What will the future of crypto look like?

May 18, 2022

MUSHROOM ALPHA

Wednesday! Luna went bust, market is down but our spirits are up cuz crypto ain’t luck. Hang in there all. Web3 is not about up or down. It is about innovation. Those that stick around investing and building will be the winners of this cycle.

Today's Topics:

  • TLDR - A16z State of Crypto Mega Deck

  • Coinbase + ENS and sitting in a tree

  • Robinhood working on non-custodial ETH wallet 

  • Quick Links

TLDR - A16z State of Crypto Mega Deck

Andreessen Horowitz (a16z), a fancy VC firm published their slide deck magnum opus “State of Crypto” yesterday. Slide deck jockeys at McKinsey and Accenture gasped in awe. 

Do you have time to read through a 56 page deck? No. That is what we are here for. We summarize so you can get back to Netflix or NFTs.

5 Key Points

1/ Cycles of Innovation

 Since the inception of Bitcoin in 2009 all of the following measures are up and to the right.

  • Crypto Market Cap

  • Developer Activity

  • Startup Activity

  • Social Media Activity

Has there been volatility? Sure, each cycle has gone down from a peak but the next cycle has always surpassed the prior. Think of it like this: 2 steps forward, 1 step back.

2/ Web3 aims to change how profits are distributed 

Creators want to use platforms that do not rake them over the coals.

Big Tech created and took the lion’s share of profits. Facebook and Instagram take 100% of profits while OpenSea takes 2.5%. 

In 2021 ETH based NFTs paid creators $3.9 billion. 

A16z counted 22,400 creators for $174K avg per creator

In 2022 Meta said they will “reward” creators with $1 billion.

FB has approx 2.91 billion creators for $0.10 avg per user

Which platform would you create on? Web3 wins.

3/ Crypto’s real-world impact

The promise of DeFi is to help serve the world’s unbanked. This number stands at more than 1.7 billion according to the World Bank. A billion people who are unbanked have mobile phones and crypto can bridge them into financial services.

DAOs (Decentralized autonomous organizations) - Strangers can work together to achieve goals, build communities, and companies.

NFTs - Virtual property rights on pictures, art, music, in-game items, tickets, virtual land, and more.

Company Examples:

Goldfinch - Crypto loans without collateral for emerging markets

Flowcarbon - Reimagining carbon credits using blockchains

Helium - Decentralized wireless network battling giant telecoms

Spruce - Let people control their own data across the web unlike Google and Meta

4/ Ethereum is a beast but competitors are trying to sink their battleship

Other Layer 1s such as Solana, Polygon, Avalanche, etc are gunning for it.

Ethereum Pros

  • Around 4000 developers and counting

  • $15 million in fees per day

  • DeFi, NFTs, DAOs, dApps and more being created daily

Ethereum Cons

  • Slower performance

  • High fees

Enter cross-chain bridges and Layer 2s. CCBs allow for assets to go from one blockchain like ETH to another like Solana. Think of it as a language translator.

Layers 2s help ETH lower transaction costs while also speeding them up. Like a fast virtual accountant IRL that speeds up your bookkeeping.

5/ We are still early

They are calling between 7-50 million active ETH users.

Internet: 1990-2005 to reach 1 billion users

Web3: 2015-2031 to reach 1 billion users if trend lines continue

We think the first 1 billion users will come much faster than 2031.

Start building!

If you insist on plowing through here you go.

Coinbase + ENS and sitting in a tree

What is one reason why many have not claimed an Ethereum Name Service (ENS) ID? It looks like a pain in the ass. But now Coinbase is looking to help us push the Easy button.

Using the Coinbase Wallet people can now claim an ENS ID.

Why get an ENS? It simplifies crypto addresses from robot talk into readable domain names. With an ENS link you can put wallets, web URLs and even subdomains under one crypto umbrella. The hope is this helps increase adoption by making crypto friendlier to people who don’t look like Vitalik.

Robinhood working on non-custodial ETH wallet

On the heels of their previous wallet launch Robinhood is working on a new wallet - think MetaMask rip off. The difference is the new one is non-custodial so users will have custody over the private keys. The good news is you jump off the teet of RH but the bad news is you are subject to losing everything if you get hacked or lose the private key.

They will launch it as a new app with:

  • Slick UI/IX which RH is known for

  • Full control to store and trade crypto

  • No network fees - Remains to be seen how this will play out

  • NFT and DeFi support

Beta comes this summer. Full launch by EOY.

Quick Headlines

Ledger launches a Browser Extension - Users can connect their hardware wallet to Web 3 apps.

Luna Storytime by Haseeb Qureshi - Long but entertaining read on the Terra crash

Terra's Legal Team drops the mic on their way out - We guess they did not like Do Kwon's new plan.

Cloudflare will run and fully stae ETH Nodes - Fingers crossed "The Merge" will happen soon?

ConsenSys and LivePerson launch VillageDAO - Their aim is to make crypto customer service suck less by giving rewards to community members who help out. Ironic cuz ConsenSys runs MetaMask which has questionable UI/UX. Ask someone burned by iffy gas fees.

Getty Images doing NFTs - Their timing could not be worse but hey why not?

Universal Music Group is going to release NFTs on LimeWire - Perhaps this is the summer of music NFTs.

Funding News:

Encode Club raises $5M to train up future Web3 Devs - Think coding boot camp for Web3

Certora scores $36M for smart contract security - Security is becoming a larger issue in DeFi and Web3 so this space will grow fast.

Till tomorrow!

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Disclosure: We are a newsletter for information only. We are not financial advisors nor do we claim to be. Consult your legal, investment or tax advisor. Crypto is risky. Do you own research.