Key Takeaways:
- Active Developer count is one of the key indicators reflecting the health and maturity of a blockchain ecosystem.
- More developers generally lead to more innovation, more security, and more trust in a crypto project.
- Ethereum and Layer-2 platforms built on top of it have the most Active Developers.
At Bitcoin Market Journal, we talk a lot about Daily Active Users (DAUs), but this guide looks at a different type of active user: the developer.
These are the people regularly creating the crypto projects we use. And they are also important to growth: developer contributions directly impact the innovation, security, and trust of a crypto project.
In this guide, we’ll cover:
- Why Active Developers (ADs) are so important
- How to measure ADs
- The top blockchains by ADs
What are Active Developers?
In simple terms, anyone regularly involved in the programming and maintenance of blockchain software is an active developer (AD). The term can be used to refer to both individual developers and developer teams.
Electric Capital, compiler of the blockchain Developer Reports, looks at blockchain projects from the perspective of open-source commits to platforms like Github. In other words, “active developers” are actively making and publishing changes to the blockchain’s code.
ADs aren’t always full-time employees of the projects they work on. Instead, they come from diverse backgrounds and work in various capacities from all over the globe. We can broadly divide ADs into the following categories:
- Core Development Teams: The major crypto projects have underlying blockchain protocols. The development and maintenance of these protocols are handled by teams of software developers, engineers, and data scientists. They are creating the “base layer” of crypto.
- Independent Contributors: Because most of crypto is open source, thousands of independent developers also contribute their time and expertise to improve specific features or look for bug fixes in crypto projects, often voluntarily.
- Startups and Service Providers: Employees of blockchain-based startups and major companies also fall under the definition of active developers. They develop wallet services, dApps, smart contracts, and other projects that sit on top of the base layer.
- Academic Researchers: Universities and research institutions also play a defining role in crypto. Various protocols and blockchains often start as research projects involving professors and students in an academic setting. For example, the Zcash crypto project started at Johns Hopkins University in 2013.
What Do Active Developers Do?
ADs are the brains behind blockchains.
They are the ones who develop a blockchain protocol from scratch, creating core functionalities and features – as well as those who build the dapps on top of those protocols.
You need active developers to test the code, fix bugs, optimize performance, improve security, patch vulnerabilities, provide community support, offer technical assistance, create documentation, and conduct other forms of routine maintenance.
Everything in the crypto sphere relies on developer output, from protocol hard forks and upgrades to new smart contracts and dapps. Many senior ADs also work in crypto governance roles. Vitalik Buterin, the co-creator of Ethereum, is an excellent example of this.
Why Measure Active Developers?
Crypto investors can glean valuable insights by examining the active developers behind a particular blockchain, project, or app. Here are some key performance indicators that tell us a blockchain project is getting traction:
Developer Interest: When many developers consistently flock to a protocol, it is usually a good indicator of the project’s long-term viability. For example, due to its large number of developers, some expect Ethereum to overtake bitcoin at some point and become the world’s most valuable crypto – an event dubbed “the flippening.”
Not surprisingly, Ethereum has consistently ranked at the top of the pile in active developers.
Ethereum, and other popular Layer-2 chains built on it, attract the highest number of developers.
As of this writing, Ethereum has about 200 core developers and over 1,500 smart contract deployers per day. While this number rises and falls with crypto cycles, the general trend has been upward:
As Ethereum has grown so have the number of developers. Note the spikes that occur at and after key updates such as the September 2022 Merge and the April 2024 Dencun update.
Another type of developer is called a contract deployer, who create, test, and deploy smart contracts onto blockchain networks – think of these as building the dapps that sit on top of the base layer.
Here we have seen an explosion of developer interest, especially with Layer-2 networks built on Ethereum:
Deployment includes all the smart contracts used in dapps, rather than active development of the core blockchain.
Regardless of how you measure it, high levels of sustained developer interest are usually an indicator of the stability, maturity, and long-term viability of a blockchain project.
Competitive Advantage: Skilled talent is needed in crypto, and there is a good deal of competition between various companies for talented developers. If a company increases its AD counts, it is usually a sign of gaining traction over its competitors.
Again, Ethereum leaves all other blockchain projects in the dust here. The number of full-time developers at Ethereum has doubled since 2021, indicating high activity levels across its ecosystem. More ADs tend to improve a company’s ability to innovate and improve on its features.
Community Support and Engagement: Ultimately, blockchain is about people. You need to first increase awareness, attract them to your project, and eventually develop a community. Having many active developers, especially those who actively post on social media about the company, is a good sign.
Constant interaction between users and developers can also contribute to the evolution of the project. It creates feedback loops that allow developers to find problems faster and figure out essential features for improved user experience.
ADs as an Investor Valuation Metric
The market price, token supply, token ownership, market cap, and daily active users are all valuable metrics for evaluating cryptocurrencies. However, these metrics are largely focused on the demand side of the equation.
A balanced assessment of crypto requires an in-depth understanding of the supply side as well. Supply metrics from a crypto POV include tokenomics, governance, security, bug hunting, smart contract support, cross-chain interoperability, and more.
All this requires massive volumes of software code. The number of available developers will determine a project’s ability to manage these responsibilities and complete critical tasks quickly.
In short, the contributions from ADs affect cryptocurrency valuation in the following ways:
- Project Health: The size of a project’s developer community can tell you a lot about what people in the know think about its viability and prospects. A higher number of ADs indicate that the company is healthy and vibrant.
- Stability and Security: The codebase of cryptocurrencies is constantly threatened by hackers and cybercriminals looking for flaws and vulnerabilities. Having more hands on deck for patching, bug fixing, and code reviews helps improve the stability and minimize the security risks of crypto.
- Innovation and Adaptability: Crypto projects must constantly improve and evolve, adding new features and use cases to drive user adoption. A higher AD count indicates that the crypto is more likely to succeed.
- Trust and Market Perception: Seasoned crypto investors look at the developer community behind a company. A strong and active AD community helps build trust and confidence. Solana, which had a near-death experience in 2022 due to its connection with FTX, is a good example. It has managed to rebound since then, partially due to its strong community of active developers.
The Relationship Between ADs and Users
The “network effect” is an economic concept where the value of a network increases exponentially as more people use it. Today, some of the most valuable companies in the world are network companies (Meta, Apple, Google).
In crypto, network effects play a big role: Here’s how they typically play out.
The User Adoption Stage: The process starts with creating the initial codebase of the project. The development team then markets to potential users by publishing whitepapers, social media, airdrops, influencers, and bounty programs.
Community engagement is critical here. Developers often engage in forum discussions, conduct AMA sessions, and answer queries on social media handles to interact with their audience and increase awareness about the project.
Community Building: In the second stage, the continued interaction between developers and users helps amplify the network effect in several ways. It increases trust in the project and helps it gain credibility. High engagement levels eventually lead to strong communities that market the crypto to other potential users.
Feedback Loops and Value Generation: When developers constantly interact with users, the result is a mutually beneficial exchange of information. Support from developers helps the project become more user-friendly, increasing its adoption rate.
Developers also gain valuable feedback and constructive criticism from daily users of the crypto/project. They can use these insights to improve the codebase further, identify potential security threats early, and generate more user value.
When a team consistently delivers exciting new features, major improvements, and bug fixes to a software project – and continues to market itself well – they will generally see a steady uptick in active users.
Having more ADs can help a crypto company attract more daily active users.
Emerging Ecosystems and Small Chains
Identifying smaller companies with a rapidly growing number of Active Developers can be a crypto investor’s secret weapon.
For example, Sui and Aptos are two examples of newer Layer-1 chains that are winning market share. (Not investment advice, just two examples to illustrate the concept.)
The Sui Network recorded a tenfold increase in its core developer count from 2022 to July 2024, coinciding with the launch of its token in April 2023.
Aptos has been around since early 2022, quadrupling its AD count from 20 in early 2022 to over 80 as of this writing.
To put things in perspective, other established blockchains have clocked a decline in core developer counts since the beginning of the bear market in 2022: examples include Algorand (-64%), Avalanche (-10%), and NEAR (-28%).
Aptos and Sui have received millions of dollars in funding from major investors like a16z, Binance Labs, Accel Partners, Tiger Global, and Multicoin Capital. Similarly, Osmosis Labs counts Paradigm and Ethereal Ventures among its main backers.
In market cap, Aptos is ranked 29 and Sui is 47 among all crypto projects. These emerging blockchain ecosystems are attracting both investors and developers, indicating considerable future growth potential.
They highlight the importance of looking beyond price and market cap when researching new crypto investments. Factors like investor funding activity and rising developer counts often hint at the future growth potential of emerging ecosystems.
Investor Takeaway
The spectacular market crash in 2022 resulted in $2 trillion in crypto losses. Major tokens like bitcoin and Ethereum lost over 60% of their value. Yet, we only saw a marginal decrease in active developer counts between 2022 and 2023.
The developers contributing over 80% of the code commits for years are still actively involved in crypto. Most developers are in crypto for the long haul, boding well for the industry's long-term growth.
Investors should include ADs as a metric for fundamental research in crypto. Developers are the architects of crypto’s fundamental infrastructure. They build and maintain the codebase, interact with users, and help in community growth.
Put another way, ADs can help you find potentially promising projects that you can then research using our industry-leading Blockchain Investor Scorecard. They’ll help you find diamonds in the rough.
Subscribe to the Bitcoin Market Journal newsletter to get our analysis and insights on the most valuable companies for crypto investors.
