2022 Developer Report Analysis
When considering the inclusion of web3 projects to your crypto portfolio, it is important to consider a number of factors before making an investment. One of the most critical aspects to examine is the state of a particular blockchain. Sometimes people say follow the money but in this case it might be more prudent to follow the developers. It doesn’t matter how much fomo is out there, if no one is building on your beloved blockchain, it is destined to be a ghost-town.
"Developers are a leading indication of value creation. Developers build apps that deliver value to users. Killer apps attract customers, and those customers bring more developers. Because crypto is significantly open source, we have an unprecedented ability to measure developer adoption and fundamental traction in an emerging industry."
The annual 2022 Developer Report by Electric Capital provides a comprehensive overview of the development status of Ethereum, Bitcoin, and other prominent blockchains. The report they put together is almost 200 pages. If you want to check out the full version click here: https://www.developerreport.com/developer-report.
Understanding the state of development in the web3 ecosystem can lead you to make better investment decisions. To save you some time, the team at Velvet.Capital summarized some of the most critical information.
Over the last 7.5 years 22,000 out of the 23,000 current developers started working in the ecosystem. To put that in perspective about 1000 developers entered Crypto in the first 6.5 years of its inception.
Most of the developer growth in crypto occurred during the last two bull runs - essentially since the emergence of projects like Ethereum, Polygon, BNB, and others who have entered the market and developed DeFi, NFTs, Metaverse, and other utilities on the Blockchain.
Number of Developers Relative to Price
Does the height of developers in a given cycle happen at the peak price? Or do developers see the drop in price about to happen and leave before? Or is the peak for developers during the bear market?
Take a look, below are the past two market cycles with price and developer count.
What you can see here is the peak in monthly active developers during the cycle actually typically happens near the bottom of the bear market. In 2017, the peak in developer count was very close to the bottom. For this current cycle, it looks like it may have been close to the bottom (unless we see a lower bottom in this cycle).
Which Developers Are Leaving
Here's a chart segmenting all crypto developers since 2015 into 3 groups (Full Time, Part Time, One Time):
The largest segment is part-time developers. The second-highest is full-time developers. There could be more part-time developers because crypto is a young industry. Therefore, there are many new and developing projects with developers working on them in their free time. On top of that, web3 promotes remote development and many projects do not have a physical in-person office. Working part-time remotely is simpler than part-time in person.
Not to mention, some developers may be simultaneously working on multiple projects since they are not at an office anymore. As the crypto ecosystem grows, we may see a shift into a higher percentage of developers being full-time since more projects will have the funds to pay for full-time employees.
Note that most developers that come and go with market prices are one-time and part-time developers.
Full-time developers are much more likely to continue building during the depths of the bear market, as only 5% of the churn is full-time developers.
So now you may be asking yourself… Where are all these developers that have entered crypto?
The developer report broke down the ecosystems being developed into 4 categories: bitcoin, Ethereum, Top 200 (excluding BTC and ETH), and other ecosystems.They found 28% of developers work for bitcoin or Ethereum, and 50% of developers work on one of the other top 200 projects.
Development on BTC
Bitcoin is currently around 920 active developers (as of December 2022), down slightly over the past year from 944 in December 2021.
Development on ETH
Like Bitcoin, Ethereum has also been growing in terms of developers over its lifespan.
However, over the past year, unlike Bitcoin, Ethereum has actually gained developers slightly.
Ethereum doesn't only have more developers than Bitcoin, but ETH has more developers than any other crypto project. The 2nd largest project (in terms of Active Developers) is Polkadot. Compared to Polkadot, Ethereum has 2.5x more developers. Most crypto projects fall between 0 and about 250 Full-Time Developers.
Other Projects Developer Growth In 2022
Which Contracts Are The Most Popular?
Of the top 10 Ethereum gas spenders, 7 of the top 10 are DeFi or NFT Smart Contracts.
The largest DeFi Ethereum gas spender was Uniswap, a Decentralized Exchange (DEX) and Automated Market Maker (AMM).
The real growth in DeFi development started during the DeFi Summer of 2020 with the number of developers growing from 1,100 in 2020 to about 4,700 at its peak in early 2022. Developers have since dropped to around 3,900 by the end of 2022.
One-time developers are the smallest segment and lost the most people in 2022. Dropping by a total of 21% in 2022. One-time developers will come and go as the market goes up and down, but those who are part or full-time are the ones who will continue to build products that will bring DeFi to the mainstream. Meaning basically - the number of part-time and full-time developers are a much more crucial metric for measuring growth. You can see on the chart part-time (-6%) and full-time (-9%) developers were down much less than one-time (-21%) in 2022.
At the peak of DeFi developers, in early 2022, the number of developers entering DeFi per month was around 1000. Since then, the amount of developers entering DeFi has dropped about 50% to 500 per month.
DeFi development isn't only happening on Ethereum.
Cosmos, Solana, Polkadot, BNB, Kusana, Polygon, and Avalanche also have DeFi development on their blockchains. Since these blockchains are newer they all have far fewer developers than Ethereum.
Velvet.Capital is proud to be developing DeFi on the BNB Chain.
Currently, 50% of DeFi developers are outside Ethereum, up from 30% at the start of DeFi summer.
Like most newly emerging markets, it starts with a single player or two who pioneer a new technology. As these innovations succeed (such as DeFi), more players follow in behind them as they perceive a potential gold rush. This rush will ultimately take market share slowly away from the first innovators.
This increase in development and competition causes the creation of better products for consumers since many projects are competing to make the best product. This is the free-market at work- innovation through competition.The trend of waning Ethereum dominance in DeFi is likely to continue as other chains put more and more resources into DeFi.
So don’t forget, developers serve as a decisive factor in value creation. They craft applications that provide value to users, and popular apps draw in a large number of customers, thus attracting even more developers. The open-source nature of the cryptocurrency industry offers a rare opportunity to quantify developer adoption and gauge fundamental momentum in a rapidly evolving market.
How Velvet.Capital Positions You For Investing Success
Crypto investing can be hard. DeFi can be even harder. But it doesn’t have to be! At Velvet.Capital, we believe in DeFi done right. We’re passionate about the transformational nature of DeFi and want to help onboard the next billion users into crypto.
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