The crypto world is shaky right now. Fewer checks are being written, and regulatory pressure in the U.S. as well as economic uncertainty globally are casting a shadow on the sector as a whole. But the developer space is showing signs of promise.
According to Alchemy’s latest Web3 Development Report, web3 developer activity continued to grow in the second quarter, both year on year and quarter on quarter. Ethereum and crypto wallet software developer kits (SDKs) saw 26.8 million and 11.1 million installations in the second quarter, respectively.
The market is seeing some signs of recovery: Ethereum’s price has increased 53.7%, to about $1,850, since the beginning of the year, potentially sparking greater interest.
To some, it feels like 2019 all over again, where outsiders see crypto solely as token prices and market movements and insiders see a view of a rapidly growing web3 ecosystem. “We are seeing the signs both in the number of devs contributing to projects, launching web3 apps/games, and in on-chain data, which is up massively compared to metrics just six months ago,” said Jack O’Holleran, CEO of Skale Labs, a multichain network.
Other layer-2 blockchains also saw massive gains last quarter. About 75.9 million smart contracts were created in Q2 on the Ethereum blockchain and on layer-2 blockchains like Arbitrum, Optimism and Polygon, among others.
But other subsectors of the crypto industry haven’t been as fortunate. NFT trading volume and users declined about 42% and 33%, respectively, quarter over quarter. Decentralized finance trading volume fell 27%, though users increased 35%, during the same period, the report found.
The increase in DeFi users “speaks to the stickiness” of the projects and products being built in that subsector, Blake Tandowsky, growth analyst at Alchemy, told TechCrunch+. “Even though prices might not be up and every celebrity isn’t uploading NFTs as profile pictures, there are developers who are super interested in the space,” he said.
If past cycles can predict the future, then things are looking up for crypto.
Bearish conditions bring builder opportunities
The current crypto bear market has provided developers with an opportunity to focus on core technology development rather than being guided solely by speculative interests, said Nischal Shetty, co-founder and president of layer-1 blockchain Shardeum and the founder of Indian-based crypto exchange WazirX.
The phrase “in bear markets you build” is cliché, but it might hold true for crypto. “During bear conditions devs often have more time to critically assess and refine their projects, as the pressure to keep up with soaring market demands subsides,” Shetty said.
There are two types of developers out there: the sticky cohorts who remain in the space, no matter the market conditions, and people who come in “when prices are up to the right,” Tandowsky said. Not that this is always a bad thing, however. “Developers are always going to be first when getting excited about new technologies.”
Even with mixed results, devs are still showing increased interest in the space, illustrating that trading volume may not be the only driving indicator for builders looking to build. Alchemy measures builder momentum through libraries, smart contracts and dApps to determine how and where developers are building, deploying and scaling in the web3 ecosystem.
For example, the increase in the number of crypto developers may be attributed to prices. “The growth in the number of developers is always lagging behind the growth of Bitcoin’s price since it takes several months of preparation to acquire the required skills to become, for instance, a smart contracts developer,” said Mikołaj Zakrzowski, a web3 analyst at CryptoQuant.
For reference, Bitcoin’s price has increased about 75%, to around $29,000 since the beginning of the year, CoinMarketCap data shows. Even though it’s up year to date, it’s still down from 2021 all-time highs. “Being aware of this dynamic adds valuable context in interpreting major shifts in the activity of developers,” Zakrzowski said.
But not everyone agrees.
“Builders who are here for the values crypto can deliver don’t really care about token price,” said Nate Hamilton, co-founder of Distractive, a marketing agency that helps crypto startups get off the ground. “Sure, everyone has bills to pay, but if you’re here because you believe that decentralized networks and applications can change the world, ups and downs in token price matter less.”
Regardless, the overall pie is growing. In the past seven years, the crypto industry saw over 22,000 monthly active developers enter the space, bringing the total number to 23,343 as of December, up 5% from a year earlier. Around 52% of all monthly active developers began contributing in 2022, marking a big wave of people entering in recent quarters.
In general, bear markets have little to no “crypto tourists” because the possibility to create or invest in something that will bring in profits quickly are slim. In reality, those who remain in the space, or enter it, are typically doing so because they actually see real value in it beyond monetary gains.
“This [time] allows developers to focus on building products and dApps with real-world use cases, rather than catering to the swarm of users that enter crypto during a bull market,” O’Holleran said.
Of 625 web3 developers surveyed by Alchemy, the top five topics in web3 that people were most interested in were smart contract security, account abstraction, ZK-rollups, smart contract development and AI, in that order. At the same time, those surveyed also acknowledged that funding is the biggest barrier to growth.
“As blockchain gains recognition in various sectors beyond crypto, such as supply chain management and gaming, developers will continue to be enticed by the diverse range of applications and use cases,” Shetty said.
The ball keeps rolling
Going forward, Shetty, O’Holleran and Zakrzowski all said they see developer momentum continuing into the third quarter and beyond.
Even with market fluctuations, the industry has reached a stage of maturity that is “no longer solely dependent on speculative trading trends,” Zakrzowski said. “Mainstream adoption of blockchain continues to grow, and as more industries discover the value of decentralized solutions, the demand for skilled developers will only increase.”
And as market conditions change — and possibly improve — O’Holleran expects more developers will be interested in learning about blockchain technology and how they can contribute to the space.
But the task at hand may not be that simple, Hamilton said. “[Developers need] to figure out how to bring the masses into crypto with applications that can drive value for the end users without them having to know it’s even crypto.”
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