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The crypto ecosystem has grown into a $2 trillion market, making it one of the fastest rising niches in modern-day finance. While many stakeholders tend to overlook the growth curve, it has been an interesting journey over the past decade. At first, Bitcoin was the only digital asset but the ecosystem grew to feature altcoins such as Litecoin and Bitcoin Cash, which are among the pioneer crypto assets.
Thanks to the innovative power of the crypto community, smart contract blockchain networks came into existence in 2016 following the debut of Ethereum. This marked a new era for the crypto market, given that users could develop decentralized applications (DApps) hence paving the way for Decentralized Finance (DeFi). However, it was not until summer 2020 when DeFi emerged as a powerhouse in the digital asset space.
Before that, there was the Initial Coin Offering (ICO) era that marked the 2017 crypto bull run. Legend has it that most crypto millionaires were minted during this period. ICOs were a popular way for crypto projects to raise money from heavyweight investors, although the trend did not last long after Bitcoin peaked in December 2017. At the time, one BTC went for $20,000 while some altcoins had risen by over 100x within a year.
Then came the long crypto winter, the shift from bull market conditions to a bearish environment caught many people off guard. The few that survived went back to building more user-friendly and practical innovations to set the stage for mainstream adoption. Well, we are now in 2022 and some of the efforts seem to be paying off. The past two years, in particular, have been very experimental, with areas such as DeFi and NFTs getting a lot of traction.
The Experimental Phase
Unlike the ICO era, 2020 ushered in a new phase for the crypto market. It was during this year that DeFi protocols started to launch their mainnets on smart contract platforms, most of which debuted their protocols on Ethereum. DeFi has since opened up a sea of opportunities, including yield farming and community-governed ecosystems driven by incentives.
So, what is DeFi all about? Simply put, this nascent market seeks to decentralize financial services, allowing anyone across the world to access the featured products seamlessly. The DeFi era has been quite experimental, with crypto users testing out DeFi protocols that offer services such as lending and borrowing, decentralized exchanges and synthetic assets.
That said, the most notable development from DeFi has been governance tokens. Basically, these are blockchain native tokens that give holders the power to steer ecosystem growth through voting. The first DeFi governance token to launch was Compound’s COMP, after which the platform started to offer yield farming opportunities. Since then, most DeFi projects have followed a similar launch path.
As DeFi was still settling in, NFTs came about at the beginning of 2021, bringing in a new breath of life to the crypto community. Even better, this crypto niche caught the attention of stakeholders from other industries, including art and the gaming sector. One year down the line and NFTs are the most popular crypto asset class. Celebrities from Hollywood and the sports industry are some of the people that are currently experimenting with NFTs to store, authenticate and sell their work across borders.
2022 Will Define the Future of Crypto
Going by the trends, it is likely that 2022 will be a defining year for the crypto market. While a lot has evolved, the ecosystem still faces fundamental challenges that could hinder mass adoption. For starters, smart contract blockchain networks like Ethereum have become expensive to use due to scalability issues. It is no surprise that this pioneer DApp platform is now being challenged by other players such as Avalanche and Solana.
However, scalability is not the only shortcoming, the crypto industry faces other significant threats such as security and illiquidity. With so much at stake, it is a no-brainer that stakeholders will likely be focusing on solving these issues throughout 2022. The next section of this article highlights some of the solutions that will define the future, alongside other trends such as blockchain-based gaming which is a fast-rising niche.
Despite the lucrative opportunities, crypto has become a hub for scammers and fraudsters. According to a review by Crystal Blockchain, crypto hacks totaled $4 billion in 2021 with DeFi taking the larger share. Luckily, upcoming crypto innovations such as Avarta are introducing authentifiable decentralized identity systems to enhance the security of DeFi and the NFT market.
Avarta offers a biometrically-secure blockchain wallet, enabling crypto users to leverage their face as the private key to accessing multiple blockchain environments. This wallet bases its infrastructure model on the Proof-of-Identity consensus meaning that a user can authenticate their identity when accessing DeFi or NFT products. Users also have the flexibility of controlling their private keys by choosing how and when to expose their information.
Besides the security, Avarta’s wallet helps users to store transaction history, which can be used to prove whether they are a reliable borrower, lender or investor. Meanwhile, the user still retains full control of their personal and biometric data.
NFT Lending and Borrowing
NFTs may already have captured the market’s attention but this ecosystem lags in terms of liquidity. Most NFT owners are currently stuck with idle digital collectibles due to lack of market depth. That does not have to be the case. NFT lending and borrowing ecosystems are coming up to solve this challenge; one of the notable platforms that has moved in on NFT lending is Drops.
The Drops NFT lending ecosystem is designed to introduce the much-needed liquidity and utility in the digital collectible market. With Drops, NFT owners can use their digital collectibles as collateral to access or provide loans. Drops features lending pools that can accommodate collaterals in the form of NFTs, DeFi tokens and metaverse items. Businesses and retail investors who own these items can put their idle capital to use while taking advantage of other ecosystem incentives such as staking and yield farming.
The blockchain-gaming industry is closely linked to the NFT ecosystem; according to the latest Dapp Radar report, games represented 52% of the total crypto industry usage. As far as popular blockchain games are concerned, Spell of Genesis designed by swiss-based firm EverdreamSoft (EDS) is among the pack leaders. This game involves collecting cards to create a strong deck that can challenge enemies in a series of battles.
Additionally, EDS has pioneered a product suite featuring an open source software dubbed Crystal Spark. Developers can leverage Crystal Spark to connect with multiple blockchain environments and integrate their gaming products. Other blockchain-gaming oriented features offered by EDS include the Casa Tookan wallet for managing in-game items while playing Spell of Genesis and other digital collectible games such as Cryptokitties.
Like most growing industries, crypto has come a long way and will likely continue to grow as more people appreciate the underlying potential. As we move into a more aggressive growth phase, innovations focused on solving the fundamental challenges will certainly define the future of digital ecosystems and the crypto market. The trends featured in this article are a mere glimpse of what has been happening within the past decade. 2022 is one of the years that will pave a clear path for the future!
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.