Open-source software developer activity in crypto peaked last June and fell 11% by Dec. 15, according to a new report from crypto venture firm Electric Capital.
The firm’s annual report argues assessing developer numbers and activity, an often overlooked metric for cryptocurrency projects, provides a leading indicator for where future value in crypto will be created.
From its November 2021 peak, crypto’s total market capitalization fell by 71% from $2.9 trillion to $860 billion by the end of the same period, according to Coinmarketcap and CoinGecko.
“Developers build killer applications that deliver value to end users, which attracts more customers, which then draws more developers,” Electric Capital said in its report.
Overall, the industry’s total number of monthly active developers rose 21% in 2022 to 23,343 from 18,416 the prior year, suggesting developer activity remained “sticky” relative to the plunge in digital asset prices. This report comes as crypto firms have already laid off an estimated 2,600 workers in January, according to Yahoo Finance’s tally.
The crypto ecosystem for the second-largest cryptocurrency, ether (ETH-USD), remains far and away the largest by developer activity, with 1,873 full-time developers.
Following Ethereum, Polkadot (752), Cosmos (511), Solana (383), and Bitcoin (300) round out cryptos 5 largest ecosystems by full-time developers.
With at least 200 full-time developers, Polygon (253), Kusama (250), NEAR (205), Cardano (163), and Tezos round out the top 10 largest ecosystems.
“We’re seeing the same thing this cycle that we saw in the last cycle [2017-2020],” Electric Capital partner Mari Shen told Yahoo Finance.
“Even when prices fall, developers do not proportionately respond,” Shen explained, suggesting that the feature makes developer trends in crypto ecosystems a less rate sensitive way to judge a crypto project’s health.
The venture firm analyzed 124 million “code commits,” or updates including additions, revisions, and other changes made during 2022 to crypto-specific open-source software. The study breaks out total developer activity into full-time, part-time, and volunteer workers with full-time serving as the strongest signal for how a crypto ecosystem’s developer community holds up during a bear market.
Notably, the findings are based only on crypto programming done on public projects, which doesn’t account for the ranks of software developers working on private projects for crypto firms. A spokesperson Binance, for example, told Yahoo Finance its total developer headcount is more than 2,100 engineers.
According to the report, 28% of all monthly active developers work on either Ethereum or Bitcoin as of Dec. 15, 2022.
Through last year, Ethereum’s developer community size continued to dominate other crypto ecosystems. Its 2.5 times larger than the next largest, Polkadot, due in part to hosting a larger number of decentralized finance (DeFi) applications and NFT projects, according to Shen.
Ethereum saw its full-time developers rise by 9% year over year to 1,873 from 1,712. Based on how its developer numbers hold up compared to the other 200 largest crypto ecosystems, the report also found Ethereum was better at retaining developers than any other ecosystem.
Bitcoin’s monthly active developers, in contrast, dropped 4% from 312 to 300.
“Ethereum and almost all other [crypto] ecosystems are more prone to [market] cycles and how prices change,” Shen said. “Even though its developer ecosystem isn’t growing, I would argue that [Bitcoin] is actually very healthy. I don’t think you need intense growth to sustain the bitcoin protocol.”
Overall, crypto’s total monthly developers has more than doubled from 10,893 since Electric Capital’s first developer report in August 2019.
As Shen explained, crypto as we know it today started fourteen years ago with one developer — bitcoin’s creator Satoshi Nakamoto — who essentially worked for free.
“It’s a very different industry. A lot of [developers] are frankly, true believers… It has this kind of ideology around it, which I think means when prices drop there’s still a reason to build these things,” Shen said.