State of Crypto: Still HOPE!? This Report Will Surprise You!!

Let’s not sugarcoat it crypto sentiment Is in the toilet many are wondering Whether they’ve arrived too late and Whether those hypnotic gains are a thing Of the past Well the answer may surprise you that’s Because according to a recent crypto vc Report our best days are yet to come It’s not opium it’s solid facts and in This video i’m going to break it down Page by page and tell you exactly where All that hidden value could lie [Music] Bonjour I am chef guy the creator of the most Delicious sensual crypto content on the Internet Ok so i take a whole handful of Painstaking research i mix it with an Extra large measure of knowledge Then i add a generous sprinkling of Objectivity and a soup sauce of english Je ne sais quoi Then i mixed together inside a warm Studio for 40 minutes i had a number of Helpful images and voila a video all About crypto for you to feast upon Now although i may be the most respected Chef in all of paris I am not a financial advisor dakar so If your portfolio is looking a little Underdone I cannot help you Now if my videos set a fire in your

Belly then remember to subscribe to the Channel and ping that little bell too Then the waiter will inform you when the Next one is ready to be consumed okay i Must return to the kitchen and to my art It is time for you to experience the Fruits of my liver Bon appetit So what is this report of which i speak Well it’s the annual state of crypto Report by the crypto arm of andreessen Horowitz or a16z For those who don’t know who they are It’s important to give you a bit of an Overview of the firm That way you’re fully aware of any Biases that could be present in the Report Andreessen horowitz is perhaps one of The most prolific venture capital firms In the world they have been particularly Active in the tech space and have backed Hundreds of successful tech unicorns Everything from stripe to lift coinbase To reddit I’ll leave a link to this site below That details all of those investments So let’s just say that they’ve been Pretty successful by vc standards Now a16z crypto had its beginnings when Andreessen horowitz completed a raise For their first dedicated crypto fund This was for 300 million dollars back in 2018 and it was run by two general

Partners katie hound and chris dixon Andreessen horowitz went on to raise two More crypto specific funds a 515 million Crypto 2 fund in 2020 and a whopping 2.2 Billion crypto 3 fund in summer last Year A16z crypto can therefore be seen as the Division of andreessen horowitz that Oversees these three massive crypto Funds Now katie hound left a16z last year and Has subsequently gone on to run her own Fund but chris dixon remains the top gp In these crypto specific funds And when it comes to crypto unicorns A16z crypto has had their hands in Nearly every pie You can see a list of all their Investments over here i’m sure you’ll Know most of the names on this list Dapps exchanges dows banks nft issuers Nft marketplaces Quite simply if you are a crypto startup That has been backed by a16z then it’s Seen as a badge of honor And given that they usually get in on The seed and private rounds with the Lowest token prices of all they can make Return multiples we can only dream of 100x would be an okay return for the Likes of these guys Now i’m not here to cast dispersions on Their business model vcs fulfill a Central role in the funding of new

Businesses crypto or otherwise But it’s important to know where they Have invested when it comes to assessing The impartiality of their research And none of this should detract from This year’s state of crypto report Because it really is quite impressive so With that intro out of the way let’s Dive right in The first page over here goes over the Concept of web3 now this is a buzzword You know down here a lot and it’s Important to understand exactly what it Means so quite simply web one was about The open protocols on the internet think Tcpip etc In this network the value accrued to the Users and the builders anyone could use It However in the web 2 space most of that Value accrued to some really large tech Companies the likes of google facebook Amazon etc they built these applications On top of web one that would allow them To extract the most value from their Walled off silos of information Now we’re in the era of web 3 where the Ethos of the early internet has come Back You have the community governed ethos of A decentralized internet with much of The functionality of web 2 applications Now this next page over here shows just Why the current internet is flawed

Dictatorships on the one hand who Develop cbdc’s in the social credit System and big tech oligopolies on the Other that are driven by nothing but Profit I do love this chart over here for those Who don’t recognize it it’s the s curve Essentially this is a graph that shows How those companies in web 2 started With good intentions they provided value To new users and they cooperated However as they grew much bigger over Time they have extracted value from Users and become hyper competitive One of the simplest ways you can look at It is that web one was about reading and Getting information web 2 was about Reading and writing And web 3 is reading writing and owning When you own the underlying Cryptocurrency that powers the network That the dapps run on you directly have A stake in it Now this page over here further Reinforces that notion in web 2 those That are at the bottom of the value Chain are the users The investors sit at the top and earn The big bucks However with the creation of a token Economy in web3 all those who use the Network benefit equally Now there is of course a lot more to Web3 than this and i have a video that

Covers it in depth which you can find in The description Anywho this next section looks at what They call quote cycles of innovation and It’s pretty instructive basically price Drives interest which drives people to Think about new ideas which creates Startups which people can then invest in That’s why it can sometimes be hard to Separate out the tech from the price Because they are whether we like it or Not inextricably linked This takes the concept to another level Where they try and compare the different Volumes of the market cap developer Activity startup activity and social Media activity the notion here being That the price as reflected in the Market cap is driving the other Components in the crypto space These include the developer activity on Github the amount of funding being Raised from private investors and those Who talk about crypto on social media Okay so that’s the innovation feedback Loop Moving on though it’s time to get into The real meat of the report and that is A look into layer ones So on this page they have a list of some Of the blockchains people are developing On they seem to have left out a number Of other promising layer ones here so i Would take it with a pinch of salt i’d

Also point out the polygon isn’t a layer One so it’s interesting that it’s on This chart but perhaps i’m just being Pedantic Anywho what’s interesting to note is That some of these other layer ones have Way more users and daily transactions Than ethereum That includes the likes of solana and The bnb chain Now one would therefore think that they Are more appealing to users right well Not quite That’s because over on this page they Show the amount of transaction fees paid On these blockchains As you can see on a seven day average Ethereum users pay over 10 times the Fees that are paid on the next closest Blockchain bnb chain Now some may point to this as proof that The ethereum blockchain is unsustainably Expensive However i would counter that this is Just a reflection of the demand for that Block space Even though it is more expensive than Others people are happy to pay a premium For the added security that comes from The ethereum blockchain Now of course this is not to say that There aren’t ways to reduce these fees And i’ve covered them in a number of Videos which i’ll leave in the

Description moreover there is a hope That with the full rollout of the Consensus layer and sharding scaling is Likely to improve and lower transaction Fees will be the result at least we hope Now what all this demand to use ethereum Means is that it’s become a bit of a hub In the crypto space Naturally other layer ones are looking To capitalize on the high fees and get Users onto their blockchains This is where the cross chain bridges Come in now over here you can see the Top bridges that have transferred value Away from eth in terms of total Transaction value i was quite surprised To see that avalanche has had the most Transferred over This chart shows the top bridges out There based on the total amount of eth That’s been deposited into them Interesting to see that combined between The polygon pos chain and the polygon Plasma chain there are over 300 000 eth Locked in these bridges we’d better hope That they are ultra secure This is relevant when you consider that Sitting at number three is the axi Infinity ronin bridge if you’ll recall This was hacked in april and over 650 Million dollars were stolen one of the Biggest hacks on record Of course it doesn’t help that just Before that the wormhole bridge over

Here was also hacked for 320 million Dollars back in february Quite simply bridges are risky and this Is something that vitalik himself has Pointed out on a number of occasions so Although these bridges are encouraging For cross-chain value transfer they are A potential point of failure Okay with that cursory warning out of The way next page what this shows is the Number of developers working on various Protocols since the first commit It’s not hard to see why ethereum still Remains so popular given the amount of People working on it The only other blockchain that appears To have gone on a similar trajectory at This stage is solana avalanche also Appears to be growing quite well since Its launch but it will be interesting to See if it can match the trajectory that Ethereum has achieved And speaking of this commit graph the Data comes from electric capitals 2021 Developer report i actually covered this In a previous video which i will leave In the description for you it’s well Worth your time Let’s move on to the next section though And this is on layer 2 scaling we start Over here with a bit of the lay of the Land with layer 2 each scaling one of The most prominent l2 scaling solutions Out there has been rollups and within

Rolluptech you have optimistic rollups And zero knowledge or zk roll ups Optimistic roll-ups are as the name Would suggest optimistic about the state Of the transactions but can be Challenged if required However zk roll ups assume no such thing And require state transitions to be Verified off-chain Now of course this is just the most Basic description of how they differ and If you want a complete comparison then i Would suggest my video on eth layer 2 Scaling top right paw favor But the tldr here is that these two l2 Scaling solutions are transforming the Ethereum network and there are already Some really popular projects developing These roll-up solutions This next page compares some of the tvl Of the different layer twos based on Their underlying protocol technology As you can see roll-ups and particularly Optimistic roll-ups are the l2 of choice On to this next page here and they take A look at the fees required to transact And swap on some of these layer twos as Compared to the eth main chain quite the Difference Now i can’t speak for some as i’ve only Personally used optimism loop ring and Arbitrarium if any of you have used the Others on the list please let me know Your experience in the comments below

What i will say is that fees shouldn’t Be viewed in isolation One should also consider the Transactional and computational demand That’s currently being sent through These protocols It’s never a zero sum game with fees Okay so that’s the state of the l1 and L2 space ethereum still dominates and Layer twos are competing for the goal of Bringing stresses off the main chain Moving on though the next section is Particularly interesting and it is all About defy This page over here gives some really Interesting statistics as to why the Current financial system is ripe for Defy adoption 1.7 billion people over 22 percent of The world’s population don’t have access To a bank account People rely on remittance providers in Order to get 650 billion dollars sent Home Now this ain’t cheap as the middlemen Involved in these remittance Transactions take a total of six percent Of these transactions crazy Perhaps even crazier than that is the Fact that 48 of adults have not sent or Received a digital payment for a year Now they don’t define exactly what Digital payment means but if it means What i think it means then financial

Institutions have done a terrible job of Making digital banking accessible to These people it’s not like they have an Excuse either of all those who are Unbanked 1 billion have phones and 480 Million have the internet It’s this backdrop that gives you the Sense of the raw power that defy has to Disrupt and disrupt it has going from Absolutely nothing in january of 2020 to An ecosystem of 100 billion dollars in Tvl in just under two years Of course while over 60 percent of this Defy tvl is locked up on ethereum it’s Interesting to see that this has been Shifting It used to be over 95 in late 2020 so Competition is increasing When it comes to the use cases of d5 Protocols today the bulk of them stem From decentralized exchanges and lending Protocols Trading and borrowing volume on these Peaked towards the end of last year In fact volume on decks is like uni-swap At times even eclipsed the volumes on Centralized exchanges like coinbase Now onto this next page here and it’s All about that eath proof-of-stake merge More specifically it looks at the total Amount of heath that has been locked in The beacon chain at the time of this Report over 12.6 million eath and Counting

Something i will point out though is the Fact that a large proportion of this is With liquid staking providers the likes Of lido steak fish kraken etc Lido has a full 4 million each in its Address or a full 31 percent of the Total eath staked Is this cause for centralization Concerns that’s something i’ll be Exploring in an upcoming video so keep Your eyes peeled Now despite how large we think d5 is it Helps to measure it up against some of The biggest players in the c5 space If we were to assume tvl was assets Under management it comes in at 31st so We still have a long way to go Next section though and this focuses on One of the most controversial topics in Crypto at the moment Over here they give a quick overview of The three different types of stablecoin Fiat-backed crypto backed and Algorithmic Those that are in the fiat-backed bucket Are the likes of usdc usdt or at least We hope b usd etc etc crypto backed are The likes of die which is backed by over Collateralized crypto Then you have the algorithmic that Adjusts supply and demand to maintain a Peg that third one was the darling of The crypto space up until a few weeks Ago when the ust stablecoin

Spectacularly collapsed more about that Below This next chart over here shows the Market cap of the stablecoins in Question over the past two years apart From the fact that it’s been increasing Rapidly you should also note that usdc Is eating into usdt’s market share Perhaps fears over stablecoin regulation This over here is a particularly Interesting chart it shows the on-chain Velocity of various stable coins i.e the Number of times that it’s being Transacted versus the total supply That’s outstanding You can think of it as a benchmark of The popularity of certain stable coins Dye and usdc appear to be the highest And i can only assume this is because of Their extensive use in d5 protocols Liquidity pools lending swaps etc Whereas it appears as if usdt is either Merely being kept as a huddled pile of Stable or it’s only being traded on Centralized exchanges Now we often hear the regulators talking About how much of a risk stablecoins Could be And while they may have a point with Algorithmic stablecoins the stablecoin Market cap is still insignificant when Compared to the broader money supply That’s best illustrated with this chart Over here which shows that market cap

Compared to the m1 money supply of some Large global economies a mere fraction Pennies on the dollar Moving on though and this next section Is on nfts Over here we have an overview of weekly Sales in the nft markets both primary And secondary as well as the total Market participants buyers and sellers What i find surprising here is the fact That although the crypto market has Taken a bath the nft market appears to Have held up quite well we see that the Volumes and market participants are Still quite healthy That seems to run contrary to some of The reporting out there that claimed the Nft market was flatlining but it appears As if newspapers like the wall street Journal were quite selective in the data That they chose and were cherry-picking Surprise surprise This next page over here has what is Called the take rate for numerous web 2 Platforms compared to the likes of openc Quite simply this is the fee that the Platform takes from those who use it 30 For apple itunes 45 for youtube and 100 For facebook instagram and twitter I can only assume that the reason that Those last three are at 100 is because They own all your data and they make all Their money from said data

Nothing in it for you They also have this crazy quote here From richie torres a u.s congressman Quote you know something is profoundly Wrong with our economy when big tech has A higher take rate than the mafia Well said sir Now of course 2.5 percent for open c Seems reasonable in these circumstances I’ll also add that there are nft Marketplaces out there such as coin Bases that charge zero fees although it Seems as if this hasn’t really helped Its popularity but that’s neither here Nor there Now this page over here is particularly Captivating for me it’s the return that Creators earn on the platforms that they Choose to use When you use centralized large Monopolistic platforms you are getting The crumbs after they have eaten the Bread However when you produce an nft be it a Song picture or artwork you get all the Direct value With nfts artists have been able to earn In two minutes what would have taken one Million streams on traditional music Streaming services artists such as mo Ruff black dave and heno have all been Able to earn thousands of dollars per Nft drop remember it’s not all about Profile pic jpegs

And that’s perfectly summarized over on This page where we see the various use Cases that exist for these nfts Airdrops royalties dow governance etc I’ve talked about many of the numerous Types of nfts in a previous video of Mine which i will leave in the Description for you quite simply nfts of The future Yes there is a lot of hype in the market Right now and a great many of these scam Pfp projects are going to zero but you Really need to dive deeper into these Other use cases to appreciate nft’s Potential Next section though and this is on web 3 Gaming This page over here shows that whereas The music industry fought against Innovation with lawsuits and the like The gaming industry has embraced it The music industry stuck with its Business models and hoped that it could Retain those sales volumes by Protectionist measures Whereas in the gaming industry it Adjusted the business model with the Likes of mmos free to play and virtual Goods on top of that the rise of video Game streaming brought a new social Aspect to gaming that had not existed Before And it seems like that tradition has Been continued in the blockchain and web

3 space These high level stats are quite telling 20 of the nft sales in 2021 were gaming Related almost half of all crypto wallet Activity has come from games Moreover some of these games have Generated a lot of active users over 50 Of them have over 1 000 unique on-chain Users at this point in time And it’s not just users and activity but Money lots and lots of it Demand for virtual real estate has been Going insane recently land sales have Now topped 2 billion However over 40 percent of this appears To have come from the likes of the Recent hype around the other side land Drop to the board ape ecosystem These land parcels have yet to Demonstrate their utility although i do Have high hopes and you can find out More about the top virtual land Ecosystems in my video on it and you Know where to go for that good stuff So it appears as if gaming is ripe for Web 3 adoption right well not quite yet That’s because from the feedback that i Get from the gaming community they’re Not all that enthused with the fact that Crypto and nfts are trying to encroach On their ecosystem Moreover having played some blockchain Games myself i can confidently say that They aren’t all that captivating

So i would say that there’s still a Great deal of development required Before web 3 gaming can really convince Those gamers to join the cause However something that i for one don’t Need convincing of is the potential of Dows covered in the last section of the Report Now i really like this visualization That compares dows to your traditional Company The latter is tightly controlled and Defined with hierarchical structures Dows on the other hand are Permissionless and allow the broader Community to govern the ecosystem They’re a part of It’s truly the fairest way for those Users to be able to get representation In the protocols they interact with It’s because of this that daos have been Able to amash gargantuan treasuries with The aum in some of the top dows reaching Over 10 billion dollars here are some of The top dows in the space and uni swap Gnosis and bit dao take the medals the Majority of the value in these dows Stems from the governance tokens of the Protocols themselves save for bit dao And olympus dao that’s because these Governance tokens allow the participants Of the daos to be able to participate in On-chain voting and the like In total there have been over 56 000

Decisions that have been made in these Dows from a collection of more than 3.4 Million votes It’s safe to say that people are keen on Decentralized governance of course i Will say that it’s not all plain sailing There have been times when community Governance in d5 has been less than Optimal That’s particularly the case when large Holders of governance tokens read vcs Use their token power to push through Controversial proposals But i think it’s fair to assume that a Report by avc won’t mention this fact In all seriousness so dows really do Have the potential to transform Decentralized governance and you can Learn more about that by checking out my Video on it there’s always a video isn’t There And that is about it for the summary of Most of the report it’s quite clear that The 3 industry is still in its infancy And is going through its own process of Creative destruction Moving fast breaking things refining Their protocols and moving fast again There is a reason that a16z was able to Raise almost three billion dollars for All of its crypto funds institutional Investors want to get a piece of that Web 3 pie and they want to have their Money at the cutting edge of crypto vc

Investing Now of course this report only talked About the positives and the potential It’s interesting to note that the only Time that they used the word risk in the Report was in the disclaimer There is absolutely no guarantee that Web 3 will be the panacea that we all Hope it could be It’s also possible that the trad phi Titans and tech giants squash the Industry before it can fully develop It’s equally likely that participants in The space can fall victim to their own Hubris this is something that we noticed More recently with the collapse of Terror a project that was backed by some Of the most prominent vcs in the space With billions of dollars But that is venture investing for you And it’s not exclusive to the crypto Space They say that over 95 percent of Startups fail so the goal is to make Sure the five percent you do invest in Really can change the world And that’s it for my video today folks But what did you think of the state of Crypto did you find this report Interesting or is it all just hopium i’d Love to know in those comments below Now come a little closer as i have a Little secret to tell you What you’re seeing here on youtube is

But a fraction of what i share on my Other social channels Most of these are verified with blue Ticks and they include My telegram insider channel for daily Market analysis and thoughts My twitter for announcements and the Occasional post Instagram and tick tock for behind the Scenes views and memes And lastly but definitely not leastly my Weekly newsletter it’s here that i share My crypto tips as well as a breakdown of My personal portfolio It comes only once weekly as well and With a spam free guarantee yes siree The links to all of those are in my Socials page below Finally if you found this video helpful Slap a like on it subscribe and ping That bell as well to make sure you never Miss another one Time’s up for this crypto guy but i’ll Be seeing you guys very soon au revoir [Music] You