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10/17/2024

How Many Crypto Users Are There Really?

a16z's 2024 State of Crypto report devoted considerable attention to evaluating the crypto industry. As the industry matures and on-chain applications continue to grow, we wanted to understand exactly how many people are actively using crypto. This is a difficult question because the clearest and most straightforward metric for usage — active addresses — is highly susceptible to manipulation. Here we share our thinking on the matter. In traditional software, the concept of a "user" is

How Many Crypto Users Are There Really?

a16z's 2024 State of Crypto report devoted considerable attention to evaluating the crypto industry. As the industry matures and on-chain applications continue to grow, we wanted to understand exactly how many people are actively using crypto.

This is a difficult question because the clearest and most straightforward metric for usage — active addresses — is highly susceptible to manipulation. Here we share our thinking on the matter.

In traditional software, the concept of a "user" is well-defined. There are of course many ways to measure user quality — entire fields of growth analytics are dedicated to this — but at the most basic level, users can be aggregated into metrics like "daily active users" (DAU), "monthly active users" (MAU), and so on.

In crypto, things are more complicated. That's because on-chain, user identity is pseudonymous. A single person can easily create and control what are known as sybils — a collection of distinct identities called "public addresses." (There are plenty of entirely legitimate reasons to do this, such as for privacy, security, or other purposes.) As a result, it's difficult to know how many addresses any one person might be using. (Conversely, multiple people may share a single address through multisig, account abstraction, and various other smart account protocols.)

Until recently, the capacity of most popular blockchains was fairly limited, which resulted in high transaction fees. This created a natural barrier to launching and operating hundreds or thousands of addresses, since doing so would be prohibitively expensive. But recently, crypto infrastructure has become far more scalable — through L2 rollups and new high-performance L1s — driving transaction costs on many blockchains down to near zero.

But isn't the cost of creating multiple identities also near zero for traditional internet applications? In most cases, yes. It's trivially easy, for example, for one person to create and use multiple email addresses. The key difference in crypto, however, is that there are strong financial incentives to do so.

The crypto industry has long rewarded early users of protocols with tokens. Today, new protocols typically distribute their initial circulating token supply through an "airdrop" — a reward event in which token allocations are granted to a predefined set of addresses. This address list is usually drawn retroactively from historical on-chain transaction records. Some people may attempt to game the system by spinning up multiple distinct identities and using them to transact. In the industry, this strategy is commonly referred to as "airdrop farming."

Given these behaviors, it's clear that the 220 million unique monthly active addresses we measured in September 2024 do not directly translate to 220 million individuals or users. (Note that active addresses across multiple EVM chains are counted only once toward the 220 million total.)

So how many active users are there really? 10 million? 50 million? 100 million? That's the question we set out to answer. Here's more detail on our methodology.

Methodology 1: Filtering Active Addresses

One approach we took was to filter out addresses suspected of being bot- or sybil-controlled. Using on-chain analytics and forensics, we explored several methods to do this:

  • Filtering out addresses that received funds from a disperse contract source — a disperse contract is a smart contract whose sole purpose is to receive funds and automatically distribute them to multiple distinct addresses. While there may be some false positives, this activity implies that the target addresses all received funds from a single source and are therefore connected in some way.
  • Filtering out addresses with near-zero balances at both the start and end of a given time period. For example, if you're looking for genuinely active monthly users in September 2024, you might try excluding addresses with near-zero balances on both September 1 and September 30. This criterion implies that these addresses are essentially transient. While bots and sybils may attempt to "clean out" their balances after acting, real users would typically expect to retain some balance in their wallets to cover future transaction fees.
  • Analyzing the distribution of addresses with one, two, three, four, five, or more transactions within a given time period. Addresses with only one or two transactions during this window may be lower-quality users, and in the worst case, bots or sybils. This methodology works best when aggregated over longer time periods.
  • Filtering out addresses that executed a large number of transactions within a very short window. A person using a wallet or app interface can only reasonably process a certain number of transactions in a given period, whereas bots can transact at far higher frequencies.
  • Optimistically including addresses associated with identity protocols that require some upfront setup cost. For example, addresses with ENS names, Farcaster IDs, and other social identity links are more likely to belong to real users.

These are just some of the on-chain patterns that may indicate bot-like behavior. This is not an exhaustive list, and we welcome suggestions building on the above.

Methodology 2: Inferring from Wallet Users

Another approach for estimating monthly active users is to look at off-chain data sources. The most natural starting point is wallet users.

In February 2024, the popular crypto wallet MetaMask reported 30 million monthly active users. They defined a monthly active user as "an individual who loads at least one page in the MetaMask extension or opens the mobile app in any consecutive 30-day period."

Suppose we want to estimate the number of transacting users — the next step is to determine what share of MetaMask users actually execute transactions. In 2019, MetaMask reported that on any given day, roughly 30% of active users confirmed on-chain transactions. (This is the most recent estimate available.) Applying that ratio to the MAU figure, we arrive at approximately 9 million monthly transacting users through MetaMask wallet products.

Next, we need to understand MetaMask's market share among all wallets across all blockchains. While this precise data isn't readily available, we can make some informed estimates based on what is known. For instance, we have a reasonable estimate of MetaMask's share of mobile wallets based on data from mobile analytics firm Sensor Tower. (We are unable to disclose the specific figure here due to commercial service agreements.)

Once we have an estimated market share for MetaMask, we can simply extrapolate an estimate of the total crypto user base from the 9 million monthly active transacting users we derived earlier. We can then compare this against the results of Methodology 1 to see whether they are at least in the same order of magnitude.

We can further refine our estimate by analyzing data from other wallet and infrastructure providers willing to share their proprietary metrics, then cross-checking those against the numbers we derived above.

Other Considerations

It's worth noting that some people use multiple addresses and wallets to transact. This is unlikely to significantly inflate the count (because unlike bots and sybils, there's a practical upper bound on how many wallets a single person can reasonably use), but it may be worth an additional deduplication pass under some reasonable assumptions.

On the other hand, there are also cases where a single address may be associated with multiple users. Exchange omnibus accounts are one example. This only gets more complex as account abstraction protocols and smart contract wallets proliferate. We have not accounted for these factors in our analysis.

Final Estimate: 30–60 Million Monthly Transacting Users

Based on our analysis using the various methodologies outlined above, we estimate that there are currently somewhere between 30 and 60 million genuine monthly crypto users. This is admittedly a wide range, but it represents the best estimate we can derive from available data.

Note that this is only 14–27% of the 220 million monthly active addresses we measured in September. It is also just 5–10% of the 617 million global crypto owners that Crypto.com reported in June. (Global crypto owners are those who hold crypto but do not necessarily transact on-chain.) This gap suggests there is an enormous opportunity to convert existing crypto holders — many of whom are passive holders — into active users. With meaningful infrastructure improvements enabling entirely new and compelling applications and user experiences, dormant crypto holders could reemerge as active on-chain users.

Measuring the number of active crypto users is difficult, but by applying several methodologies detailed in this piece, it is possible to begin deriving reasonable estimates.