Noted venture capital firm Andreessen Horowitz (a16z) on Wednesday released a list of a “few of the things we’re excited about in crypto” for 2024. The list includes improvements to decentralized governance, the shift to “play and earn” games and the increasing number of global brands embracing the power of non-fungible tokens (NFT) for audience building.
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Founded in 2009 by Marc Andreessen and Ben Horowitz, Silicon Valley-based a16z invests across a number of industries but has become a giant within the crypto investment landscape. In May 2022, the firm committed $4.5 billion in capital to its fourth crypto-specific fund.
Here’s a rundown of the nine major crypto trends the a16z team outlined for next year:
- A new era for decentralization: Decentralization is championed as a means to counter the concentration of power, but it has faced challenges from the efficiency and stability of centralized systems. Recent advances in web3 governance, however, including adaptable decentralization models and more effective decentralized governance methods, are poised to usher in a new era of decentralized coordination, operational functionality and innovation, according to a16z.
- Fixing crypto’s user experience (UX) problem: Developers are actively working on innovative solutions that could revolutionize the UX frontend in the coming year, making it easier for users to transition from web2 to web3, the VC firm says. Those solutions include passkeys for simpler logins than seed phrases, programmable smart accounts that make the accounts more manageable and embeddable wallets within decentralized applications (dapps).
- Modular tech stacks improve innovation: Network effects, or the phenomenon in which the value of a network or platform increases as more users join, are a powerful force that can be promoted through integrations. Open-source, modular tech stacks can promote permissionless innovation that allow developers to specialize while incentivizing more competition, all without causing more fragmentation.
- AI and blockchains collide: A few tech giants dominate artificial intelligence (AI) due to the prohibitive costs of compute power and training data. But the creation of permissionless, blockchain-backed AI markets will allow individuals to contribute and be compensated for compute power and datasets, a16z argues, driving down costs and making AI more accessible. The transparency of blockchain systems can also tackle AI-generated content issues like deep fakes.
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- Shift to “play and earn” games: Play-to-earn (P2E) games like Axie Infinity allowed players to earn money through gameplay. However, games aren’t meant to be a workplace and some titles began to compromise the quality of play to favor earning potential. The market is now shifting toward a “play and earn” model, according to a16z, that provides the opportunity to earn within a game that’s fun to play regardless of monetization.
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- AI the gamemaker: When AI is generating web3 gaming elements such as lore, terrain and narrative, it’s important for that AI to be “credibly neutral”. Crypto could help provide the guarantees that such games need, including the ability to understand when the AI makes mistakes and diagnose and penalize as needed.
- Developer improvements for formal verification: Systems designed by smart contract developers need to handle billions of dollars and tackle bugs that could have disastrous consequences, all often without the ability to hotfix, or make live fixes to the code. A new wave of formal verification tools have emerged that are more tailored to the needs of smart contract developers, rather than general software developers, which could lead to more robust applications in the future that are less prone to hacks, according to a16z.
- Global brands continue to embrace NFTs: Established brands like Starbucks and Nike are increasingly using NFTs to engage mainstream consumers, offering digital assets through gamified loyalty programs, collectibles, and more. Beyond these initial forays, brands are poised to leverage NFTs to reinforce customer identity, bridge physical and digital goods, and collaborate with their most dedicated fans, signaling the potential for NFTs to become ubiquitous as digital brand assets across various industries in the near future, a16z says.
- “SNARKs” go mainstream to improve compute workloads: Traditionally, computational workloads have been verified by re-executing the compute on a trusted machine, on a machine that’s specialized towards the task or on a blockchain, though each method has its own issues. The emergence and improvement of SNARKs (Succinct Non-interactive ARguments of Knowledge), which provide a cryptographic receipt of a compute workload that’s impossible to forge, can help in situations where a company can’t re-execute on the initial compute provider for whatever reason (often power limitations), according to the VC firm. Potential use cases could include Internet of Things (IoT) devices that verify their own upgrades, and IRS forms that can verify the included information.
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