2021 was an intriguing year in the blockchain and crypto sphere. With bulls taking charge of the markets and bitcoin breaching all-time highs in the first half of the year. Investors and ‘hodlers’ had a good time investing in currencies, DeFi, and NFTs before the iconic market crash of May 19 and the ‘ranging’ market towards the end of the year.
How did the blockchain protocols perform in terms of development? What were the key trends in core development and developer contribution over the past year? Will they continue this year as well?
We will try to provide some insights from the performance of the space in the past year in this article.
2021, the year of super, duper growth
It was a record year for the cryptocurrency market, which briefly surpassed $3 trillion in value in November. Bitcoin, the largest cryptocurrency by market value, and ether, the second-largest, hit all-time highs, while altcoins, like meme-inspired dogecoin and shiba inu, all experienced perception and price surges.
Similarly, blockchain-based applications such as decentralized finance(DeFi), garnered interest from both retail and institutional investors, pushing the growth of Web3, which is the decentralized iteration of the internet based on blockchain technology that powers NFTs and underpins cryptocurrencies. These helped push cryptocurrency into the mainstream in 2021.
In February, the bitcoin market value hit $1 trillion for the first time. This milestone came after major institutional investors and notable financial companies began to support the cryptocurrency early in the year. Companies including Tesla, Square and MicroStrategy started to use their balance sheets to buy bitcoin.
In August, a major upgrade to Ethereum launched. The upgrade, called London, included Ethereum Improvement Proposal (EIP) 1559, which changed the way transaction fees, or ‘gas fees’ are estimated. It also started the reduction of ether’s supply.
Moreover, Ethereum developers prepared for the network’s upcoming shift to a proof of stake model through a number of upgrades throughout the year.
The Elon Musk factor
In May, just before Elon Musk made his ‘Saturday Night Live’ debut, the price of dogecoin began to spike. On May 8, the day of Musk’s SNL appearance, dogecoin hit an all-time high of about 73 cents. But its price quickly retreated from that peak. As Musk appeared on the show, dogecoin fell as much as 29.5% and dropped to 49 cents at one point.
That was a quintessential representation of the roller-coaster run that dogecoin had all year, most of which had to do with Musk. The Tesla and SpaceX CEO has been a consistent supporter of the meme-inspired cryptocurrency.
Dogecoin’s rally first began in February after a series of tweets from Musk, and since, he has continued to hype up the digital coin.
The rise of NFTs
Other digital assets, like Non-Fungible Tokens (NFTs) sold for millions of dollars alongside fine art in major auction houses. In addition to art, NFTs representing in-game assets and digital land soared in value too.
NFT grew wild in 2021, its funding was up to 130x to hit $4.8B in total, accounting for a 12,878% YoY growth. Interest in NFTs exploded after Beeple’s $69 million sales of a piece called ‘Everydays’ in March; it was historic for a number of reasons. That sale prompted mainstream coverage of NFTs that was unprecedented in history.
Decentralized finance (DeFi) was another wonder of 2021 as venture deals almost doubled YoY to hit 240. Higher-than-average yield products, more efficient transactions, surging consumer demand, and growing interest from institutions made DeFi an attractive bet for investors.
As a result, DeFi funding grew 851% YoY to reach $3.4B.
2021: Blockchain in numbers
According to a report by CBS, Coinbase Ventures, a US company, is the top blockchain investor (with a 68 company count) in 2021.
Global blockchain funding hit $25.2B in 2021, up by 713% YoY and the number of blockchain deals crossed 1,000 for the first time, virtually doubling 2020’s 662. Blockchain funding accounted for 4% of global venture funding, up from just 1% in 2020.
That share is likely to rise in 2022 thanks to emerging crypto, NFT, and Web3 startups. Furthermore, the global blockchain unicorn count jumped from 9 to 47 in 2021 with a remarkable 40 unicorn births (3 in Q4 ‘2021) and 2 public exits.
Over half of blockchain unicorns are based in the US (26), followed by Asia (10) and Europe (5). Crypto exchange FTX(Bahamas) leads with a $25B valuation followed by NFT marketplace OpenSea(United States) at $13.3B and Bitmain Technologies(China) at $12B.
What to expect in 2022
Last year, we saw a significant number of countries ban and pass draconian laws on cryptocurrency, topping the list is Nigeria- the largest crypto market in Africa (February) and China banning cryptocurrency for the umpteenth time in September.
On the flip side, El Salvador, in June, passed a new law to adopt bitcoin as legal tender, becoming the first Nation to do so. The law allows bitcoin to be used as payment for goods and taxes in El Salvador. Businesses can price their goods in bitcoin, and exchanges will not be subject to capital gains tax, according to a CNBC report.
Going forward, we presume that more governments will embrace blockchain technology as this will allow them to conduct their business more effectively and gain public trust. It also suffices that more countries will embrace cryptocurrencies as legal tender.
Importantly, crypto-miners have been objects of state victimization owing to the huge energy demands required for their operations and security. In fact, this was why Elon Musk cited changes to his viewpoint on Bitcoin automobile payments in January 2021.
We will probably see a lot of effort made to make blockchain technology green and offset its carbon footprint throughout 2022. This could be done with the use of less energy-consuming blockchain technology, which generally uses proof-of-stake algorithms rather than proof-of-work. When cryptocurrencies go green, blockchain technology may help save the environment.
Ethereum network is working in this direction already as there are plans to shift to a proof of stake model, where users can only validate transactions according to how many coins they hold, rather than the energy-intensive mining rigs used now.
This development is part of the merge to Ethereum 2.0 (Eth 1.0). Eth2 will be hugely impactful since it will change the Ethereum infrastructure and ultimately make mining obsolete.
The NFT market would continue to grow as more and more activities go from physical to digital. The NFT platform provides users with the ability to assert their property rights over a digital asset. The NFT 2.0 model will be less about art and more about utility, gaming, social sharing and gaining access to hyper-exclusive communities.
The metaverse concept alone will provide a wealth of new use cases for inventive NFT applications.
Penultimately, there will be greater demand for blockchain/crypto skills and creativity in 2022 and beyond. The rising influence of cryptocurrencies, the growing prominence of blockchain in various sectors and the potential for growth in the blockchain industry all contribute to a higher demand for blockchain and crypto ingenuity.
In all, the technology landscape is currently in a state of upheaval and we don’t know precisely what will happen in 2022 and subsequent times. One thing is certain — the future is blockchain. It is high time we started integrating it into all enterprises.
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