A lot is happening in the crypto space, and we can’t seem to hold our breath. From the World Economic Forum(WEF in Davos) held in May and convened in person after a covid-enforced absence to the recent Crypto Valley Conference held this June, where experts engaged one another on policy, technology, and strategy to move the industry forward.
The crypto industry is on its way to fully become mainstream. Last year, the crypto market capitalization hit $3 trillion, and Bitcoin outpaced Nasdaq 100 to become the best performing asset of the decade. The crypto market has thrived this year despite the bear market, which slowed things down slightly.
More is happening in this space; the UST and stablecoins conundrum, the curve wars, the ongoing NFT frenzy, new technologies presenting all kinds of solutions, and investors spotting fresh markets and opportunities. The UST depeg may have set off the alarm bells and heightened fears of stricter regulations as authorities continue to pay closer attention. The industry you think you know is changing quickly; one year from now, you may fail to recognize it.
In this post, we will navigate the current crypto ecosystem, starting with the pressing crypto adoption and regulation issues before proceeding to blockchain technology, DeFI, DAOs, and NFTs.
If you’re ready, let’s dive in.
The bearish market may have slowed things a little bit, but crypto adoption continues to surge. Crypto is poised to overtake traditional investments and gain massive adoption in 10 years, according to a recent study by Bitmap, which underlined that more people classify crypto as a trustworthy investment amid all the criticisms.
The fourth quarter of last year saw Crypto Apps downloads break the 100 million ceiling for downloads in a single quarter; the report also indicated that there is a good chance more people own cryptocurrency than on-chain data seemed to suggest.
The crypto adoption index is poised to grow exponentially as new users are being onboarded quickly. A survey indicated that many crypto owners in the US, Latin America, and Asia pacific bought their first crypto in 2021. More than half of crypto owners in Hong Kong, Brazil, and India also bought crypto for the first time in 2021. In Europe, two in five respondents got started last year, according to Gemini’s state of Crypto report.
Although there is not yet a globally coordinated crypto regulation, a little anxiety is understandably creeping in among proponents in the industry about the impending crypto regulations and what they would mean; with different countries taking steps towards crypto regulation. Some may be regarded as controversial, like India slamming about 30% tax on crypto gains. In Asia, barring the stringent conditions in China, the industry has generally thrived, particularly in Japan, UAE, Myanmar, and Cambodia.
In the US, the White House signed an executive order ensuring the responsible development of digital assets back in March. The order represents its commitment to participate in research, engage departments and stakeholders in drafting a policy framework for cryptocurrencies, harness its benefits, and minimize the associated risk.
The EU’s long-awaited regulation on crypto assets may be imminent after the initial proposal was amended. Around March this year, negotiations began on how the final draft will look. These rules will be directed towards combating financial crimes, protecting consumers and the market from price manipulation, as well as reducing carbon footprint by 2025.
The much anticipated Ethereum 2.0 merge is scheduled for August; the layer-1 blockchain will move away from the energy-intensive proof of work method of consensus to an energy-efficient proof of stake system. Hopefully, it will translate to higher throughput and lower transaction costs on the industry’s most preferred blockchain.
The competition amongst the L1s is gearing up. Still, Ethereum is firmly in control with more than 4000 active developers, followed by Solana with 1000 developers, and Bitcoin in third place with about 1000 developers. Ethereum also leads the way in transaction fees with about $15 million on a seven-day average compared to second-place BNB Chain, which has $1,304,470.
Potential Ethereum killer, Solana, leads the charts and topples the BNB chain and Ethereum for the number of active addresses and average daily transactions according to Nansen as of May 2022. Solana recorded 15.3 million transactions and had about 15.4 million active addresses; the BNB chain recorded 5 million transactions and 9.4 million addresses. In comparison, Ethereum had 1.1 million transactions and 5.5 million addresses, and even polygon had more transactions(3.4 million) for the stated period than Ethereum.
The latest data from the analytical firm L2BEATS indicates that Arbitrum still leads the layer-2 scaling solutions charts; these scaling solutions compete with each other to lower the transaction fees on Ethereum, followed by dYdX and Optimism. However, the total value locked (TVL) for layer-2 networks currently stands at $5.04 B.
Layer 2 blockchains help decongest the main layer ensuring scalability while inheriting the security features of the main chain. They comprise Optimistic rollups (assumes transactions to be valid ) and ZK- Rollups( state transactions are verified off-chain).
The level of interest in the DeFi ecosystem for June is estimated to be worth more than $107 billion, down from about $200 billion recorded in April; currently dominated by Maker DAO with about 9% market dominance or about $9.45 billion total value locked (TVL), with Curve (CRV) and AAVE lurking just close behind.
The curve wars had also characterized DeFi space with different protocols competing to offer users a higher $CRV rewards when they lock their $CRV. ConveX Finance and Yearn Finance are the biggest competitors.
DeFi applications like Token exchanges and lending protocols are the most popular, but Asset tokenization which brings bonds, equities, and other securities to the blockchain, is also gaining momentum. Protocols like Uniswap and Pancake swap still dominate the charts for trading volumes. However, users seem to prefer CEX as Binance dominates the overall trading volume for Token exchanges, according to the latest data from the Block and Coingecko.
Consensys had predicted that 2022 would be the year of the DAOs; trustless and transparent, decentralized autonomous organizations do not have a regular hierarchical structure as rules are enforced in the blockchain as smart contracts. DAO eliminates the hierarchical bottlenecks in traditional institutions. Anyone can make a recommendation, albeit with a bit of cost, and there is no superiority complex, as members are equal partners.
Although concerns emerged regarding how DAOs can be represented in the eyes of the law, the state of Wyoming in the US has taken the lead by allowing DAOs to exist as Limited Liability Companies under the Wyoming liability Act. It is hoped that more countries will take a cue from Wyoming.
Not all DAOs are born equal; according to crypto data aggregator Massari, there are about $11 billion locked up in DAO treasuries as of April. Uniswap,Gnosis, BitDAO, UXD protocol, and Lido are the top 5 DAOs by Treasury size, according to the latest a16z report. DAO’s use cases vary from fundraising to NFT investing, decentralized project funding, and Governance.
DeFi protocols dominate the DAO space; MakerDAO, Uniswap, Compound, Curve, and Aave are some of the best-performing DAOs; others include Apecoin, Friends with Benefits and Constitution DAO- who tried to purchase a copy of the US Constitution. While some organizations are already firmly established as DAOs, others like SushiSwap hope to transition into a DAO as the benefits are enormous.
The NFT frenzy has not abated in 2022, with numerous brands and artists diving into this space, launching digital assets, connecting with their fans, and building communities. The industry has been projected to grow to $13.6 billion at a compound growth rate of 35% between 2022 and 2027. The growth of the NFT market has been attributed to the growing influence of celebrities and the increasing demand for digital artworks.
The 2021 sky-high transaction volume of $40 million has been matched in record time as collectors have sent about $37 million to marketplaces in the first quarter of 2022. The NFT space was spurred by the success of the digital Owl sensation, Moon birds, which racked in more than $500 million in sales volume, and the prestigious Bored Apes Metaverse project, Otherdeeds, which recorded more than $700 million in sales-including secondary ones.
Ethereum-based and largest NFT marketplace, OpenSea, continues to dominate proceedings according to the latest data from DApp Radar, followed by the Solana-based Magic Eden and LooksRare just above NBA Top shot and CryptoPunks. Here are the rest of the top NFT marketplaces.
The Crypto Ecosystem is awash with activity, disruption, and excitement as blockchain solutions permeate almost every sector. Professionals across Tech and traditional Finance industries are transitioning to Crypto and the blockchain. Developers are working assiduously behind the scenes to bring fresh ideas to life, and regulators are having a hard time drafting policies to govern the burgeoning industry; right now, there is too much traffic in this space.
We promise to keep you updated on the latest trends; we simply cannot hold our breath monitoring development in this ecosystem.
