing states, and I

28:24

know this, the following election over

28:26

the last month or so, it's just gotten

28:29

increasingly narrow. When

28:31

you combine the relevance for crypto for

28:33

voters in these swing states with the

28:35

narrowing of the election, Darren,

28:38

Eddie, is there any indications like how

28:40

it is? Could crypto decide this election?

28:42

Like how close is that statement to

28:44

becoming true? Well, that's a

28:46

that's a pretty bold statement. But I'd say

28:48

I'd say this is that it's clear that

28:50

it's going to be a very close election

28:53

and that every topic could end

28:56

up being the marginal topic. It's hard to

28:58

say. Of course, there's

29:00

many, many critically important issues. And I

29:03

don't know that the average American

29:06

cares about idiosyncratic technical choices in

29:08

blockchains. That would shock me. But

29:10

they do care about innovation. They

29:13

do care about the quality of

29:15

our regulations. They do care about

29:17

maintaining the United States advantage in

29:20

technology, which is paid dividends to our

29:22

country. So I think it's

29:25

not too surprising to me that it's bubbled

29:28

to near the top of

29:30

issues that may be new types of issues

29:32

that people are talking about. Moving

29:34

over to slide 17 here,

29:36

still in the politics category.

29:39

I think this slide shows how and why crypto

29:42

is a political issue

29:44

both domestically and internationally. The title here,

29:46

stablecoins can strengthen the US dollar's position

29:48

as its global reserve currency status slips.

29:51

And it kind of it kind of

29:53

shows the status of the US dollar

29:55

in the global economy. But then it

29:57

shows the share of US dollars stablecoins

29:59

in the crypto economy, there's a very

30:01

big discrepancy between these two things. Darren,

30:04

maybe you can walk us through this

30:06

gap here. Yeah, I

30:08

think maybe to start, right? I

30:10

think most people understand that the

30:12

US dollars status as

30:15

a reserve currency gives the United States a

30:18

tremendous amount of power. But

30:20

a lot of that is actually

30:22

under threat from these foreign sovereign

30:24

digital currencies, these CBDCs. And

30:28

I think this slide shows that the

30:30

opportunity for the United States is kind

30:32

of sitting right in front of us

30:34

and it's crypto-based stablecoins. Over

30:36

99% of stablecoins are

30:39

denominated in USD. This

30:41

split is unusually high, as you

30:43

can see with the foreign exchange

30:45

reserves, which are in decline, international

30:47

debt, loans and payments. And so

30:50

rather than kind of the US

30:52

developing its own central bank digital

30:54

currency, why not embrace what's kind

30:56

of sitting right there, which is

30:59

these crypto stablecoins, which are already

31:01

denominated 99% plus in USD, to

31:06

kind of strengthen the position of the US

31:08

in an environment where it really is under

31:10

threat. And I think that's what this slide

31:12

and the data tries to show. And

31:15

following up to the next slide, slide 18, it

31:17

shows stablecoins as the 20th

31:20

largest holder of US debt. Now,

31:23

20 is not a high number, but also

31:25

the existence of stablecoins is also very young.

31:29

We are right ahead of stablecoins, is right ahead of

31:31

Germany in terms of holding

31:33

United States debt. And I'm assuming this number

31:35

is going up, like soon will be 19,

31:37

soon will be 18. That's

31:40

my bias, that's my guess. Where

31:43

do you think this number tops out, Eddie?

31:45

Do you think we, United, stablecoins,

31:47

US dollar stablecoins comes in at number one

31:49

in the future of the largest buyer of

31:51

USD? Well, that's a wider ways in

31:53

the future, but it's honestly, if

31:57

we end up using stablecoin, if

31:59

we end up using... blockchains to track

32:01

balances of stable coins and they serve

32:03

some very significant advantages for

32:06

their holders, then there's little

32:08

reason to believe that they wouldn't want

32:10

to, that countries wouldn't want to hold

32:13

on blockchains as well. That could be a potentially attractive

32:15

option. I don't know where this tops out, but given

32:17

the trend, given the advantages of having

32:20

things on chain and what that affords

32:22

to countries, I think it's definitely going

32:24

to increase. Yeah, it's pretty,

32:26

like if this continues on a

32:28

log pace, right, you know, we're 10x away

32:32

from being basically number two, just behind

32:34

Japan. So

32:37

if we cross a trillion or so,

32:39

then we might be getting close to

32:41

ahead of China as far

32:43

as like a holder of US

32:45

debt, which would be absolutely crazy,

32:48

phenomenal. I personally prefer the internet

32:51

holding United States debt much more

32:53

than I do China holding US

32:55

debt. Yeah, it's

32:57

very fascinating. So where's this

32:59

stable coin demand coming from?

33:02

I think this part of this section actually kind

33:04

of reverts back to what we were talking about

33:07

earlier with Argentina, which is circling back to the

33:09

next slide 19 here. Like

33:11

why is this dollar demand on internet

33:13

blockchains such a strong force? Well,

33:17

there's so many stories of inflation, of currency

33:19

inflation across the world, much not

33:21

just the inflation that we're experiencing in the United States

33:23

over the last two years, which is like come down.

33:25

But for example, Argentina inflation was like 80% a year

33:27

over a year, I believe. So

33:30

I kind of want to just full circle us back

33:32

to the story of stable coins. One

33:34

of the main use cases of blockchains

33:37

is providing currency debasement from fiat currencies.

33:40

One of the core offerings of

33:42

blockchains to allow people disintermediated access

33:45

to digital assets. And

33:47

you can imagine for someone who doesn't have a

33:49

high quality bank account, being able

33:51

to just go and buy just by

33:53

having internet access, stable coins or other

33:55

types of assets is an incredibly high

33:57

quality offering. And that's putting

34:00

aside the fact that with contemporary infrastructure

34:02

trans, you know, transacting it to other

34:04

people could cost less than a penny,

34:06

put those things together and you have

34:08

what is a very,

34:10

very high quality internet

34:12

product. We have to

34:15

take it in its full, in its full

34:17

context. Stablecoins are,

34:19

in my opinion, are just the beginning.

34:21

And you could imagine all kinds of

34:23

different exposure to all kinds of different

34:26

assets across all kinds of different jurisdictions,

34:28

being very attractive to people who don't

34:30

have a very sophisticated financial infrastructure at

34:33

their disposal. I can also, connecting this

34:35

to the political discussion, can also see

34:37

this being very attractive to US politicians

34:39

who are looking for, you know, other

34:42

purchasers of US debt and to maintain

34:44

dollar dominance. I recall in a congressional

34:46

hearing David and I watched just a

34:48

few weeks ago, Maxine

34:51

Waters even, you know,

34:53

said something about, hey, you know, we got

34:55

to do some deal making, we got to

34:57

get this stablecoin thing across the finish line.

35:00

It does feel like that stablecoin legislation is

35:02

increasingly moving in a bipartisan way. And of

35:04

course, if you're in a country like Argentina,

35:06

where you've got massive currency debasement, you know,

35:09

the old promise of crypto, which is like

35:11

Swiss bank in your, in your account? Well,

35:13

this is actually a US bank in your

35:15

account, which is pretty good if you live

35:18

in Argentina. So I could see lots of

35:20

global demand. I could see bipartisan support. I

35:22

could see this just getting started. One, one

35:25

monkey wrench in in in like the works

35:27

here might be, do

35:29

other countries actually want the

35:31

US to sort of invade

35:33

their territories, right? Because you

35:36

think many countries around the world want

35:38

to maintain their their sovereign independent, you

35:40

know, fiat system, they don't necessarily want

35:42

to dollarize. And yet if the dollar

35:45

is kind of invading via route

35:47

of the internet, do you think there might be

35:49

some reaction to that, some legislation to try to

35:52

keep it out and push it out? Yeah, you

35:54

know, it's a great question. And of course, Darren

35:56

and I do not represent the State Department, so

35:58

we can't speculate on it. Exactly what they would

36:01

prefer to do. But I would say at a

36:03

very high level, offering people

36:05

more choice may force

36:07

governments to compete to give them

36:10

better services, better monetary policy, better

36:12

access to financial services in general.

36:15

And I think that that

36:17

is probably a global positive, although, of

36:19

course, it's very nuanced. And

36:22

we'll have to see how it plays out. All

36:25

right, getting into what Eddie here called the

36:27

vibe of 2024 infrastructure, crypto-native

36:31

trends here. I want to ask what the state

36:33

of the Ethereum fee economy is, because I know

36:35

that this was a big theme starting

36:38

pretty aggressively in 2021 and 2022, and then went away with

36:42

the bear market. But since demand for block

36:44

space has returned, we've actually been able to

36:46

see a new equilibrium in

36:49

terms of the fee economy in

36:51

the Ethereum ecosystem. Darren, can

36:53

you just walk us through the state of

36:55

the Ethereum fee structure as it has been over the

36:57

last year? Sure. Well,

36:59

one data point that we've been tracking, we've

37:01

actually included it in every state of crypto

37:04

report that we've done for the last three

37:06

years, is the percentage of total

37:09

L1 fees paid by rollups. And that number

37:12

was really up only. I think it was

37:14

like 1% in 2022, and then 5% in

37:16

2023, and

37:20

then it was peaking at over 15%.

37:24

And then it dropped off of a

37:26

cliff after EIP 4844, or

37:30

proto-dink charting, which significantly

37:32

reduced the costs for

37:34

L2s, as we know. Wait,

37:36

are we seeing that in the chart, that drop,

37:38

Darren? Yep. We are, yeah. It's

37:40

the light blue line here, going up to 15%, and

37:45

then just completely falling. I was

37:47

distracted by the ETH denominated. So in

37:49

ETH denominated terms, I guess it's not

37:51

much of a change. Exactly. We also

37:53

show that figure, because we want

37:56

to make it

37:58

clear that this drop was a result.

38:00

result of cost reduction, not lack of

38:02

L2 adoption. And I

38:05

think the overlay here between those

38:07

two numbers really paint the picture

38:09

of what has transpired here. L2

38:13

has continued to gain traction in

38:15

the Ethereum world. EIP

38:18

4844 significantly reduced the costs

38:20

for layer twos, but the

38:22

value on L2s in an

38:24

ETH denominated manner has continued

38:26

to go up. So I

38:28

think this really tells the

38:31

story of what has happened from

38:33

an infrastructure standpoint. What

38:36

can we say happened as a reaction to

38:38

this? Did we get more total activity across

38:40

all of these layer two networks or

38:43

did usage stay flat? When

38:45

fees went down, what happened? Well,

38:47

at first, right, because it's early

38:50

and it's hard to take advantage

38:52

of that extra supply, there is

38:55

a modest increased sideways, right? That

38:57

happened right in late March. But

39:00

I think if you track the

39:02

mega gas per second consumed by

39:04

all the L2s on Ethereum, there

39:07

has been a significant growth in

39:09

how much state, in

39:13

the capacity that's being utilized. And

39:16

that's just a general pattern in how new

39:19

supply is adopted and incorporated in

39:21

technology in general. This is

39:23

just always the case. We're

39:26

definitely near or at all

39:28

time highs in terms of how much gas

39:30

is being consumed in Ethereum world, let alone

39:32

the rest of crypto. Eddie,

39:35

how would you explain that to somebody who doesn't

39:37

know what gas is or really like EIP 4844,

39:40

dengt sharding, all of these kinds of crazy crypto

39:42

terms? If like your mom or grandma

39:44

or cousin or somebody was asking like what this

39:46

means, how would you explain it to them? They

39:49

made a faster computer. Beautiful.

39:54

And I would maybe also add that we

39:56

have this slide here. I think the real

39:58

important question to ask is, how do you

40:00

explain it to them? ask is like, what

40:02

does this actually mean for the end users

40:04

of these blockchains? Right. And I think it

40:06

becomes very clear when you just take the

40:08

simple example of trying to send US dollars

40:10

internationally. Right. Without crypto, you could use an

40:12

international wire transfer and pay roughly $44. In

40:14

2021, you could have used USDC

40:19

on Ethereum mainnet and using

40:21

the average gas price paid

40:23

roughly $12. Today,

40:26

you can use USDC on Ethereum mainnet and

40:28

pay about $1. Or you could use USDC

40:30

on base a layer 2 and pay less

40:33

than a cent. This is a more than

40:35

99% cost reduction. And in my opinion,

40:39

this is what infrastructure improvements are all

40:41

about. Wow, $44 for a

40:43

wire transfer in kind of the

40:45

trad-fi world to less than a

40:47

cent as a 99% cost

40:50

reduction. Of course, that's less than a cent.

40:52

It's instantaneous. The wire transfer is quite a

40:54

pain in the ass. And it takes three

40:56

to five days to actually settle. When I

40:58

say pain in the ass, I mean, we're

41:00

talking like full, you

41:02

know, like maybe in some cases, you

41:04

have to go to your bank branch, actually present your

41:07

ID in order to transfer these funds depending on the

41:09

on the amount. You can't do

41:11

it on weekends. Sorry, banker hours, right? This

41:13

is a much better product from a cost

41:15

perspective, but like just also from a, you

41:18

know, timeliness perspective. I want to

41:20

go back to this, this chart that you were showing,

41:22

which is, you know, Ethereum L2

41:25

fees kind of going down,

41:27

right? Post this EIP 4844,

41:30

but also showing a total locked value

41:32

inside of L2 is going up. This

41:35

is, there's something hidden, I think, in this chart, which is

41:37

a, there's an interesting debate in crypto,

41:39

which is like, uh oh, did

41:42

Ethereum just like, you know, outsourced

41:44

its execution layer to L2s that

41:46

are, you know, parasitic to Ethereum's

41:48

ability to accrue value. And I

41:50

think what you can see in

41:53

this chart is actually perhaps now

41:55

this is ETH denominated value, which is

41:57

still useful. It's not just showing ETH,

41:59

but it's also other token value. But

42:01

perhaps the strategy is working where Ethereum

42:03

transaction fees go down for

42:05

L2s, but it's able to export

42:07

Ether into these various

42:10

economies as a unit of

42:12

value. And these economies grow and grow

42:14

and continue to expand and start to

42:16

consume more Ether. That is like the

42:18

Ethereum bull case right now, which is

42:20

basically like you trade off the fees

42:22

in the short run, but you export

42:24

Ether as as a monetary asset

42:26

and seems to be, maybe I'm reading too much

42:28

into this, but seems to be what this graph

42:30

is actually showing. Do you have any thoughts on

42:33

this? Yeah, I feel pretty

42:35

strongly that the idea that, you know,

42:37

oh, you know, Ethereum

42:39

shouldn't have turned the fees down so

42:41

much. I think that's a pretty silly

42:43

idea. I think it's very clearly the

42:46

case that entrepreneurs and

42:48

new startups in the space, when they

42:51

choose their infrastructure, they want

42:53

to look a few years ahead and

42:55

build places where they know it will

42:58

remain affordable for them and their users.

43:00

It's a critical, critical decision when developing

43:02

an application that you want thousands or

43:04

millions or billions of people to use.

43:07

Even today, some people

43:09

worry that there is not enough

43:11

capacity on Ethereum L2s. And

43:14

so the idea that fees would be maintained

43:16

artificially high, and that would be a long-term

43:19

benefit, it's kind of absurd to me. The

43:21

reason why fees are so low now is

43:23

just that it hasn't

43:25

been very long since we got Blob

43:27

space, the extra sort of fast lane

43:32

or bus lane, so to speak, for

43:34

capacity in Ethereum. And

43:37

we still haven't reached the

43:39

target where all of that extra Blob

43:41

space is consumed. But based on

43:43

the current trend, and we don't have a graph on

43:45

this in the report, but you can find it yourself

43:48

somewhere, based

43:50

on that trend, we will reach the

43:52

point where that extra Blob space is

43:54

being consumed very soon, maybe in a

43:56

matter of months, maybe early next year,

43:58

I'm not exactly sure. but

44:01

we undoubtedly probably need more. Some

44:03

leaders in the Ethereum space have called

44:05

for an expansion of the blob target.

44:08

So actually increase that capacity even more, despite

44:11

the fact that right now we're not utilizing

44:13

all of it. And that's specifically because of

44:15

what I was saying, new projects want

44:18

to see that there will remain capacity

44:20

when they bring all their users and

44:22

usage online. So to me, there's just

44:24

no question, there ought to be more

44:26

capacity as much as possible. There

44:28

is no such thing as too much

44:30

supply in the space of software and

44:33

creative space where people will figure

44:35

out how to use it, mark my words. That is

44:37

like the clearest thing I could say. People will figure

44:39

out how to use the space. New

44:41

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44:43

Layer 2 every single week. Why is

44:45

this happening? Maybe it's because Mantle has

44:47

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44:49

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44:53

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44:55

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44:57

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44:59

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45:01

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45:03

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45:05

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45:07

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45:09

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45:13

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45:15

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45:17

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46:10

I think going back to 2021,

46:12

we were all shocked by how fast

46:14

demand came. Demand

46:16

in 2020 was just limited to just

46:19

crypto natives playing some fun DeFi games.

46:21

And in 2021, we

46:23

got far more users on chain

46:25

than we had ever had possible. Ethereum fees

46:27

got up to $600. And

46:30

then this is when kind of the very fast

46:33

layer one blockchain era

46:36

in crypto came, which is actually kind

46:38

of where I wanted to turn to

46:40

next on slide 26. It says blockchains

46:43

now process 50 times as many transactions

46:45

per second than they did just four

46:47

years ago. And we have not just

46:49

Ethereum and not just Ethereum layer twos,

46:51

but Bitcoin, Tron and Solana also contained

46:53

here. Um, Darren,

46:56

this is a secular trend, not just across

46:58

the Ethereum layer two space, but across all

47:00

of crypto, right? Just talk about the global

47:02

scaling of the entire industry for us. Yeah,

47:05

I mean, I think this is just another

47:07

way to illustrate it, right? Just simply looking

47:09

at the actual number of transactions that were

47:12

processed per second, you know, four years ago,

47:14

January 1, 2020. It's, you

47:16

know, versus versus today, it's grown

47:18

by more than 50x, right? So

47:20

just the total amount of throughput

47:23

that we can have on a

47:25

transaction level has increased by 50x

47:27

in four years, which I

47:29

think is really impressive. And it's

47:31

like you said, the result of

47:33

both Ethereum scaling via L2s and

47:36

then also these alternative

47:38

L1s like Solana

47:40

that are contributing to just the

47:42

increase in block space and therefore

47:44

the transaction throughput that we're seeing.

47:47

Darren, in the Solana part of that graphic, do you

47:50

know if that contains a vote transactions or not? I

47:53

believe it excludes the vote transactions.

47:55

Okay, cool. That is my These

47:57

are raw organic real Solana transactions.

48:00

Yep. And it also, of

48:02

course, doesn't represent the complexity of those

48:04

transactions. And as we all know, there

48:06

are many more dApps and smart contracts

48:08

and sophisticated ways to make

48:11

a transaction today. So I'm willing to

48:13

bet that if we were to compare

48:15

the block space, which is the total

48:17

amount of gas, essentially, which

48:19

is very hard to do across blockchains, it

48:22

would be even bigger than 50X. I

48:24

want to get to a nerdy

48:26

slide really quick, which is the

48:28

ZK slides here. So there's a

48:31

slide titled Zero Knowledge Approves Maybe

48:33

the Endgame for Blockchain Privacy, Scaling,

48:35

and Interoperability. I mean, David and

48:37

I believe so too. And

48:40

ZK is just in its infancy.

48:42

If you think about the entire

48:44

cryptoeconomic computer that we're building from

48:47

Bitcoin on forward, all these crypto

48:49

projects really powered by breakthroughs in

48:51

cryptography. We're just at the very

48:54

early stages of seeing this next

48:56

generation breakthrough, which is like ZK

48:58

cryptography. Like it's so early on

49:01

this. You know, Vitalik has talked

49:04

elsewhere about ZK itself being at least

49:07

as big or perhaps bigger than blockchain in and

49:09

of itself. Anyway, I'm hyping this up. What are

49:11

you guys seeing in the data? This

49:15

is the amount spent monthly to verify ZK

49:17

proofs on Ethereum. We've got a chart on

49:19

this. And

49:21

yeah, like what's your overall sense of ZK? We're

49:25

huge fans. We've been banging the drum for

49:27

a while and it's been incredible to see

49:30

how much the space has evolved. I

49:32

think we're just getting to the

49:35

point where it may be possible

49:37

to verify blockchains like Ethereum in

49:40

near real time, you know,

49:43

for a fair amount of money, but close

49:45

to being close to economically superior

49:48

just to prove them. If

49:50

that's the case, then everything changes, right?

49:52

Because one of the core challenges in

49:54

blockchains is that many of the validators

49:57

on an L1 have to

49:59

re-execute all the other things. underlying transactions. And

50:02

if you can get to the point where a set

50:04

of very powerful computers can do that, you can

50:06

avoid redoing a lot of work. So although, and

50:08

I think we show this in slide 30 here,

50:11

although of course, ZK

50:14

proving is very slow compared to

50:16

conventional computing, much, much, much slower

50:19

in fact, it

50:21

may still be economically superior

50:23

at the limit for

50:25

distributed systems where you would otherwise have

50:27

to re-execute the same computation. In other

50:29

words, imagine this very slow computer, but

50:32

it runs one time and many, many,

50:34

many, many other computers never need to

50:36

run it again, right? There's like this

50:38

weird kind of effect where it ends

50:40

up actually paradoxically being faster despite the

50:42

fact that it is in

50:46

its initial pass slower. Yeah,

50:48

if you go back to 28, you'll

50:51

see there are more and more applications

50:53

that are crunching ZK proofs on

50:56

Ethereum. That will definitely be the

50:58

case across blockchains. Elio

51:00

is a recent project that is

51:02

a blockchain entirely composed of ZK

51:05

proofs, partly in order

51:07

to create privacy for its users. But

51:12

the development of ZK VMs, all

51:15

kinds of specialized ways to develop, to

51:18

write the ZK software, I think

51:20

we're going to see a tremendous amount of ZK, specific

51:24

hardware, proving networks, all

51:26

kinds of interesting stuff in order

51:28

to bring this technology to its full

51:30

effect in crypto. This

51:33

chart is very interesting where you're

51:35

plotting kind of ZK VMs on

51:38

the line, comparing that to like Intel

51:40

CPU clock speed from

51:43

the 1970s onward. Do

51:46

you really think it, like, does it

51:48

follow this kind of log scale path,

51:50

the same sort of path that, like

51:53

I guess this is Moore's law basically, that

51:56

CPU clock speed followed, or is it

51:58

a bit different than that? Is it

52:00

like a bit more, I guess,

52:02

just like radical in terms of a step

52:04

function type of change? It's

52:07

a bit different. This is actually a really

52:09

interesting question that we could talk about for

52:11

some time. I think it will remain very

52:13

quick for a while, right, for the next

52:15

few years potentially. But unfortunately, it

52:17

does reach a limit. Like, there is a

52:19

point where it's impossible, of

52:21

course, for ZK proving to be

52:24

faster than just natively

52:26

executing code. So there's just

52:28

no chance that it's ever going to be

52:30

faster. However, like I was saying

52:32

a little bit earlier, if it

52:34

is only, let's say, 100x

52:36

slower, which would

52:39

be, to be clear, a very significant

52:41

advancement from where it is today, if it's

52:44

only 100 times slower, then the

52:47

ability, that economy of scale, the

52:49

ability to reuse that proof in

52:51

many settings means you could

52:54

actually end up cutting

52:56

the amount of compute expended radically.

52:59

So it doesn't actually need to be faster

53:02

than a native computer in order

53:04

to provide extreme

53:06

economic savings. Darren,

53:08

you're smiling there. What would you add to this? I'm

53:11

smiling because I think this is somewhat

53:13

of a humbling slide. He and

53:15

his teams have been working really

53:17

hard on these ZK virtual machines.

53:20

And there's a lot of really smart

53:23

people working on these problems, but it's

53:25

funny to kind of show it on

53:27

a graph in the kind of pre-1960s

53:29

mainframe era on the classic Moore's law

53:31

chart for microprocessors. And so I

53:33

think it's a bit of a humbling slide. We're

53:37

in 1998 with respect to crypto. Maybe we're

53:39

in the 1960s with respect to ZK technology,

53:41

huh? Something like this. Yeah,

53:43

that's right. With the nuances that Eddie,

53:46

of course, described here, but it is

53:48

a bit of a fun humbling slide.

53:51

It's hard to really capture this in the slide, but

53:53

ZK has been a term thrown around in crypto as

53:55

long as I've been in crypto in 2017. I

53:59

think the first time I even been used as ZK

54:01

application was ZK Sync in 2019 to

54:04

donate to Gitcoin. But even since

54:06

then, ZK really hasn't been broadly

54:08

deployed just because it's needed to

54:10

have a lot more of research

54:12

development and just production readiness. But

54:15

the vibe, again, I'm going to have to check

54:17

you guys because this is a report with stats

54:19

and numbers and facts. But my vibe is

54:22

that really, ZK is really starting to actually hit the

54:24

pavement, like the rubbers meeting the road here in 2024.

54:28

Is there anything you can add to

54:30

that to make that a little bit

54:32

more fact-based rather than vibe based? Yeah.

54:34

I'd say just two years ago, there

54:36

were no open source ZK

54:39

VMs. That is to

54:41

say virtual machines where you can write general

54:44

code and after you

54:46

execute the code in that ZK

54:48

VM, outcomes a proof of the

54:50

execution, a proof of what happened

54:52

in that program, a very succinct

54:54

proof. There were zero of them

54:56

two years ago. Of course, there were a few efforts

54:58

to develop them, but that none of them were out

55:01

there, and none of them were open source. Today,

55:03

there are at least three or four, and

55:06

they're high quality, and they're getting way, way faster.

55:09

Projects like Risk Zero and

55:12

Sysinct have developed their

55:14

ZK VMs, which are fantastic. Of

55:16

course, selfishly, we have a ZK

55:18

VM called Jolt, another open source

55:21

one, using a different set of

55:23

cryptographic technologies than the

55:25

others. But it's now become

55:27

a thing that is possible to develop

55:29

by relatively small teams. They're

55:31

getting way, way faster, way, way easier to

55:33

use. And I genuinely expect

55:36

that in the next year, we'll see

55:38

a handful of very high quality applications

55:40

that use ZK VMs when they did

55:42

not exist even a year

55:44

and a change ago. I think

55:46

reasoning about ZK and imagining what ZK can

55:48

do can be kind of hard for

55:51

somebody that hasn't pounded their head into white

55:53

papers and podcasts for 10 hours, 100 hours

55:55

in a row. Eddie,

55:58

Darren, could you guys just illustrate? What

56:00

frontier we're unlocking when we

56:02

have production-ready, efficient, ZK VMs?

56:05

What's out there that's useful and cool

56:07

and impactful upon the internet?

56:11

Well, the high-level principle is that you'll

56:13

be able to prove what

56:16

a computer did when it gives you a

56:18

result. You can

56:20

just know what it did. Of course,

56:22

in a blockchain context, knowing exactly what

56:24

a computer did is a critical part

56:26

of security. Just knowing that things went

56:28

according to plan and that the blockchain

56:30

or the program ran according to its

56:32

specification. That's one of the core value

56:34

propositions of blockchains generally. But

56:36

maybe more intuitively, you can think about

56:38

this applying to artificial intelligence or something.

56:41

When you give an AI a prompt, whether

56:43

it's for an image or for some text,

56:46

how is it that you know, how do you

56:48

know that this is exactly what that AI model

56:50

was supposed to put out, as

56:52

opposed to having its output influenced

56:54

by an attacker or someone

56:57

trying to influence you or even

56:59

an advertiser? You

57:01

want to know how this thing

57:04

came about, what the program was that did

57:06

it without having to just trust the data

57:08

center or the computer that it came from.

57:12

I don't know if you guys follow this

57:14

stuff at all, but there's a lot of

57:16

very spooky stuff out there with, for example,

57:19

deep fakes and impersonators.

57:22

That kind of highlights to me that you never

57:25

really know what's on the other end of the

57:27

line, so to speak. And

57:29

ZK, at least by its

57:31

succinctness property, makes it very easy

57:33

to know and to verify that

57:35

exactly what happened on the other

57:37

line. Yeah, I

57:39

think ZK is going to be absolutely transformational.

57:42

I think crypto natives might see it like

57:44

in smaller ways, like earlier

57:46

than they may think as well. It's like I was

57:48

just talking to the co-founder

57:50

of Sysinct at a

57:52

conference. They've teamed up with Conduit.

57:54

They've got a way to just

57:56

like basically convert optimistic

57:59

role. like on the OP stack

58:01

to ZK rollups. And it's

58:03

like the tangible benefit for a crypto

58:06

user is of course with the optimistic

58:08

rollup, if you ever want to withdraw,

58:10

there's like a seven day waiting period

58:12

for fraud proof. If that just gets

58:14

converted to a ZK rollup, that's pretty

58:16

much instant. Like you're talking within minutes,

58:20

you have that like fully proven. So

58:22

we'll see it impact us in marginal

58:24

ways too, although that's like pretty, that's

58:26

a pretty big delta from seven days

58:28

down to like, you know, minutes. Okay,

58:31

so let's talk about the apps now, the

58:33

key applications, everyone's like, hey, where are the

58:35

apps, what's crypto doing? This

58:37

slide is very interesting and

58:39

it sort of denominates crypto usage

58:41

by category. So we see decentralized

58:43

finance, 34%, we

58:46

see stablecoins, 32%, we

58:48

see infrastructure that contains

58:51

bridges, oracles, you know, smart

58:53

contract wallets, that sort of thing, 14%, token

58:55

transfers, 13%, centralized

58:57

exchanges, 3%, gaming 2%, NFTs, 1%,

58:59

social under 1%. Summarize

59:03

the slide for us. First of all, how

59:05

did you acquire it? This is based on

59:07

daily active addresses and sort of what types

59:09

of things they're doing on chain, what types

59:11

of activities they're getting up to. And

59:15

what does this say? I mean,

59:17

to me, this kind of looks like, oh, it's still about,

59:19

you know, money, it's still about going bankless, it's

59:22

still about like the finance thing, but

59:24

what are your takeaways from compiling this

59:26

data, Darren? Yeah, so first of all,

59:28

the data came from Artemis, which tracks

59:31

a number of different blockchains, although I

59:33

will say some of the kind of

59:35

emerging behaviors in terms of

59:37

gaming and social tend to

59:39

happen on specialized chains at this point,

59:42

which may not be included in the

59:44

full dataset. But I

59:46

do think, right, it is pretty

59:48

clear that the main types of

59:50

activity today in crypto are still

59:52

DeFi and stablecoins, they make up

59:54

a majority of share. And

59:57

things like gaming and NFTs

59:59

and social. still are very

1:00:01

much emerging. And there's actually

1:00:03

some interesting new behaviors

1:00:05

that we're starting to see that we talk

1:00:07

about later in the report as a result

1:00:10

of things getting cheaper and

1:00:12

the infrastructure improving. But

1:00:15

I think today it's fair to

1:00:17

say that DeFi and stablecoins still

1:00:19

dominate most activity on the main

1:00:21

blockchains. Something that's

1:00:24

been a pretty big narrative this last

1:00:26

year is this crypto AI intersection. So

1:00:29

this is slides 37, 38 for people following

1:00:31

along. The title here, Blockchain

1:00:33

Can Address Some of the Most Pressing

1:00:35

Challenges Facing the AI Industry. And

1:00:39

also at the same time, if you are deeply

1:00:41

crypto native, you know that there's also a lot

1:00:43

of, call it fluff in the AI crypto space.

1:00:46

How would you articulate the reality

1:00:48

of the AI crypto intersection? Is this a

1:00:50

meme? Is this real innovation? What's going on

1:00:52

over here? A lot of

1:00:55

people are excited about the intersection of AI and

1:00:57

blockchains. And there are some key themes that are

1:00:59

already coming up that I think are really important.

1:01:02

The first is that we've all

1:01:04

seen on Twitter everywhere else, we've

1:01:06

seen all this really, really high

1:01:08

quality generated content. A

1:01:10

key question that's going to emerge, I

1:01:13

have this like, I actually have this

1:01:15

ongoing Twitter thread that I keep appending

1:01:17

new posts to every month or two

1:01:19

as new things develop. How much more

1:01:21

convincing generated images, generated

1:01:23

videos, generated voice are? I think I

1:01:25

just posted one like less than 12

1:01:27

hours ago, where

1:01:30

MKBHD, the well

1:01:33

known tech reviewer, had

1:01:35

someone synthesize his voice and

1:01:38

use it for a product promotion. And

1:01:40

he wasn't involved at all just to kind of legitimize

1:01:42

it more. People

1:01:44

will want to understand authenticity

1:01:47

and legitimacy. Those

1:01:50

are critical, critically valuable things that we take

1:01:52

for granted just because you'd need a whole

1:01:54

product studio to synthesize someone's voice or image

1:01:56

or something like that. Now it's

1:01:58

becoming incredibly cheap. And

1:02:01

when it's cheap to synthesize these

1:02:03

very valuable things, they can erode

1:02:05

the commons. They can erode,

1:02:07

and when I say the commons, I mean

1:02:09

the fact that we all recognize MKBHD's

1:02:12

voice. That's a thing we

1:02:14

can all kind of enjoy and take for granted and

1:02:16

know that it's legitimate, but that starts

1:02:18

to disappear. We

1:02:20

need technology to allow us to

1:02:23

trace that authenticity again. And

1:02:25

thankfully, blockchains are probably the best way

1:02:28

to do that. Cryptographic

1:02:31

signatures and being able to

1:02:33

trace people's IDs plus a

1:02:35

censorship-resistant bulletin board where you

1:02:37

can post attestations and

1:02:39

relationships between identities, all those types

1:02:41

of things. Those are almost

1:02:44

certainly key ingredients in being able

1:02:46

to solve the authenticity problem. So

1:02:49

many people are exploring that intersection. I think that's

1:02:51

a very fruitful one. With

1:02:54

regard to democratization, think about

1:02:56

how you use AI models today. You

1:02:59

use them through a

1:03:01

big data center, and

1:03:03

Microsoft or OpenAI or

1:03:05

other type of data center.

1:03:08

And that's great, and they provide a very high-quality service. But

1:03:11

if you're concerned about directly controlling

1:03:13

that system and having unfettered

1:03:15

access to it for the foreseeable future,

1:03:18

then you probably want there to be some

1:03:20

type of decentralized AI infrastructure that you can

1:03:23

access as you want. In other words, blockchain

1:03:26

as a disintermediating technology may also

1:03:28

help disintermediate people's relationships with increasingly

1:03:30

important AI agents. AI agents now

1:03:33

do all kinds of cool stuff,

1:03:35

but they're brand new. They're only

1:03:37

going to get more important. Aren't

1:03:40

you going to value having total access

1:03:42

to your agents and to your data

1:03:45

and those types of things that you

1:03:47

use for increasingly valuable economic things? There's

1:03:50

of course transparency, ownership. I talked

1:03:52

about transparency earlier. That's

1:03:54

like knowing what model actually generated that answer

1:03:56

for you. And I promise you, the more

1:03:59

valuable it becomes. comes to hear that answer

1:04:01

from an AI model, the more valuable it

1:04:03

will be for someone to try to influence

1:04:05

that answer. And you're going

1:04:08

to want transparency in that. Although

1:04:10

technologically we're in the earliest innings of

1:04:12

being able to solve these problems, I

1:04:15

think that it's totally clear that the

1:04:17

intersection of AI and crypto is where

1:04:19

they will be solved, probably not in

1:04:22

AI in its own. We need every

1:04:24

technological tool possible. And

1:04:27

sometimes when you have these

1:04:30

intersecting technologies, it's good to just kind of think

1:04:32

about, are there smart people that are working on

1:04:34

these problems? And

1:04:36

I think when we look at the crypto industry, we're seeing

1:04:39

a lot of overlap with AI, both

1:04:42

on the builder and user side of

1:04:45

things. AI, even in crypto social

1:04:47

circles, was the breakaway narrative of 2024

1:04:49

based on some data that we have. We

1:04:54

also looked at web traffic data

1:04:57

and found that there's a high

1:04:59

overlap between crypto and AI users

1:05:01

based on kind of specific overlap

1:05:04

trends with chatgpt.com. These

1:05:06

top kind of crypto websites are right

1:05:09

up there with the AI companies themselves

1:05:11

in terms of using chatgpt,

1:05:14

which indicates that both crypto and

1:05:16

AI are frontier technologies. And as

1:05:18

a result, there's likely to be

1:05:20

a large overlapping user base, which

1:05:23

I think just speaks to the fact that

1:05:25

we will likely continue to see a

1:05:28

lot more people building at the intersection of these

1:05:31

two technologies. Yeah, I can just

1:05:33

also say from personal experience, all my

1:05:35

crypto homies are also into AI, just like all of them,

1:05:37

right? There's a

1:05:39

massive overlap here. Actually, I was

1:05:41

talking to Dixon again

1:05:43

after the conference last week, and we were

1:05:46

talking about crypto acting as sort of

1:05:49

a counter ballast for AI. It's

1:05:52

the case that AI is going to create like

1:05:54

10,000 new economic opportunities or

1:05:57

like more, but it's also going to create a thousand new problems.

1:06:00

Right centralization type problems problems like you

1:06:02

know is this you like a human

1:06:04

or a robot like it's past the

1:06:06

picturing test I don't know and so

1:06:08

crypto acts as a counter ballast for

1:06:11

a subset of those a thousand new

1:06:13

problems. We're going to need crypto

1:06:16

for all of these new AI like Both

1:06:19

opportunities and problems that they essentially

1:06:21

cause Okay, let's go

1:06:23

to something that is near and dear to

1:06:26

David and my heart Which is this idea

1:06:28

of going bankless? This is a metric that

1:06:30

we track often like almost on our weekly

1:06:32

basis, but it doesn't change that much on

1:06:34

a weekly basis This is the

1:06:37

market share of decentralized spot

1:06:40

trading versus centralized spot trading

1:06:43

since the birth of DeFi So this is only

1:06:45

like a four-year-old metric, you know DeFi summer 2020

1:06:47

basically, you know Dex

1:06:50

trading is a percentage of centralized exchange

1:06:53

trading Refuse to say sex is a boss

1:06:55

a here sex trading is like

1:06:58

it used to be zero percent 2020

1:07:00

and now has climbed to above 10%

1:07:02

it's almost hit up upwards of 15%

1:07:04

and so on a steady trajectory Upwards

1:07:07

and again, this is like a

1:07:09

DeFi eating CFI which you love to

1:07:12

see it software eats the world We

1:07:14

like when decentralized software protocols eat centralized

1:07:16

software protocols. That's what this entire crypto

1:07:19

move You like movement is all about.

1:07:22

I just wanted to pull the slide up and just like

1:07:24

show it again Because I think this number is going higher.

1:07:26

I think this number is going to go 30% You

1:07:29

know 40% 50% 60% I can even see it going 80% plus. Of course, we are bankless We

1:07:35

are biased towards, you know, Dex trading, of

1:07:37

course But yeah, do you have any

1:07:39

perspective on this on this data set and where do

1:07:42

you see it going? Well, there's

1:07:45

a there's a few key limiting factors right

1:07:47

that for for decentralized exchange trading There's always

1:07:49

been the gas cost which is like an

1:07:52

extra fee right on top of the swap

1:07:54

There's the challenge in the UX and

1:07:57

just figuring out like how do I handle my

1:07:59

wallets and custody? and things like that. Where

1:08:02

do I find the liquidity and all those things? Every

1:08:05

one of those dimensions has improved over the last

1:08:08

year. And as those dimensions continue

1:08:10

to improve, it's hard to

1:08:12

imagine why decentralized exchanges wouldn't

1:08:16

continue their growth in market share, particularly

1:08:18

because they provide so many safety

1:08:23

benefits. That's the interesting thing, right? You

1:08:26

don't need to take that exchange for granted. Think

1:08:29

about other failures in

1:08:31

centralized exchanges we've seen over the years. Oh, I'm thinking

1:08:33

about one. I can't think of one. I can't think

1:08:35

of a single one. There have been a few. There

1:08:37

have been a few small ones. But needless

1:08:40

to say, decentralized exchanges totally solve

1:08:42

that issue. And

1:08:44

they also don't require specific

1:08:48

trust in jurisdictions, let alone the

1:08:50

exchanges themselves. I definitely see the number

1:08:52

going up. I don't know about going up to 100%, right?

1:08:57

What's more likely in my mind

1:08:59

is that they specialize, right? It's

1:09:01

like the centralized exchanges offer

1:09:03

services that a small group, a

1:09:05

single group of people running a

1:09:07

company can offer on top of

1:09:09

that exchange mechanism. And

1:09:11

then the decentralized exchanges may be

1:09:13

specialized toward the cases where you

1:09:15

want to minimize your trust assumptions,

1:09:17

maximize the security, maximize composability with

1:09:19

the rest of crypto, things like

1:09:21

that. But I definitely see this

1:09:24

number going up as those obvious points of friction

1:09:26

disappear. That's been really great. I've

1:09:28

already learned quite a lot about what's going on in

1:09:30

the last year or so. But I

1:09:32

will say that all metrics that we've looked at

1:09:35

so far are downstream of this next

1:09:37

metric that we're going to look at

1:09:39

right now. And

1:09:41

that is builders, the builder

1:09:43

interest inside of crypto. Crypto

1:09:47

is nothing if there are no builders,

1:09:49

no software developers building cool things to

1:09:52

do on top of these blockchains, using

1:09:54

up block space, changing the

1:09:56

Internet. What can we say about the state

1:09:58

of builders in 2024? Because if

1:10:00

I recall, actually, 2023 might have

1:10:02

been crypto's first ever down year

1:10:04

in crypto, net crypto

1:10:07

interest among builders. Maybe

1:10:09

you guys can clarify that if that was true or

1:10:11

not. But what can we say about the state of

1:10:13

building in crypto in 2024? Yeah,

1:10:16

well, one thing I'll say is that, I

1:10:18

mean, of course, we know that builders are

1:10:21

the heartbeat of the crypto industry. And

1:10:24

A16Z Crypto meets with thousands of

1:10:26

builders every year in

1:10:28

different contexts. And we've

1:10:31

finally built the tools internally

1:10:33

to be able to share

1:10:35

some aggregated proprietary data around

1:10:38

where the builder energy is.

1:10:40

And so we have a new dashboard

1:10:43

that we're calling the Builder

1:10:45

Energy Dashboard, which allows you

1:10:47

to look at the market

1:10:49

share of builders across blockchains,

1:10:51

categories, technologies, and geographies. And

1:10:54

you can check that out

1:10:56

at builderenergy.a16zcrypto.com. But

1:10:59

I guess starting with blockchains, we can kind of

1:11:01

show and we do on the slide here the

1:11:06

percentage split between where builders

1:11:08

are interested in building from

1:11:10

an ecosystem standpoint. I

1:11:13

mean, we see that Ethereum and the

1:11:15

L2s capture a majority of mine share

1:11:17

among builders today. This

1:11:19

in particular was a breakout ecosystem in 2024

1:11:22

showing high growth. Not

1:11:26

all of the builder activity is happening on

1:11:28

Ethereum. Bitcoin and Solana

1:11:30

also saw kind of big

1:11:32

increases in builder interest. But

1:11:35

Ethereum and the L2s still kind of

1:11:37

majority mine share in 2024. What

1:11:41

about net aggregate builders at

1:11:43

large over the crypto industry? Did that go up

1:11:45

in 2024? I believe

1:11:48

it did just in terms of

1:11:50

the overall numbers of builders

1:11:52

that we engaged with in this data

1:11:54

specifically here. I will say it went

1:11:56

up. We aren't speaking

1:11:58

to any of the actual.

1:12:00

raw numbers because we feel

1:12:02

the need to aggregate into

1:12:05

percentages only. But I

1:12:07

think we can say that it went up. Guys,

1:12:09

this is a fantastic report. The visuals

1:12:11

are absolutely stunning. Bankless listeners will include

1:12:14

a link in the show notes so you can go download this and

1:12:16

scan through it yourself. I think that that's

1:12:18

the way you're going to get all of the material here.

1:12:21

Let's talk about what's next for crypto.

1:12:24

And one of the, I think mental models that a

1:12:27

16Z has pioneered is there's basically

1:12:29

a different adoption waves for crypto.

1:12:31

This is shown in slide 56

1:12:34

here toward the end. We've been

1:12:36

through our fifth wave, like kind of fifth

1:12:39

wave question mark of adoption. We've

1:12:41

had wave one, wave two, wave three, wave four,

1:12:43

and now we are in wave five. You can

1:12:45

sort of see this in the graph when you

1:12:47

look at total crypto market

1:12:49

cap, the different waves of just

1:12:51

up bull markets and then like

1:12:54

busts and then down. Then

1:12:56

a new wave begins. That's kind of been

1:12:58

the trend here. You can see that by

1:13:00

global crypto market cap, search

1:13:03

interest in crypto, active

1:13:05

crypto developers, crypto startup

1:13:07

fundraising rounds. What can you

1:13:09

say about this? Because there is, like

1:13:12

this is very near and dear to everybody

1:13:14

listening. We're always wondering like, okay, was that

1:13:16

it? Like are we in it? What part

1:13:18

of the cycle are we in? Is

1:13:20

there going to be another cycle? Are we going to go up

1:13:22

again at all time highs? Are they in the future? How big

1:13:25

could this grow? Any reflections on this

1:13:27

fifth wave that we're in? First of

1:13:29

all, is the data basically pinpointing that

1:13:31

we're in a fifth wave of adoption?

1:13:34

Where does this lead? I think

1:13:36

the markets, from an outsider's point of

1:13:38

view, the markets look very chaotic. I

1:13:41

think the way that we think about these markets is

1:13:44

that there's actually some underlying order to

1:13:46

all this madness. We

1:13:49

call it the price innovation cycle. The

1:13:51

idea is that when prices go up,

1:13:53

people get interested, developers build, and then

1:13:55

new products kickstart the next wave. We've

1:13:58

seen this now four times. Bitcoin's

1:14:01

inception. And I think there is

1:14:03

a question of are we in the fifth

1:14:05

wave? And I think it is actually a

1:14:07

little bit hard to tell because while prices

1:14:09

have gone up, it's

1:14:11

hard to say, is it a function

1:14:14

of net new interest and innovation, or

1:14:16

is it more of the external factors

1:14:18

like the ETFs and the political tailwinds?

1:14:20

So I think there is a question,

1:14:22

which is why we have the question

1:14:24

mark there of are we in the

1:14:26

fifth wave or not? But

1:14:28

I do think the quality of builders

1:14:31

that we're seeing, the product pipeline that

1:14:33

we have visibility into is very strong.

1:14:35

And as chat GPT showed us, it

1:14:37

really only takes one product to kickstart

1:14:39

an entire industry. And so we'll

1:14:42

see what happens. I think the jury's still out

1:14:44

there. What do you think Eddie, fifth wave? Yeah,

1:14:47

I'm not sure that we are, to be honest.

1:14:49

I mean, it looks impossible to say, right? You

1:14:51

can only kind of know in retrospect, so take

1:14:53

everything I'm saying with a grain of salt. But

1:14:56

I tend to think that right now we've

1:14:58

had some very positive developments

1:15:01

like the ETFs and so on,

1:15:03

like Darren alluded to. But we

1:15:05

have a lot of very powerful headwinds

1:15:08

like regulatory challenges

1:15:10

and lack of clarity, you

1:15:13

know, the upcoming

1:15:15

elections, people are holding

1:15:17

their breath, right? Lots

1:15:19

of price volatility as a result of

1:15:21

macroeconomic volatility. I think that

1:15:23

it's hard to say. I tend to

1:15:26

think that we've mostly just

1:15:28

gotten over the doom and gloom of 2022

1:15:30

and 2023. Right.

1:15:34

There was some very, very serious, we were

1:15:36

in the middle of recovering

1:15:39

from some centralized exchange

1:15:41

meltdowns. We were realizing

1:15:43

how challenging the regulatory environment was going

1:15:45

to be. And I think

1:15:47

those things really dampened interest. And I think we've

1:15:49

kind of gotten over that now. But

1:15:52

we are still a little bit of

1:15:54

a ways away from those breakout applications

1:15:56

that lead the way, that show people

1:15:58

exactly what it is. it means like

1:16:00

to make a breakout application that creates

1:16:02

a ton of value for users that

1:16:04

mainstream people can access and use that

1:16:06

really is global and decentralized in the

1:16:08

way that we all aspire to. So

1:16:10

I'm not quite sure we're there yet.

1:16:13

Hard to say. Being in crypto

1:16:15

feels like we are fighting a war on

1:16:17

17 different fronts all

1:16:19

at once. And

1:16:21

2023 and 2024 were definitely emblematic

1:16:24

of that. We had the political

1:16:26

front. We had the infrastructure front.

1:16:28

We had the app front. We

1:16:31

had just like the user mindshare front. And

1:16:34

each one of these things I think we made

1:16:36

varying degrees of progress as you kind of just

1:16:38

noted Eddie. But when you summate the year as

1:16:40

a whole how would you say how strong of

1:16:42

a victory or lack of victory did we have?

1:16:44

Like did we have a 10 out

1:16:46

of 10 dub? Maybe a 4 out

1:16:48

of 10 could have done better. How

1:16:50

would you summarize like summarize how

1:16:52

well we've done on the list of two dues

1:16:55

the very long list of two dues that we

1:16:57

have as an industry in 2024? I

1:16:59

think we've done extremely well in terms

1:17:02

of scaling blockchains so far and adjacent

1:17:06

technology like ZK that's exceeded

1:17:09

my expectations. I

1:17:11

think we have not done as great as

1:17:13

I wanted but positive in terms of improving

1:17:15

the UX. By improving the UX I mean

1:17:17

of course like abstracting

1:17:19

gas completely, abstracting and

1:17:21

simplifying custody, simplifying the

1:17:24

way people interact with

1:17:26

multiple networks. Those problems are in

1:17:28

some ways getting better, in some

1:17:30

ways getting worse. I think

1:17:33

we've done better than I thought on

1:17:35

stablecoins and we've done a lot better

1:17:37

than I think everybody expected in terms

1:17:39

of regulation. We didn't really

1:17:42

highlight that in this conversation but the passage of

1:17:44

the 521 bill in the House of

1:17:47

Representatives with the support of 71 Democrats

1:17:50

was a totally surprising and

1:17:52

incredible move. I think

1:17:55

it's undeniable evidence that things are probably headed

1:17:57

in the right direction and everybody should feel

1:17:59

good. feel really, really good about that. There's

1:18:02

also the Doona legislation, the

1:18:04

entity for DAOs out

1:18:07

of Wyoming. It's a very positive development. And

1:18:10

there's been early indicators of

1:18:12

bipartisan support for stable coin

1:18:14

legislation. All those fronts are

1:18:16

totally, if you had told me that a year

1:18:18

ago, I would have been totally shocked. So that's

1:18:20

way ahead of expectation. Yeah, that's

1:18:23

kind of a quick summary. So I'd say

1:18:25

positive in many fronts with

1:18:27

some noticeable areas for improvement.

1:18:30

Yeah, I would just add, I really do

1:18:33

think we're at kind of an inflection point

1:18:35

in the crypto industry, right? Like the infrastructure

1:18:37

has just now become, it

1:18:40

has just now gotten to the point where

1:18:42

we can start to see these new types

1:18:44

of applications emerge, right? Like I think the

1:18:47

stable coin example is pretty simple, right? When

1:18:50

fees go down, stable coins become

1:18:52

a very good product. When fees

1:18:54

are high, stable coins are not

1:18:56

a very good product. I think

1:18:58

we're seeing new types of emerging

1:19:00

behavior in things like NFTs and

1:19:02

social and gaming that are really

1:19:04

only now this year possible. And

1:19:06

so I try

1:19:09

to have as much patience as possible when

1:19:11

it comes to this stuff, because we

1:19:13

are just now at this point where we're

1:19:15

gonna start to see these experiments. Builders

1:19:18

are going to build these new products

1:19:20

that are only now possible in

1:19:23

a low fee environment. And I

1:19:25

look forward to reporting on all this

1:19:28

next year, because I think we need

1:19:30

to give builders a chance to build.

1:19:32

And I think we're really well positioned

1:19:34

to see that takeoff next year. Really

1:19:37

well positioned for takeoff in 2025. I

1:19:40

can't wait to have you guys back next

1:19:42

year. It seems like from my reading

1:19:45

of this, we have product market fit

1:19:47

in a number of categories, DeFi, stable

1:19:49

coins, among others. So we

1:19:51

get good product market fit. We're sort of

1:19:53

waiting for regulatory market fit, or regulator market

1:19:55

fit, and like making some progress

1:19:57

as you both pointed out. there. So we'll

1:20:00

see what that brings in the next year.

1:20:02

Very excited to have you both with us.

1:20:05

And for bankless listeners, of course, there's a link in the

1:20:07

show notes for the 2024 crypto report,

1:20:10

state of crypto report from A16Z

1:20:12

Crypto. Darren, Eddie, thank you so

1:20:14

much for joining us. Thank

1:20:16

you. I'm glad. Got to let you know, of course,

1:20:18

Bankless Nation, crypto is risky. You could lose what you

1:20:20

put in, but we are headed west. This is the

1:20:22

frontier. It's not for everyone, but we're glad you're with

1:20:24

us on the bankless journey. Thanks a lot. Thank

1:20:30

you.