Developers pour into crypto space despite stagnant markets

This year was huge for the crypto developer space even though the digital asset market continues to wallow in a downturn, according to a new report by web3 developer platform Alchemy.

Although the crypto market capitalization is down about 58% year to date, web3 developers are pouring into the space.

The report found that developer activity increased based on the number of crypto software developer kit (SDK) libraries being downloaded, smart contracts being stored on blockchains, and the growth in the number of decentralized applications (dApps) in the market.

“It’s a really exciting time in web3 overall and especially in the web3 development space,” Jason Shah, head of growth at Alchemy, said to TechCrunch. “We were shocked at the results [because they run] counter to the narratives out there with token prices being down, pullbacks in investments, and even layoffs. But in the data with libraries, smart contracts, and dApp growth, all those numbers are up year over year.”

Despite the bear market, crypto has become a “builder market,” with many clearly undeterred, Shah said.

“Crypto bear markets are often when the best projects get built,” Francesco Melpignano, CEO of layer-1 blockchain Kadena, said to TechCrunch.

Ethereum’s cryptocurrency has fallen 64% year to date, but that hasn’t stopped developers from downloading its SDK. In 2021, about 552,000 developers installed Ethereum SDKs on a weekly basis. That number has spiked 178% year on year to more than 1.5 million downloads per week, the report found.

Sure, a developer downloading a tool kit doesn’t necessarily mean they’re suddenly a developer in the crypto world, but the number of smart contracts and dApps — which are built off these tool kits — have risen significantly as well, showing that the download numbers are converting into tangible results.

“If you zoom out and look at the whole space, it gives you a more neutral look and shows that overall growth is there,” Shah said.

Beyond Ethereum, other layer-2 blockchains like Polygon, Optimism, Arbitrum and layer-1 blockchain Solana also saw massive growth. Optimism and Solana active developers both grew over 1,000% year to date, while Polygon rose 335% and Arbitrum increased 516% during the same time period, the report showed.

Infrastructure across data platforms, social protocols, crypto wallets, and decentralized finance (DeFi) sectors also spiked. Alchemy saw “billions of data requests YTD,” the report stated, “suggesting developers are activity building dApps with diverse use cases.”

OK, so what’s driving the growth?

Sources say there’s no single cause — but a handful of factors have contributed to the acceleration of web3 developer activity, whether it be driven by the macro environment or something else.

“Developers are hearing from their friends and colleagues about the opportunities in web3, so the technology seems less foreign or exotic,” Ed Felten, co-founder and chief scientist at Offchain Labs, said to TechCrunch. “Tools and educational resources are getting better as the web3 ecosystem matures. Most of all, every new developer joining the web3 space makes the space even more valuable for the next developer.”

The economic outlook is uncertain in every sector, not just crypto, Felten added. “Uncertainty accelerates change as people re-evaluate their options and position themselves for the next bull market.”

But as crypto technology and infrastructure scales, there will be cycles of growth, Melpignano said.

“When investors stop realizing immediate returns, the party pauses, yet the dissemination of information still reaches a massive audience, serving as a trigger for those with an entrepreneurial spirit,” Melpignano said. “Subsequently, builders emerge with a greater diversity of projects and applications, which ultimately realize the promised potential.”

Developer and dApp interest are growing across decentralized finance (DeFi), all three sources said.

“DeFi will continue to thrive,” Felten said. “But the fastest growth will probably come in gaming and social applications. Some web2 players are dipping their toes into this market, and we’ll see more of them moving in more deeply.”

People are looking into how popular Web 2.0 companies could be reimagined into web3, through topics like social media empowering content creators to financial markets changing access to liquidity, Melpignano said.

Long-term, Shah said he thinks “we’re going to watch crypto eat the world.”

“We’ve digitized everything, so the sky’s the limit,” Shah said. “There will be more experimentation and certain pockets will see a lot of adoption … it’s hard to predict what is the killer app that forms on the blockchains, but we’ll be watching.”