If prices were the sole indicator of success in the crypto sector, summarizing the events of 2024 would be straightforward. At the writing of this article, 1 bitcoin is worth slightly even more than during its historic record when it entered the 6-digit range. The crypto market capitalization is currently around $3.6 trillion, and there are 220 million monthly active wallets around the world.
All these numbers are impressive, but they do not tell the whole story. In this article – relying on a16z’s State of Crypto 2024 report – we will discuss the most important technology trends, regulatory developments, and societal benefits of crypto. By the end, it should be evident that while the BTC/USD trading pair will always be in the spotlight, the crucial developments often take place under the hood.
The U.S. aims for primacy on all fronts
Despite having murkier regulations compared to other jurisdictions, 40 million U.S. citizens now own cryptocurrencies, with the SEC’s early 2024 approval of spot Bitcoin and Ethereum ETFs significantly widening the investor base. Additionally, the U.S. has a dominant lead in the stablecoin space, as the USD-pegged stablecoins account for over 99% of the entire market. Their importance is evidenced by the fact that they are among the top 20 holders of U.S. debt today.
Stablecoins have a wide range of use cases (e.g., cross-border payments, programmable money, decentralized store of value) and enjoy strong support among the industry. They are often seen as a truly decentralized payment method, in contrast to CBDCs, which many consider to be a potential tool for governments to increase their surveillance of and control over the economy. When that is coupled with the largely uncontrolled rise of BigTech firms, the appeal of stablecoins becomes clear.
With the recent victory of President Trump, experts also argue that the U.S. crypto sector is likely to catch up in terms of its regulatory environment. The country is already leading in cryptocurrency and stablecoin spaces, which may aid regulatory advancements. We should note, however, that the EU and the UK have taken a clear lead in crypto regulation recently. Closing that gap is going to require a coherent, and balanced regulatory response that fosters innovation and consumer protection at the same time.
On the other side of the Atlantic, Europe is also making significant steps in regulating and opening up to crypto. The EU’s MiCA act will fully enter into application at the end of 2024. Afterwards, the newly licensed crypto providers and traditional financial institutions will both be able to offer crypto services (e.g., crypto trading, custody, investment advisory) to their clients. As a response to MiCA, several of the largest European banks have already announced plans to offer crypto services, including Deutsche Bank, Societe Generale, Santander, and Credit Agricole.
Financially empowering the unbanked
Interestingly, while crypto’s promise is mostly touted by companies and entrepreneurs in the most developed nations, most of its positive societal impact is being generated in the developing nations in the world. According to World Bank estimates, 1.4 billion people remain unbanked today with no access to regulated financial services. For these people, crypto wallets and instruments do not represent an amusing new asset class to diversify their portfolio with. Instead, it becomes a new form of money that offers a modern way to handle parts of their finances at reasonable costs.
In 2024, crypto usage reached record levels with an estimated 617 million crypto owners and 220 million monthly active wallet addresses globally. The increasing trend in mobile wallet usage was strongly powered by the increasing popularity of these wallets in developing countries, such as Nigeria, India, Pakistan, Indonesia and the Philippines. The attractiveness of crypto to the people in these countries can be broken down into the following factors:
- Efficiency: Cross-border payments are often significantly cheaper and faster with crypto wallets, compared to the 5-10% fees often charged in these countries.
- Democratization: while banking services are usually only available to those with sufficient wealth, most people have a smartphone with which anyone can access crypto wallets.
- Inclusion: Airdrops and other methods for distributing free tokens are a valuable bonus for professional investors, but a crucial source of income for developing populations.
- Stability: Most developing countries experience high and fluctuating inflation rates, against which USD-pegged stablecoins provide an accessible hedge.
Today’s experiments may offer the solutions of tomorrow
Positive societal impact can only continue to flow if the technology improves swiftly enough. On this front, one thing is becoming increasingly clear: we are living in a multi-chain world. Rather than a dramatic rise in dominance by the largest chains, various chains have experienced strong growth in terms of popularity, transaction processing capacity, cost effectiveness and the growth of their developer communities. The volume of value exchange between different chains is also ramping up rapidly.
As a rising share of activity in the Ethereum ecosystem is moving towards Level 2 blockchains (secondary layers built on top of a primary chain), capacity is freed up on the main chain, thereby reducing costs for users. In 2021, an average transaction on the Ethereum main chain cost about $12. Today, on the main chain it costs roughly $1, while on the BASE Level 2 chain, it takes less than $0.01. This cost decrease of over 99% makes the network continuously more attractive.
Others take a different approach to growth. High throughput blockchains such as Solana, NEAR and TON specialize in handling huge swathes of transactions cheaply and have steadily increased the total value locked (TVL) in their ecosystems. Overall, these positive developments mean that blockchain networks now process 50x the number of transactions compared to 4 years ago.
Additionally, customization and smart contracts are now key features driving blockchain adoption. Users expect to have more options for personalization and programmability when it comes to handling blockchain-based transactions and other operations, such as contracting, staking, lending and data storage.
Another hot topic these days are zero-knowledge proofs which are now under development in more than 250 crypto projects. These are cryptographic methods that allow one party to prove to another that they possess a piece of information, without revealing the information itself. In doing so, ZK proofs offer a safe method of verification, being valuable options for privacy, data sharing and authentication use cases. Should the ongoing projects deliver technological breakthroughs, the benefits will positively impact the scalability, privacy and interoperability of blockchains.
DeFi is on the rise, the AI boom offers opportunities for blockchains
The technological development of blockchains would be of little use without truly valuable use cases that generate real demand from users around the world. According to a16z, stablecoins and DeFi currently lead the way, but the list is growing. The top crypto & blockchain use cases currently are the following:
- Stablecoins: Stablecoins have found product-market fit, now enabling fast and cheap global payments at scale. In 2024 Q2, the transaction volume processed through stablecoins was $8,5 tn, more than twice the $3,96 tn processed by Visa. The activity in these assets remains strong amidst crypto bear phases, indicating the robustness and maturity of this use case.
- DeFi: Decentralized financial services enjoy wide interest from users, including the unbanked and the underbanked, with the most popular services being staking, DeFi-based derivatives, lending & borrowing, and the tokenization of real-world assets.
- Infrastructure: Blockchain capacity is growing, with solutions such as Level 2 chains, zero-knowledge proofs, oracles, and blockchain bridges, thereby reducing the burden on main chains and leading to efficiency improvements.
- Token transfers: An increasing share of crypto trading now occurs through decentralized exchanges (DEXes), with memecoins being increasingly present in crypto portfolios.
- Blockchain & AI: These two technologies have several ways they can be used together, such as verifying the authenticity of AI-generated content with blockchain or widening the access to computing power.
- Other: Further relevant use cases include ones that are less developed but generate increasing interest, such as blockchain games, crypto-based prediction markets, and decentralized social networks.
More importantly than new records, 2025 promises openness and clarity
Ending 2024 on a high looks a certainty for the cryptocurrency industry with record prices and market capitalization reached during the year. Regardless, we believe the technological improvements, the increasing regulatory clarity and the maturing use cases offer even more cause for optimism. While lots of obstacles remain both from a technological and a trust perspective, the expected convergence of institutional players and the crypto sector promises to foster plenty of responsible innovation in this field.
our own research and conclusions regarding the EU crypto market as well as a16z’s State of Crypto 2024 report. While it focuses primarily on the US, the report contains valuable insights on the global crypto market. Andreessen Horowitz (a16z) is a California-based venture capital firm that currently ranks first among all VC firms in terms of assets under management. The company is a regular investor in blockchain and crypto startups.
At Dorsum, we continuously monitor developments in the global blockchain and digital asset space, be it business news, technology trends or regulatory updates. We work actively with our clients on blockchain use cases. If you have questions about the technology, digital assets or are planning to implement a service in this area, do not hesitate to contact us.
Source: A16Z, World Bank, CoinMarketCap
Authors: Botond Bátorfi, Péter Kanti
