Original Article:
Author: STANFORD BLOCKCHAIN CLUB
Guests: Avichal Garg and Maria Shen
Translator: DeepTechFlow
Summary:
In this article, I interviewed Avichal Garg and Maria Shen from Electric Capital to gain insights into their perspectives on the future of cryptocurrency. The article explores three main topics discussed during the interview: developer activity, crypto social, and NFTs. Through these discussions, we gain a better understanding of the trends in the cryptocurrency field for the coming years.
Developer Activity:
Each year, Electric Capital publishes an annual developer report that is read by hundreds of thousands of people seeking key insights into cryptocurrency developer activity.
To compile this report, Electric analyzes over 480 million cryptocurrency-related code commits, involving more than 800,000 code repositories. This comprehensive analysis provides valuable insights into cryptocurrency developer activity. Additionally, Electric maintains an open-source cryptocurrency 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 publish a developer report? The developer report was initiated in 2018 as a response to the noise in the cryptocurrency space following the 2017 ICO frenzy. Given the extreme volatility of cryptocurrencies, people often focus too much on incorrect quantitative metrics such as price trends to measure progress. However, this approach is misleading.
If we believe that cryptocurrencies are a fundamentally transformative technology on which developers can build entirely new applications, the key behavioral metric is not price trends but developer engagement. We should focus on those who are committed to long-term investment in cryptocurrencies, dedicating their time to building infrastructure and applications for users.
Separating signal from noise: Developer count continues to grow in 2023 despite price declines
Which ecosystems are developers choosing to build on? How does the United States perform in terms of cryptocurrency developer activity? What infrastructure and applications are developers currently most interested in? By answering these questions, the annual developer report provides powerful information to help new developers decide on which blockchain to build, assist governments in formulating better cryptocurrency policies, and guide investors’ focus to the areas where innovation is truly thriving.
Here are three favorite insights derived from Electric’s developer data:
Insight 1: The future is multi-chain
The future is clearly multi-chain. Currently, over 30% of developers support multiple chains, compared to just 3% in 2015, marking a growth of 10 times. Furthermore, developers supporting three or more chains have grown to 17% of all developers in 2023, reaching a historical high.
Growing number of multi-chain developers
With Electric’s developer report, you can delve deeper into developer behavior. The 2023 network graph shows which cryptocurrency ecosystems have overlapping developers. It is not surprising to see significant overlap between Ethereum and Layer 2 solutions like Optimism and Polygon, as well as EVM-compatible chains like BNB and Avalanche. However, it is interesting to note the degree of overlap between Polkadot and Cosmos developers or the fact that many Solana developers are also working on Bitcoin.
2023 Network Graph of overlapping developer ecosystems
These insights are powerful for various use cases. Teams can leverage this information to identify the next chain to expand their developer infrastructure. Ecosystem teams can identify the types of developers building on their chain, and investors can focus their attention on specific subsets of cryptocurrency ecosystems.
Insight 2: Declining share of developers in the United States
By analyzing self-reported location data from GitHub and their contributions to code repositories, it is easier to understand developer activity in different regions. According to the 2023 data, Europe and Central Asia account for the majority of developer activity (36%), followed by North America (28%). While France and Germany each hold over 5% of the share of crypto developers, India accounts for 12% of crypto developers in 2023.
Electric not only derives insights from regional developer data for a given 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 share of developers in the United States is declining. Cryptocurrency innovation is increasingly concentrated outside of the United States.
Changing share of US developers over time
This data highlights the apparent issue of innovation moving away from the United States and has been cited by policymakers in Congress to push for regulatory clarity for US developers and cryptocurrency companies.
Insight 3: Emergence of Bitcoin Layer 2 and Base
Electric’s data showcases the growth of two major ecosystems: Bitcoin and Base.
Bitcoin is a good example of how Electric identifies meaningful signals from the noise when measuring cryptocurrency progress. Despite extreme volatility, Bitcoin development has remained strong, with over a thousand new developers joining the Bitcoin ecosystem every year since 2017. Additionally, with the growth of Bitcoin’s Layer 2 solutions like Ordinals leading to increased transaction volume, as well as the rise of innovative proposals like Fraud Proofs and OP_CAT, there has been a significant increase in developer activity focused on expanding Bitcoin’s capabilities.
Growth of Bitcoin scaling solutions over time
Another ecosystem worth noting is Base. Since its launch over a year ago, Base has grown to have a thousand active monthly developers, which is unprecedented for a new cryptocurrency ecosystem.
Overall, cryptocurrencies are experiencing fragmentation in the developer ecosystem. The emergence of new chains like Bitcoin Layer 2 and Base means that there will be a multitude of experiments taking place. Fragmentation seems to persist until developers find something truly effective, and eventually, they will concentrate their efforts on more specific subsets of chains.
Crypto Social:
With the improvement of cryptocurrency infrastructure, the possibilities for users have significantly expanded. While purchasing an NFT transaction on Ethereum L1 in 2021 could cost hundreds of dollars in gas fees, L2 solutions like Base with low gas fees and higher throughput make new experiments possible, especially for social use cases.
As cryptocurrencies now provide a better user experience for applications that require more on-chain interactions, social applications have gained widespread adoption in the cryptocurrency field. Friendtech, a social app that allows creators to create private chat rooms for fans, and Farcaster, a decentralized social media protocol that allows for client building, are popular examples.
BasePaint
However, cryptocurrencies are still in their early stages. Crypto social is akin to social media in 2003—a period of massive experimentation. Interesting applications like Basepaint, a shared pixel canvas app, have emerged. In Basepaint, users can mint brushes to contribute to the canvas, and after 24 hours, mint an open edition. Profits from this open edition are distributed proportionally based on the number of pixels contributed by the artists.
Source: Metaversal.banklesshq.com/p/basepaint
WorldPvP
Another example is WorldPvP, a social app and experiment on Base where 221 countries, each represented by their ERC-20 token, compete to have the highest market cap and control nuclear weapons. Players increase the market value of their tokens through strategic trading and alliances to avoid being nuked.
The liquidity in the ERC-20 pool of the nuked countries is used to buy back half of the tokens from nuclear-armed countries, with the remaining portion being distributed to randomly selected countries. The game lasts for 30 days until a country emerges as the final winner.
WorldPvP: ERC-20 with the highest market cap wins the nuke
Observing experiments like Basepaint, it seems that fewer iterations are needed, and the success of Friendtech and Farcaster indicates that applications are becoming more mature. On-chain experiments like WorldPvP suggest that the next generation of social applications may be even more gamified than their Web2 predecessors.
NFTs:
Electric, as one of the main investors in MagicEden, has several insights into the NFT ecosystem. Here are two of the insights we discussed.
NFTs are multi-chain
NFTPulse is a tool developed by Electric to quantify and showcase the latest NFT-related data across ecosystems, revealing the increasing multi-chain nature of NFT trading volume. While Ethereum dominates NFT trading volume in 2021 and 2022, the rise of Solana and Bitcoin Ordinals challenges the notion of Ethereum’s continued dominance by the end of 2023. At times, the weekly NFT trading volume of Bitcoin Ordinals even surpasses that of Ethereum.
Until the fall of 2023, Ethereum’s weekly trading volume often exceeded 90%
Though the user experience of purchasing NFTs on different blockchains may vary, NFTs represent digital culture. With the emergence of Ordinals, those who like to support and be part of the Bitcoin ecosystem can buy and sell Bitcoin NFTs. With the growth of Solana and the development of its unique culture, Solana NFTs are becoming increasingly popular within the Solana community.
It is difficult to be bearish on NFTs
Being bearish on NFTs becomes increasingly challenging. As we move towards a more digital world, the demand for ownership of digital assets becomes crucial. We are in the early stages of EU law requiring all fashion goods and consumer products to come with a “Digital Product Passport” or NFT for authenticity and ownership verification by 2026. Furthermore, despite market cycles, NFTs, due to their nature as digital assets, will serve as the foundation for digital music, real estate, collectibles, and luxury goods.
Although NFT activity gradually declined throughout the bear market, trading volume is once again on the rise
Emotional Connection
NFTs differ from fungible tokens in that they can establish deep emotional connections with their holders. A used teddy bear purchased for $20 may not be worth $20 to most people; however, that particular teddy bear may hold greater value for the owner. NFTs, including digital art and avatar collections, have a similar effect on their owners.
NFT owners often form emotional attachments to their holdings. Avichal and Maria, both NFT enthusiasts, are acutely aware of this. They see NFTs not just as tradable financial assets. Avichal co-owns several Fidenzas with artist Tyler Hobbs and proudly displays physical prints of them at home [8]. Maria owns a Milady and even commissioned a custom portrait, highlighting the personal significance of these digital assets.
Maria’s commissioned portrait of Milady
Conclusion:
Many of the payment systems we use today, such as automated clearinghouses and credit card systems, were established in the 1960s and 1970s. Cryptocurrencies have fundamentally reimagined these systems, allowing people to solve new problems and open doors to entirely new application spaces.
With the emergence of low gas fee and high throughput blockchains like Base, we are witnessing an exciting wave of experiments in the crypto social space. Early successes like Friendtech and Farcaster, as well as innovative experiments like Basepaint and WorldPvP, make this period feel similar to the social networking era of 2003. The importance of NFTs as digital assets seems inevitable in an increasingly digital world. It is an exciting era for cryptocurrencies, and Electric looks forward to seeing the developments unfold.
