[Key Insights] a16z 2023 State of Crypto Report

Is Shapella Bad for LSDs? | Arbitrum $700M Drama Continues

April 12, 2023

📢 Sponsor | 💡 Telegram | 📰 Past Editions

Good Morning,

The Shapella upgrade is happening today. Crypto Twitter can finally end the debate whether its a bullish or bearish unlock. Also, a16z 2023 crypto index report shows that the US is losing its strides as developers go offshore — unsurprising 🤷

Let's dive in.

In Today's Email:

What Matters: $7B+ a16z releases its 2023 crypto report 📝
Case Study: Shapella upgrade effect on LSDs 💧
Governance & Features: Arbitrum DAO wants $700M back 💰

Check out our weekend issue, Breaking Down Businesses, covering Aave, here.

Reply to this email to let us know what protocols/companies you want us to cover!

Narratives: Liquid Staking Derivatives, pay close attention to what these protocols do post the Shapella upgrade.

WHAT MATTERS

a16z 2023 Crypto Index Report

a16z

State of play: One of the world’s largest crypto venture fund, a16z crypto, has released its 2023 state of crypto report. Here are some key takeaways:

Blockchain networks active addresses hit an all-time high of 15 million.
DeFi and NFT activities re-appear, with $100B traded last month.
The number of crypto developers remain steady at ~30,000.
Blockchain scaling continue to improve, with L2 solutions accounting for 7% of the total fees paid on Ethereum.
Zero knowledge technologies is gaining momentum.
The US is losing its web3 lead, with its proportion of developers falling by 26% compared to the rest of the world.
Key indicators (market cap, developer activity, deal flows) have all been increasing steadily.

Why it matters: Product cycle is different from financial cycle. By zooming out, crypto industry participants can see that significant progress have been made in the industry.

For builders: a16z crypto has over $7B in AUM. Understanding what trends they’re seeing and finding (not forcing!) a synergy with the products that you’re building is key.

For investors: Depending on the size of your capital, crypto investing needs to be adjusted accordingly. Understand whether you’re investing in the money-making business side of crypto, or on the advancement of technologies via more experimental protocols.

IN PARTNERSHIP WITH

Decentralised.co

Decentralised

We have been staying updated on all things gaming, AI, and markets from Decentralised.

Founded by early investors in Gem, Nansen and a number of other unicorns, Decentralised.co maintains a very high signal-to-noise ratio.

So much so, that they don't send out newsletters unless they think it's worth your time!

Consider signing up for their newsletter here for unique, non-consensus takes on the future of the crypto industry.

CASE STUDY

Shapella Effects on LSD Protocols

Nansen

State of play: The Shapella upgrade is happening today. As the most anticipated crypto events after the merge, Shapella will finally allow ETH stakers to withdraw their funds.

LSD protocols, which has been enabling ETH stakers to access liquidity while earning yield, will need to differentiate their strategies.
There might be an influx of new ETH stakers. At the same time, the value prop that comes from just being an LSD protocols will diminish.
The average price of staked ETH is $2,135.
Some funds have been selling LSD tokens.

Our take: Post Shapella, ETH staking rate should increase as market participants get the certainty that they can withdraw their assets at all times.

To capitalize on this, LSD protocols need to play their cards right and get into other DeFi verticals.Revenue that simply comes from just being an LSD protocol won’t increase significantly as there’s no longer technical edge. Competition in the LSD space will ramp up as it becomes easier to provider a derivative of ETH when staking is easily accessible.We’re already seeing protocols such as EigenLayer that’s trying to take the concept one step further via re-staking.

Take a peek at our new referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

FEATURES & GOVERNANCE UPDATE

Arbitrum Community Wants $700M Back

@thiccythot_

Arbitrum drama continues. A proposal called AIP 1.05 was submitted by a community member seeking back the 700M in ARB tokens that the Arbitrum Foundation had given out without approvals from tokenholders.

The proposal was initiated on April 8 and will end on April 14.
At the time of writing, 82% of voters opposed the proposal.
The proposal was meant to provide awareness to DAO governance, and ask one important question: “Does tokenholders actually have a say in governance?”

Why it matters: The Arbitrum Foundation is still facing backlash from the community members because of AIP 1. The outcome of this vote will further set the tone of the relationship between the DAO and the Foundation.

Other notable feature updates:

Aave launchesV3 on StarkNet.
Avocado supports Polygon zkEVM.
Caldera partners with Hyperlane to bridge between rollups.
Camelot launches V2.
Cardano launches Lace Wallet.
CavalRe launches a multiswap AMM.
CowSwap launches MEV blocker.
LooksRare launches V2.
Magic Eden launches on Ethereum.
MetaMask launches a new FIAT integration feature.
Redacted Cartel launches Dinero stablecoin.
Solend launches V2.
Trader Joe launches Liquidity Book v2.1

QUICK BITES

a16z unveils new crypto index report.
G7 plans to discuss crypto regulation.
SEC adds attorneys to crypto enforcement unit.
MicroStrategy reportedly back in profit on its $4B BTC bet.
Winklevoss Twins lend $100M to their own Gemini exchange.
FTX Bankruptcy Team bills $30M for their February work.
Aptos rose ahead of $50M token unlock.
JPMorgan, Fidelity thoughts on Ethereum’s Shapella upgrade.
SushiSwap recovered stolen funds.

MEME & NOTEWORTHY READS

Arthur Hayes’ read on Shapella.
Packy McCormick read on crypto’s role in solving Twitter-Substack issues.
David Z. Morris’ read on the NYT skewed Bitcoin mining bias.

gotta love some self irony
— Scott Sunarto @ NYC 🗽 (@smsunarto)
1:37 AM • Apr 12, 2023

If you enjoy reading this issue, please consider subscribing. It takes 1 minute of your time but it would mean the world to us 🙇

Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.