a16z Reiterates Bullish Thesis on Web3, Compares it to the Internet’s Early Days

Leading crypto VC firm Andreessen Horowitz (a16z) released a report offering an annual overview of the current trends and state of the crypto industry. The paper reiterated the firm’s bullish views on Web3, projecting long-term growth ahead of the sector, and weighed in on the dominant position as claimed by Ethereum among layer-one blockchains.

“Web3 is Fairer”

a16z summarized the report into a few observations, mainly on the state of Web3 and Ethereum. The VC giant attributed the recent selloff of the market as a possible sign of a seasonal downturn while maintaining that the crypto-powered Web3 could be one of the best opportunities of the decade.

The company argued that Web3 offers much fairer economic terms than Web2 giants like Meta. According to its data, in 2021, primary sales of Ethereum-based NFTs plus the royalties paid to creators from secondary sales on OpenSea yielded a total of $3.9 billion – four times more than what Meta has rewarded its creators through 2022.

Though YouTube and Spotify paid out respectively $15 billion and $7 billion to their creators as of 2021, the report outlined that each artist on Spotify and each channel on Youtube only received $636 and $2.47. In contrast, by categorizing NFT collections as Web3 creators, the firm said there are a total of 22,400 Web3 creators, and “web3 paid out $174,000 per creator.”

On top of crediting DeFi as a disruptor to the traditional finance industry, a16z also identified blockchain projects like Flowcarbon, Helium, and Spruce as strong candidates for solving significant real-world issues by leveraging the DLT strengths in privacy, transparency, and decentralization.

Ethereum Remains in Dominance but Faces Challenges

Another notable factor, as highlighted in the report, is Ethereum’s lead ahead of other layer-one blockchains like Solana, Fantom, etc. With nearly 4,000 monthly active developers, the second-largest blockchain by market cap has the most builders ahead of its primary competitor Solana which only has around 1,000.

However, the report noted that Ethereum’s emphasis on decentralization over scaling has made other networks more attractive to users with the enticement of lower fees and better performance.

“It’s Still Early“

a16z compared Web3 with the early commercial use of the Internet by analyzing the current size of such users, which is roughly between 7 million to 50 million. It states:

“The internet reached 1 billion users by 2005 – incidentally, right around the time web2 started taking shape amid the founding of future giants such as Facebook and YouTube.”

Seeing blockchain as “a hit product” like PCs and broadband in the 90s and 2000s and mobile phones in the last decade, the firm predicted that there will be “multiple winners” in the race.