In cryptocurrency, it’s often said that if you build it, they will come. This is in reference to the fact that the success of a crypto project depends on new and novel use cases created by dedicated developers who build dozens of dapps d5 protocols, nfts and metaverse worlds. Today, i’m going to unpack a report that examines the crypto projects with the most developers explain the developer trends with these crypto projects and what this means for their respective coins and tokens in 2022 and beyond. Before we look at any stats, i need to cover my ass. Nothing in this video is financial advice and that’s a fact: it’s entertaining educational content to be exact.
Please contact a financial advisor if you’re trying to stack sats. If this is your first time in coin, bureau, shire, my name is guy and crypto is what lights my fire. My mission is to create high quality, crypto content, that anyone can understand, coins, tokens news reviews and other crypto topics that are far from being bland. If these are the videos, you demand subscribe to the channel and ping that notification bell to join my merry crypto band. If you’re running short on time, you can use the timestamps below to skip ahead to any interesting topics you find it would be amazing if you watched until the end.
But if you don’t it’s totally fine, that’s enough of my intro rhymes. Let’S see which crypto projects have been putting in the overtime the report i’ll be covering today was put together by electric capital. Electric capital is a venture capital firm, with a focus on cryptocurrency. It was founded in 2018 by silicon valley, computer scientist, avichal, garg and curtis spencer. Electric capital is based in the united states and currently features a handful of similarly proficient partners who have been actively investing in crypto projects.
Since 2013, electric capital’s portfolio includes more than 50 crypto projects and companies, including near protocol mina, protocol cello and the internet computer. In contrast to other crypto vcs, electric capital has been actively involved with the crypto projects it’s invested in according to its website. It helps crypto projects expand their communities, it runs nodes on select crypto networks and even participates in crypto governance. Like other crypto vcs. Electric capital is known for its crypto reports, research and insights, most of which are freely available on the company’s medium page.
Now, electric capital’s most recent crypto report is the one i’ll be covering today and it’s the annual crypto developer report for 2021.
It was written with the help of over 100 contributors, and that’s because it examined over 500 000 github repositories containing over 160 million code, commits to assess developer activity in the crypto industry. If you’re interested in combing through the ecosystems, they analyzed i’ll leave a link to the electric capital, github ecosystem search tool in the description, so without further ado, let’s dig in electric capital’s crypto developer report starts with a few caveats. First, the authors acknowledge that they likely undercounted the number of active developers, because not all crypto code is open source, though one could argue that closed source means it’s not crypto. Secondly, the authors acknowledge that not all code commits are created equal.
Some of them may be minor adjustments to crypto code that don’t constitute any actual development progress. Thirdly, the authors specify that nothing in their report should be considered financial advice, so don’t go blaming electric capital if you make any bad decisions based on their data. Okay. Finally, the authors specified that they quote may have previously held currently hold or will, in the future, hold some of the cryptocurrencies they cover in the report. Now, unfortunately, they did not specify which cryptocurrencies these are, and instead direct the reader to the website, which doesn’t seem to provide a full list of investments.
Moving on the first section of the report gives an overview of developer activity in the crypto industry over the last few years. For starters, there appear to be over 18 000 monthly active developers in cryptocurrency the number of crypto devs nearly doubled in 2021, and is showing no signs of slowing down. Not surprisingly, there is a strong correlation between the total crypto market cap and the number of monthly active devs in crypto. What’S interesting is that history suggests many developers stay in the crypto industry, even after the bear market sets in what’s more, is that the number of monthly active, devs spikes after a bull market peak and continues to grow during bear markets, albeit not nearly as much as During bull markets, depending on crypto market conditions, the authors believe we could see a rush of new devs joining the crypto industry until at least 2023. Now, because the crypto developer category is broad, the authors drill down into the data to assess how many crypto developers are full-time, part-time or one-time devs for context.
Full-Time means more than 10 active days per month. Part-Time means fewer than 10 active days per month, and one time means one active day within a three-month window. You’Ve got to envy those devs working a 10-day month and drawing a full-time salary. Haven’T you, as you can see, about, half of the devs in cryptocurrency are considered part-time. According to these criteria, in 2021, the number of full-time devs increased by 35 percent, the number of part-time devs increased by 65 percent and the number of one-time devs increased by a massive 230 percent.
Now the authors point out that the number of one-time devs is on the cusp of eclipsing, the number of full-time devs and the last time this happened was around the top of the previous bull market. Now, on that note, if you need help spotting the top for your favorite cryptos, you can check out my video about that using the link in the top right anyways. The second section of the report explores the crypto ecosystems, where developers are most active. The authors begin this section by explaining that their measure of ecosystem, dev activity includes protocol development, think the base blockchain itself and community development think daps defy nfts and so on. As you might expect, most crypto devs are working on ecosystems in the top 200 by market cap 60 to be exact.
Even so, the growth rate of dev activity in the cryptocurrencies outside of the top 200 was nearly double that of bitcoin and ethereum in 2021. Now believe it or not, but bitcoin only has about 700 monthly active developers and only added about 50 devs last year, almost all of which are classified as part-time. By contrast, ethereum has over 000 monthly active, devs and added more than a thousand of them over the last year, a quarter of which are classified as full-time. Not only that, but the authors estimate that as much as a quarter of all new devs entering cryptocurrency are coding within ethereum’s ecosystem. This makes ethereum the largest cryptocurrency by monthly active developers, and it has nearly three times as many devs as the second place holder.
This second place holder happens to be polka dot, which boasts over 1300 monthly active devs, though the authors do not provide a breakdown of how many a full-time, part-time or one-time coming in a close third is cosmos with nearly 1 000 monthly active, devs and solana comes Forth with around 900 monthly active devs bitcoin is fifth with the 700 devs. I mentioned a few moments ago now, while cosmos nearly doubled, its number of monthly active devs in 2021 solana nearly quintupled its number of monthly active devs in the same period. That’S a 5x for anyone wondering the only cryptocurrencies with comparable developer. Growth are near protocol, terror, phantom harmony and the internet computer, which all saw a 4x increase in monthly active devs last year. The difference there is that near protocol has half the number of devs as solana, and the others on the hyper growth list only have a few dozen.
This makes it easier to post a massive percentage gain as a quick aside near protocol and solana use the same coding. Language have similar architectures and are based in the same region as such, it’s safe to assume that they’re competing for the same pool of developers. Now you can learn more about near protocol using the link in the top right anyhow, it’s not the number, but the status of the developers that counts and it looks like terror solana near protocol phantom and avalanche. Take the top spots as the crypto projects, which added the most full-time devs last year in percentage terms, the authors also analyzed the number of one-time devs for these crypto projects, and the trends were basically the same, so i won’t bother pointing them out here what i Will point out, however, is that the ecosystems for polkadot solana near protocol, the binance, smart chain, avalanche and terra are growing at a much faster rate than the ethereum ecosystem did when it first launched. Now that said, the authors point out that it takes an average of about two years for a crypto project to attract more than 100 developers.
As some of you might have noticed, many crypto projects have opted to leverage the ethereum virtual machine for their smart contracts. In a bid to attract devs from ethereum’s massive ecosystem, the authors analyzed the success of this strategy and it looks like it’s working evm compatible cryptocurrencies such as the binance, smart chain, avalanche and phantom are growing three times faster than ethereum in terms of monthly active devs. As many of you have also probably noticed, a lot of popular ethereum dapps have also opted to deploy on these alternative evm chains, namely d5 protocols, because this often involves copying and pasting the code. This means it’s possible that much of the developer activity happening on alternative evm chains isn’t original or innovative. Now this is a problem because it gives the illusion of an active ecosystem when it’s actually just a bunch of d5 degens moving from chain to chain looking for yield and gains to address this potential problem.
The authors divided evm crypto devs into two camps, primary contributors and cross chain contributors for context. Primary contributors are devs working on projects whose associated tokens exist on the same blockchain, whereas cross-chain contributors are devs working on projects whose associated tokens exist on a different blockchain than the one they are working on. Layer 2 scaling solutions for ethereum such as polygon have more cross-chain devs than primary devs, which is not that surprising. What is surprising, though, is that evm compatible ethereum competitors such as avalanche have managed to use cross-chain developer activity as a means of attracting primary developers to their ecosystems. Some crypto projects, such as cello, have since managed to move away from relying on cross-chain devs for their ecosystem growth.
By the way, if you happen to be interested in, what’s going on with polygon, you can get my most recent update about the project using the link in the top right anyhow, i digress the third section of the report dives into developer growth in d5. The number of monthly active, d5 devs nearly doubled last year, from around 1400 to over 2600 and about a third of them, are classified as being full-time. What’S crazy is that around 1 000 defy devs code, smart contracts, which secure over 100 billion dollars in total value, locked talk about responsibility, the largest d5 protocol in terms of monthly active devs was olympus dow, which boasts around 60 of them. All of these were added in 2021 because that’s when the project went live, go figure in second place. We have vega protocol a derivative dex, which has attracted around 55 devs balancer and maker.
Dao are essentially tied for third, with around 45 devs, and it looks like maker dow lost a lot of devs last year. Other blue chip, d5 protocols, such as uni swap rv and lido, take up the fourth and fifth place positions with around 40 devs each among the medium-sized d5 protocols, cross-chain dex protocol, 4chain polka dot defy hub akala and ftx’s solana based d5 project serum take first second, And third places, with around 30 devs each the small d5 protocols all seem to have between 10 and 20 devs and it’s much more of a mixed bag. As you can see here at the end of the section, the authors seem to imply that the equilibrium number of devs for d5 projects is between 10 and 20, which makes sense, given the complexity of some of these protocols, never mind the high level of developer trust. That’S required to secure the kind of capital they hold. The report concludes by explaining why they didn’t include information about the developer activity in the nft, dow and blockchain gaming niches.
This is mainly because nft projects do not usually require lots of devs or large amounts of code, which makes their dev activity very hard to track from a bird’s eye view. On the bright side, the authors note that they’re working on ways to track dev activity in these niches and expect to release their findings in a follow-up report later this year, the last slides of the report compare the size of the developer ecosystem in cryptocurrency with other Companies and industries – the most sobering of these is the realization that there are close to 27 million developers worldwide, and that means there’s a long way to go before the crypto industry swallows a significant slice of that pie. By the same token, however, the apparent correlation between new crypto developers and the total crypto market cap suggests most cryptos have a lot more room to grow now. This brings me to the big question and that’s what the findings of the report mean for the cryptocurrencies. It mentions the answer lies in electric capital’s previous report from 2020
The top five cryptocurrencies by monthly active devs back then were ethereum bitcoin, polkadot, cosmos and tezos.
Note that the authors included data from the end of 2019. As part of that report, in 2020, btc went up by 4x. Eth went up by 5x. Dot went up by around 7x when you factor in the denomination. Over the summer, atom went up by 2x and xtz essentially stayed the same.
This suggests there is somewhat strong correlation between developer activity and price action. The outliers here are atom and xtz, and i attribute their poor price action to their sub-optimal tokenomics more about the importance of tokenomics in the description, the developer price correlation is even stronger when you look at the crypto projects, which gained the most developers in percentage terms. Besides ethereum polkadot and tezos filecoin near protocol, cello, cardano, oasis network avalanche, algorand and chainlink saw a huge spike in devs in 2020.. Half of these crypto projects then saw their coins and tokens start trading in the middle or at the end of 2020.
So that leaves filecoin cardano algorand and chainlink phil went up by 5x, adapt went up by 8x; algo stayed about the same because of its tokenomics and link went up by 7x. This suggests that both the number of developers and the rate of developer growth for a crypto project are good indicators for how well its respective coin or token is going to perform in the medium to long term. Now it’s important to note that correlation does not equal causation and though there is likely some causation going on here, it’s not entirely clear how long it takes for developer activity to influence price. What is clear is that there are lots of tokonomic factors at play here that influence price and the two, you must always remember – are supply and demand if demand doesn’t outweigh supply. The number and activity of devs doesn’t really matter whether these devs are full-time part-time or one-time does matter, though, and luckily, electric capital’s 2021 report provides a top 10 list of the projects which saw the largest gain in full-time devs in percentage terms, these are terra solana Near protocol phantom avalanche polygon, kusama, internet computer, moon, river and algarand, the only thing about this list is that most of the coins that belong to these crypto projects have already posted amazing gains in 2021, and their market caps are consequently very large.
It’S going to take quite a bit of money for them to keep moving up in 2022, and the bull run also appears to be on its final legs. This means we need to factor in one more dimension of crypto development in our crypto price correlation and that’s developer retention. The report suggests that about 30 percent of all full-time crypto devs tend to stick around for years after they join. However, devs, who joined a crypto project at or near the peak of a bull market have a very high attrition rate put simply they don’t stick around. Given that the current bull market arguably began sometime in 2020, we must go further back in time to see which crypto projects gained and retained the most devs in the depths of the previous bear market.
Thankfully, the first edition of electric capital’s developer report covers this exact period, and it suggests that the number of active monthly devs on bitcoin and ethereum is likely to continue increasing regardless of market conditions. This means btc and eth should be safe to hold during the next bear market, which is probably a no-brainer. The only altcoins that saw significant gains in full-time devs during the previous bear market were cardano monero and stella. Eos is also on the list as an outlier, but its 2020 developer report suggests it lost most of its devs that year. In any case, this admittedly limited data suggests that it might be worth buying the dips on ada, xmr and xlm when the next crypto bear market comes around, as well as any other coins that have picked up large numbers of full-time devs this year, such as luna Sol and ftm now, if you’re wondering how you can prepare for the inevitable bear market, i have a video about that which you can find in the top right and that’s it for my summary of electric capital’s crypto developer report.
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