In June 2024, the number of monthly active mobile crypto wallet users reached a historic high of 29 million.
Written by: Daren Matsuoka, Robert Hackett, Eddy Lazzarin
Compiled by: 1912212.eth, Foresight News
7 Key Points:
- Crypto activity and adoption reached historic highs
- Crypto became a major political issue ahead of the US elections
- Stablecoins found product-market fit (PMF)
- Infrastructure improved throughput and dramatically reduced transaction costs
- DeFi remained popular and continued to grow
- Crypto has the potential to solve some of the most pressing challenges in AI
- More scalable infrastructure unlocked new on-chain applications
Crypto activity and adoption reached historic highs
There have never been so many monthly active crypto addresses. In September 2024, there were 220 million addresses that had interacted with a chain at least once, more than tripling since the end of 2023. (As a metric, active addresses are easier to manipulate than other measures.)
The surge in activity was primarily driven by Solana, with around 100 million active addresses. Next were NEAR (31 million active addresses), Coinbase's Layer 2 network Base (22 million), TRON (14 million), and Bit (11 million). Among EVM chains, the most active after Base was Binance's BNB Chain (10 million), followed by ETH (6 million). (Note: To arrive at the total of 220 million, active addresses on EVM chains were de-duplicated by public key.)
These trends are also reflected in our Developer Vitality Dashboard. The biggest change in share of developer interest was Solana. Specifically, the data tells us that the total share of founders building or interested in building on Solana grew from 5.1% last year to 11.2% this year. Base closely followed, growing from 7.8% last year to 10.7%, while Bit grew from 2.6% last year to 4.2%.
In absolute terms, ETH still attracted the most developer interest, with a 20.8% share, followed by Solana and Base. Next were Polygon (7.9%), Optimism (6.7%), Arbitrum (6.2%), Avalanche (4.2%), and Bit (4.2%).
Meanwhile, in June 2024, the number of monthly active mobile crypto wallet users reached a historic high of 29 million. While the US accounted for the largest share of monthly active mobile wallet users (12%), the US's share of the total user base has declined in recent years as crypto adoption has gone global and more projects have used geo-fencing to avoid US regulation.
The reach of crypto continues to expand globally. After the US, countries with significant mobile wallet user shares include Nigeria (which has provided regulatory clarity through initiatives like regulatory sandboxes and has seen significant growth in consumer use cases like bill payments and retail purchases), India (driven by a booming population and high mobile phone penetration), and Argentina (where many residents have flocked to crypto, especially stablecoins, due to currency devaluation).
While it's easy to measure active addresses and monthly active mobile wallet users, the actual number of active crypto users is harder to quantify. However, through multiple methods, we estimate the global monthly active crypto users to be between 30-60 million, representing only 5%-10% of the 617 million global crypto holders estimated by Crypto.com as of June 2024.
This disparity highlights the massive opportunity to re-engage dormant crypto holders. With major infrastructure improvements making new, engaging applications and user experiences possible, more dormant crypto holders may re-activate as on-chain users.
Crypto became a major political issue ahead of the US elections
Crypto has entered the core of national discourse in this election cycle.
As such, we measured the relative level of crypto interest in the swing states. The two battleground states expected to be the most hotly contested in November - Pennsylvania and Wisconsin - saw their crypto search interest as a proportion of total searches surge to 4th and 5th place, respectively, since the last election in 2020. Michigan ranked 8th, while Georgia remained unchanged. Meanwhile, Arizona and Nevada saw their interest levels decline slightly since 2020.
One factor that may have stoked people's crypto interest this year is the launch of Bit and ETH exchange-traded products (ETPs). These ETPs have expanded investor access, and the number of Americans holding crypto is expected to grow. Bit and ETH ETPs now hold $65 billion in on-chain holdings. (Note: While these products are often referred to as ETFs, they are actually ETPs registered via the SEC's S-1 form, indicating their underlying investment portfolio does not include securities.)
The SEC's approval of ETPs represents a major milestone in crypto policy. Regardless of which party wins in November, many politicians expect policy momentum to further strengthen as bipartisan crypto legislation is pushed. More and more policymakers and politicians in both camps are taking a positive stance on crypto.
This year, the crypto industry has also brought other important developments in the policy realm. At the federal level, the House passed the 21st Century Financial Innovation and Technology Act (FIT21) with bipartisan support, with 208 Republicans and 71 Democrats voting in favor. If passed and approved by the Senate, the bill would provide much-needed regulatory clarity for crypto entrepreneurs.
Equally significant, at the state level, Wyoming passed the Decentralized Autonomous Organization Enabling Act (DUNA), a law that legally recognizes DAOs, allowing blockchain networks to operate legally while maintaining decentralization.
The EU and the UK have been the most proactive on crypto policy and regulation. In contrast, several European institutions have issued more public consultations than the US Securities and Exchange Commission. Meanwhile, the EU's Markets in Crypto-Assets (MiCA) regulation is set to become the first comprehensive crypto policy framework, expected to be fully in effect by the end of the year.
Stablecoins, as one of the most popular crypto products, have also been a focus of policy discussions, with several bills circulating in Congress. At least in the US, one of the drivers behind this push is the recognition that stablecoins can help solidify the US dollar's global standing, even as the dollar's status as the global reserve currency has declined. Currently, over 99% of stablecoins are US dollar-denominated, far exceeding the next largest, Euro-denominated stablecoins, at just 0.20%.
Beyond showcasing the dollar's global power, stablecoins may also strengthen the US's domestic financial infrastructure. Although stablecoins have only a decade of history, they have already become one of the top 20 holders of US debt, surpassing countries like Germany.
While some countries are exploring central bank digital currencies (CBDCs), the stablecoin opportunity facing the United States is evident. Given these discussions and the growing political attention on cryptocurrencies, we expect more countries to start seriously formulating their cryptocurrency policies and strategies.
Stablecoins Have Found a Product-Market Fit (PMF)
Stablecoins have become one of the most obvious "killer apps" of cryptocurrencies, enabling fast, low-cost, global payments. As New York Assemblyman Ritchie Torres (D-N.Y.) wrote in a September New York Daily News op-ed: "The proliferation of dollar stablecoins—enabled by the ubiquity of smartphones and cryptography—may become the largest financial inclusion experiment in human history."
Massive scaling and upgrades have dramatically reduced the cost of cryptocurrency transactions, especially those involving stablecoins, in some cases by over 99%. On Ethereum, the average Gas fee for USDC transactions this month was $1, compared to $12 on average in 2021. The average cost to send USDC on Coinbase's popular Layer 2 network Base is less than 1 cent. (Note: These figures may not include certain on/off-ramp costs.)
In contrast, the average cost of international wire transfers is $44.
Stablecoins have made value transfer more convenient. In Q2 2024 (ending June 30), stablecoin transaction volume reached $85 trillion, involving 11 billion transactions. Over the same period, stablecoin transaction volume was more than double Visa's $39 trillion. Stablecoins can compete with well-known payment providers like Visa, PayPal, ACH, and Fedwire, demonstrating their utility.
Stablecoins are not a flash in the pan. When comparing stablecoin activity to the market cycles of cryptocurrencies, the two appear uncorrelated. In fact, the number of monthly active addresses using stablecoins continues to grow even as spot cryptocurrency trading volumes decline. In other words, the use cases for stablecoins have expanded beyond just transactions.
Stablecoins account for nearly a third, or 32%, of daily cryptocurrency usage, second only to 34% for DeFi, as measured by the share of daily active addresses. The remaining cryptocurrency usage is distributed across infrastructure (cross-chain bridges, oracles, MEV, account abstraction, etc.), token transfers, and some emerging applications like gaming, Non-Fungible Tokens, and social.
Infrastructure Increases Throughput and Dramatically Reduces Transaction Costs
The popularity and usability of stablecoins is largely due to advancements in the underlying infrastructure. First, chain capacity is growing. With the rise of Ethereum L2s and other high-throughput chains, the number of transactions processed per second is over 50 times higher than it was four years ago.
Even more remarkably, Ethereum's biggest upgrade this year, Dencun or EIP-4844, scheduled for implementation in March 2024, will significantly reduce L2 fees. Since then, even as the ETH-denominated value on L2s has continued to rise, the fees paid on Ethereum have dropped dramatically. In other words, the blockchain networks are becoming more popular while also becoming more efficient.
The development of zero-knowledge (ZK) proof technology has seen a similar trajectory. This technology has important implications for blockchain scalability, privacy, and interoperability. Even as the monthly spend on Ethereum to verify ZK proofs has declined, the ETH-denominated value on ZK Rollups has been rising. In other words, zero-knowledge proofs are becoming both more popular and less costly. (The term "zero-knowledge" is used as an umbrella term for cryptographic techniques that can compactly prove the correctness of computations outsourced to Rollup networks.)
ZK technology is very promising, providing developers with new pathways to cheap and verifiable blockchain computation. However, ZK-based virtual machines (zkVMs) still have a long way to go in performance to catch up to traditional computers, an observation that warrants caution.
With these infrastructure improvements, it's easy to understand why blockchain infrastructure remains one of the most popular areas for developers, with L2s now being one of the five hottest development subcategories we track.
DeFi Remains Popular and Continues to Grow
The only area more attractive to developers than infrastructure is DeFi, which also accounts for the largest share of cryptocurrency usage, with 34% of daily active addresses coming from DeFi. Since the emergence of DeFi in the summer of 2020, decentralized exchanges (DEXs) have grown to account for 10% of spot cryptocurrency trading activity, up from zero four years ago when all of that activity was on centralized exchanges.
Currently, over $169 billion in assets are locked in thousands of DeFi protocols. Some of the most important DeFi subcategories involve staking and lending.
In just over two years since Ethereum's transition to Proof-of-Stake (PoS), the network's energy consumption and environmental impact have been dramatically reduced. Since then, the share of ETH staked has risen from 11% two years ago to 29%, significantly enhancing the network's security.
While still in its early stages, DeFi offers a promising alternative to the centralization and concentration of power in the U.S. financial system. The number of U.S. banks has declined by two-thirds since 1990, with large banks dominating asset allocation.
Cryptocurrencies May Help Address Some of AI's Most Pressing Challenges
AI is not only a leading trend across the tech industry, but has also become one of the hottest trends in the cryptocurrency space this year.
AI is one of the most frequently discussed trends by crypto KOLs on social media. Surprisingly, there is significant overlap between users visiting chatgpt.com and those visiting top cryptocurrency websites, indicating a close connection between cryptocurrency and AI users.
Cryptocurrency developers also have a strong connection to AI. According to our "Builder Energy" dashboard, around a third of crypto projects (34%) report using AI, regardless of the area they are building in, up from 27% a year ago. The most popular category for applying AI technology is blockchain infrastructure projects.
Given that the training costs of leading AI models have increased fourfold annually over the past decade, we believe AI may lead to further concentration of power on the internet. If unchecked, only the largest tech companies may have the resources to train the latest AI models.
The centralization-related challenges of AI are almost the opposite of the opportunities provided by the decentralization of blockchain networks. Many crypto projects have already begun to address these challenges, including Gensyn (by democratizing access to AI computing resources), Story (by tracking intellectual property to help creators get compensated), Near (by running AI on open-source, user-owned protocols), and Starling Labs (helping to verify the authenticity and provenance of digital media).
In the coming years, the intersection of cryptocurrencies and AI is likely to further strengthen.
More scalable infrastructure unlocks new on-chain applications
With the decline in transaction costs and the increase in chain capacity, potential cryptocurrency consumer applications have become more feasible.
Take Non-Fungible Tokens (NFTs) as an example. A few years ago, when transaction fees were relatively high, people traded NFTs on secondary markets, reaching billions of dollars in total volume. Now, this activity has decreased, replaced by a new consumer behavior: minting low-cost NFT series on social apps like Zora and Rodeo. This represents a significant shift in the NFT market, which was difficult to imagine before transaction fees dropped significantly.
Social networks are another example. Although they currently account for only a small portion of daily on-chain activity, they have attracted a large number of developers: according to our dashboard, crypto projects related to social networks will account for 10.3% in 2024. In fact, social network-related projects, such as Farcaster, have become one of the five hottest development subcategories this year.
At the same time, on-chain games are pushing the limits of chain scalability. For example, the sea adventure role-playing game "Pirate Nation" by Proof Of Play, which uses a Rollup system, has been the most Gas-consuming Rollup on Ethereum.
As the November elections approach, although prediction markets are illegal in the United States, crypto prediction markets are experiencing a high point and driving the overall development of the prediction market. Kalshi, a non-crypto prediction market, won a victory in a lower court last month in pursuing federal litigation around election contracts. (To date, registered exchanges can offer traditional futures contracts based on elections.)
New consumer behaviors have already begun to emerge. These new experiences were not possible in the past due to the complexity of blockchain infrastructure and higher transaction costs. As blockchain technology improves along the classic technology price-performance curve, more such applications are expected to thrive.
Overall, the state of cryptocurrencies has made significant progress in the past year in terms of policy, technology, and consumer adoption. On the policy front, there have been major milestones, including the sudden approval and listing of Bitcoin and Ethereum ETPs, and the passage of important bipartisan crypto legislation. On the infrastructure side, there have been significant improvements, from scaling upgrades to the rise of Ethereum L2s and other high-throughput chains. New applications are being built and used, from the growth of stablecoins to the exploration of emerging categories like AI, social networks, and gaming.
Whether we have entered the fifth wave of the price-innovation cycle remains to be seen. But as an industry, cryptocurrencies have made undeniable progress in the past year. As ChatGPT has demonstrated, a single breakthrough product can transform an entire industry.
