Ethereum (ETH), the second most valuable blockchain network in the world, still dominates the Web3 landscape due to its early start, although other blockchains such as Solana (SOL) are trying to catch up, a new report from venture capital giant Andreessen Horowitz (a16z) has said.
According to a16z, much of Ethereum’s success in the Web 3 space can be attributed to the early start that the network got versus its competitors. Thanks to this, the blockchain now also boasts the highest number of monthly active developers of any blockchain, with nearly 4,000 developers, the report said.
By comparison, Solana came in second with approximately 1,000 monthly active developers, while Bitcoin (BTC), the most valuable blockchain network by far, ranked as the third most popular blockchain among developers with 500 of them active on a monthly basis.
It is this “overwhelming mindshare” that explains why Ethereum users have been willing to pay up more than USD 15m in total fees per day, the report said, calling it “remarkable for such a young project.”
Still, the popularity of Ethereum among developers has come at a price. According to the VC firm, Ethereum’s emphasis on decentralization over scaling means other blockchains have been able to lure over users by promising faster transactions and lower fees.
In addition, Ethereum’s base layer is also losing users to second-layer networks built on technologies such as optimistic rollups and zero-knowledge (zk) rollups, which all attempt to lower costs by increasing the available blockspace.
The move to second layers and sidechains means that blockchains are being hit by a new “computing wave,” like what happened with PCs and broadband in the 90s and 2000s, the report argued.
“There’s a lot of room for innovation, and we believe there will be multiple winners,” it added.
Lastly, the report pointed out that it’s still early days for Web 3 development.
Using the Internet as an analogy, a16z said that with approximately 50 million active Ethereum users at the moment, this puts Web 3 at where the Internet was in 1995 in terms of development.
“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,” the report said.
Andreessen Horowitz is among the most important venture firms in the crypto industry, responsible for backing a large number of projects, including Avalanche (AVAX), Celo (CELO), MakerDAO (MKR), Solana, and many others.