Original author: STANFORD BLOCKCHAIN CLUB
Interview guests: Avichal Garg and Maria Shen
Compiled by: TechFlow
*Note: This article comes from Stanford Blockchain Review. TechFlow is a partner of Stanford Blockchain Review and is exclusively authorized to compile and reprint it.
Introduction
In this article, I interviewed Avichal Garg and Maria Shen of Electric Capital to get their insights on the future of cryptocurrency. This article explores in detail the three main topics of our discussion: developer activities, crypto social, and NFTs. Through these discussions, we can better understand the development trends in the cryptocurrency field in the next few years.
Developer Activities
Every year, Electric Capital publishes its annual Developer Report, which is read by hundreds of thousands of people for the most important insights into cryptocurrency developer activity.
To compile this report, Electric analyzed more than 480 million cryptocurrency-related code commits across more than 800,000 code bases. This exhaustive analysis provides valuable insights into cryptocurrency developer activity. In addition, Electric maintains an open-source crypto ecosystem taxonomy that users can contribute to, and collaborates with major foundations such as Optimism, NEAR, and Solana to include the latest chain and ecosystem data.
Why are developer reports published? Developer reports began in 2018, following the ICO boom of 2017, as a way to clear the noise in the crypto space. Given the extreme volatility of cryptocurrencies, people often focus too much on the wrong quantitative metrics, such as price action, to measure progress. However, this approach is misleading.
If we believe that cryptocurrency is a fundamentally transformative technology on which developers can build entirely new applications, then the key behavioral indicator is not price action, but developer engagement. We should be looking at those who are committed to long-term investment in cryptocurrency, investing their time into building infrastructure and applications for users.
Separating the signal from the noise: Developer growth in 2023 despite price drops
Which ecosystems do developers choose to build on? How does the United States fare in cryptocurrency developer activity? What infrastructure and applications are developers most interested in right now? By answering these questions, the annual developer report provides powerful information to help new developers decide which blockchain to build on, help governments craft better cryptocurrency policy, and guide investors to where innovation is truly flourishing.
Here are three favorite insights from Electric’s developer data:
Insight 1: The future is multi-chain
The future is clearly multi-chain. Over 30% of developers now support multiple chains, up from just 3% in 2015, marking a 10x increase. Furthermore, developers supporting 3 or more chains has grown to 17% of all developers in 2023, a record high.
The growth of multi-chain developers
With Electric’s Developer Report, you can get a deeper look at developer behavior. The 2023 network graph shows which crypto ecosystems have overlapping developers. It may not be surprising to see that Ethereum shares a large number of developers with Layer 2 solutions like Optimism and Polygon, as well as EVM-compatible chains like BNB and Avalanche. However, it may be interesting to know the extent of overlap between Polkadot and Cosmos developers, or that many Solana developers are also working on Bitcoin.
2023 Network Graph Overlapping Developer Ecosystem
These insights are extremely powerful for a variety of use cases. Teams can use this information to identify the next chain to expand their developer infrastructure. Ecosystem teams can identify the types of developers building on their chains, and investors can focus their attention on a specific subset of the crypto ecosystem.
Insight 2: The U.S. developer share is decreasing
By analyzing GitHubs self-reported location data and their commits to code repositories, it is easier to understand developer activity in different regions. According to 2023 data, Europe and Central Asia accounted for the majority of developer activity (36%), with North America accounting for the second-most activity (28%). While France and Germany each accounted for more than 5% of crypto developers, India accounted for 12% of crypto developers in 2023.
Electric not only draws insights from regional developer data for the current year, but also provides insights into regional behavior over time. One of the most interesting findings is that while the overall developer ecosystem is growing, the U.S. share of developers is decreasing. Crypto innovation is increasingly concentrated outside the U.S.
US developer share over time
The data, which shows a clear problem with innovation offshoring in the United States, has been cited by policymakers in the House of Representatives in a push to provide regulatory clarity for American developers and crypto companies.
Insight 3: The emergence of Bitcoin Layer 2 and Base
Electric’s data shows developer growth in two major ecosystems: Bitcoin and Base.
Bitcoin is a great example of how Electric can discern meaningful signal from noise when measuring crypto progress. Despite extreme volatility, Bitcoin development has remained strong: more than a thousand new developers have joined the Bitcoin ecosystem every year since 2017. Additionally, there has been a noticeable increase in developer activity focused on Bitcoin scaling solutions, with the growth of Bitcoin Ordinals leading to a surge in transaction volume, and the rise of innovative proposals such as Fraud Proofs and OP_CAT.
Work on Bitcoin Scaling Solutions Grows Over Time
Another ecosystem worth watching is Base. A little over a year since its launch, Base has grown to have a thousand active monthly developers, which is unprecedented for a new crypto ecosystem.
Cryptocurrency in general is experiencing fragmentation in the developer ecosystem. The emergence of new chains like Bitcoin Layer 2 and Base means there will be a lot of experimentation happening. It seems likely that fragmentation will continue until developers find something that really works, and eventually they will focus on a more specific subset of chains.
Crypto Social
As crypto infrastructure improves, the range of possibilities for users expands significantly. While a transaction to purchase an NFT on Ethereum L1 may cost hundreds of dollars in 2021, using L2 like Base, low gas fees and higher throughput make new experiments possible, especially for social use cases.
As cryptocurrencies now offer a better user experience for applications that require more interactive on-chain moments, social applications have seen widespread adoption in the crypto space. Friendtech, a social application that allows creators to create closed chat rooms for fans, and Farcaster, a decentralized social media protocol that allows clients to be built on top of it, are some of the popular applications.
BasePaint
However, cryptocurrencies are still in their early stages. Crypto social is similar to social media in 2003 - it is a period of large-scale experimentation. Interesting applications are such as Basepaint, a shared pixel canvas application. In Basepaint, users can mint brushes to contribute to the canvas, and after 24 hours, an open version is minted. The profits of this open version are distributed proportionally according to the number of pixels contributed by the artist.
Source: Metaversal.banklesshq.com/p/basepaint
WorldPvP
Another example is WorldPvP, a social application and experiment from Base, where 221 countries, each represented by their ERC-20 tokens, compete to see who can achieve the highest market cap and control nuclear weapons. Players increase the market cap of their tokens through strategic trades and alliances to avoid being hit by nuclear weapons.
The liquidity in the ERC-20 pool of the country that was hit by the nuclear attack will be used to buy back half of the tokens of the nuclear weapon country, and the rest will be distributed to randomly selected countries. This game will last for 30 days until one country emerges as the final winner.
WorldPvP: ERC-20 with the largest market cap wins the nuclear bomb
Looking at experiments like Basepaint, it seems that fewer iterations are needed, while the success of Friendtech and Farcaster shows that applications are becoming more mature. On-chain experiments like WorldPvP show that the next generation of social applications may be more gamified than their Web2 predecessors.
NFTs
Electric, as one of the major investors in MagicEden, has several insights into the NFT ecosystem. Here are two we discussed.
NFTs are multi-chain
NFTPulse, a tool developed by Electric to quantify and display the latest NFT-related data in various ecosystems, shows that NFT transaction volume is becoming more and more chained. While Ethereum NFT transaction volume dominated in 2021 and 2022, the rise of Solana and Bitcoin Ordinals challenged the idea of Ethereums continued dominance in late 2023. At times, Bitcoin Ordinals weekly NFT transaction volume even exceeded Ethereum.
Until the fall of 2023, Ethereums weekly transaction volume will often exceed 90%
Even though the user experience of buying NFTs on different blockchains is different, NFTs represent digital culture. With the advent of Ordinals, people who like to support and be part of the Bitcoin ecosystem can buy and sell Bitcoin NFTs. As Solana grows and its unique culture develops, Solana NFTs are becoming more and more popular in the Solana community.
It’s hard to be bearish on NFTs
It’s becoming very difficult to bet against NFTs. As we move towards a more digital world, the need for ownership of digital items becomes critical. We are in the early stages of EU laws requiring that all fashion items and consumer goods must have a “digital product passport” or NFT for authenticity and authenticity by 2026.
Verification of ownership. Additionally, while the market can be very cyclical, NFTs, by their nature as digital items, will serve as the basis for digital music, real estate, collectibles, and luxury goods.
While NFT activity tapered off throughout the bear market, trading volumes are starting to increase again
Emotional connection
NFTs differ from fungible tokens because they can create a deep emotional connection with their holders. A used teddy bear bought for $20 may not be worth $20 to most people; however, to the owner, that specific teddy bear may have much greater value. NFTs, including digital art and avatar collections, behave similarly to their owners.
NFT owners often form an emotional bond with their holdings. Avichal and Maria, both NFT enthusiasts, understand this well. They view NFTs as more than just tradable financial assets. Avichal co-owns several Fidenzas with artist Tyler Hobbs and proudly displays the physical prints in his home.[8] Maria owns a Milady and even commissioned a custom portrait of her, highlighting the personal meaning these digital assets hold.
Marias Lady Commissioned Portrait
in conclusion
Many of the payment systems we use today, such as the automated clearing house and credit card systems, were built in the 60s and 70s. Cryptocurrencies fundamentally reimagine these systems, allowing people to solve new problems and opening the door to entirely new application design spaces.
With the advent of low gas fees and high throughput blockchains like Base, we are witnessing an exciting wave of experimentation in the crypto social space. Early successes like Friendtech and Farcaster, and innovative experiments like Basepaint and WorldPvP, make this period feel akin to social networking in 2003. The importance of NFTs as digital items in an increasingly digital world seems inevitable. It’s an exciting time for cryptocurrency, and Electric is looking forward to seeing how it all develops.
