It’s no secret that Andreessen Horowitz is optimistic about crypto: the company not only brags that it started investing in the space a decade agobut it also debuted last week with a $4.5 billion Web3 fund.
To understand the bullishness of a16z, despite what others have described as a “crypto winter”, the 2022 State of Crypto report is a good start. According to the disclaimers, the document is not addressed to investors or potential investors – yada, yada, yada. But it reads like an argument for crypto, DeFi, NFTs and all things web3.
The problem, in my view, is that the report’s authors, who are all part of the a16z team, are exaggerating the current capabilities of crypto. By doing this, they make it sound bigger than it is — and it can take years to get to that point.
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It is understandable that the report has an optimistic view on crypto. After all, if you’re about to deploy billions in funding in a market, and you’re not even alone, the TAM has to be up to scratch. But the report is also intended as an overview of trends, so it seems doubtful to allude to opportunities that are not yet real.
The point that bothered me the most has to do with remittances – money sent across borders by individuals, usually from a richer country to a poorer country. The World Bank expects such an annual inflow to reach $630 billion by 2022. And yes, there are inefficiencies and fees along the way. For the authors of the a16z report, that’s more than enough to list remittances as an argument for DeFi.
But are wire transfers and money transfers really ripe for crypto disruption? And is DeFi really the right solution to help what the report describes as the “huge part of the world” [ … ] understaffed by existing financial institutions”? That’s definitely not what I’m hearing off the ground – as also confirmed by two founders I contacted, Tomás Bercovich from Global66 and Ryan Newton from Paisa.
Thanks, but no thanks
Earlier this month, I was in the audience of the Tech.eu summit when Wise CEO Kristo Käärmann was interviewed onstage. “Currently, Wise does not accept cryptocurrencies. Do you think,” Bloomberg’s Ivan Levingston asked him, “that this might change at some point?”
This is a recurring ask for the fintech company, so Käärmann made sure not to sound dismissive. “I’m very excited about the technology,” he said, also adding that “there are interesting experiments going on all over the world.” But the gist of his answer was still a nail in the crypto chest. “We’re just looking for a use case,” he said. “We are looking for the problem that we can solve with it.”