Crypto in 2021: A Short Retrospective by Precog Finance
Once again we find ourselves at the beginning of a new year, but during such times of anticipation and forward-looking for what’s about to come, it’s important to turn around and take another look at 2021 and ponder about all the steps that have led us here at this point.
Whilst the world was frozen with conflict and COVID-19, cryptocurrencies were experiencing a rollercoaster of events; from adoption to innovation, to updates, NFT crazes, scams and a plethora of other ups and downs — was it a storm, or merely the calm preceding it?
A Tale of Two Adoptions
Perhaps two of the most memorable moments concerning adoption have to be those of Tesla and the country of El Salvador. The two are a near-perfect juxtaposition and offer different approaches, perspectives and of most importantly, results.
Most associate the May crash with Tesla’s reversal on their decision to accept Bitcoin as a payment method, citing environmental concerns. Regardless of whether or not Tesla was the sole catalyst of an event of such magnitude, we could certainly say that their decision was short-lived.
Shortly after in the month of June, El Salvador’s president Nayib Bukele announced that Bitcoin would become legal tender in the country; and sure enough, the decision went through and the adoption went underway in early September — but the comparison of these two cases doesn’t end here.
El Salvador decided to take the environmental issue that always comes up with PoW blockchains and flip it over its head. A few months following the announcement, the president also announced a geothermal-powered Bitcoin mining farm; a fully green, eco-friendly method free from the classical criticism that has plagued Bitcoin from the start.
That announcement however was merely a warm-up for what was to come, as in the month of November, the president of El Salvador announced the construction of a new, futuristic city to be named none other than: Bitcoin City. To be powered by the same volcano as that of the Bitcoin farm, free from most forms of tax and with Bitcoin as its official currency; there’s a lot to be said about this city, and a lot yet to be unveiled.
Who could possibly look back without remembering the NFT craze that broke out of cryptocurrency spheres and made its way across the mainstream? JPGs of rocks were trading for hundreds of thousands of dollars, and those of certain apes breached the septuple digit mark.
Mainstream brands such as the NBA and Adidas also got in on the action; the former launched NBA Top Shot selling game highlights and moments as NFTs, and the latter recently partnered with existing NFT projects to release a limited-edition collection — which quickly sold out.
McDonald’s, Taco Bell, Nike… these are some of the many brands that have jumped in on the trend, as well as an outstanding amount of famous individuals, among which include the likes of Eminem, Jack Dorsey and Quentin Tarantino.
Although the train is far from slowing down, for the time being, NFTs showcased more than an audience’s willingness to purchase digitally scarce goods. The excitement of such scale implies the readiness of crypto to enter mass adoption, and suggests that the complications that once came with blockchain use have either been polished or have been adapted to.
It also showcases the flexibility of NFTs, and blockchain technology as a whole. From their use in ticketing to government-issued documents, and from gaming and to real-estate; non-crypto companies, businesses, projects, organizations and so on, have started to pick up a technology they recognize to facilitate their operations, and use it to their advantage — which is how mass adoption tends to begin.
A Growing Metaverse
Another word that has started making rounds outside crypto circles is the Metaverse, an alternate reality that partly or fully utilizes blockchain technology to power its various protocols. In fact, the idea is so new that there isn’t a clear and concise definition of what it actually is, but that doesn’t stop projects and companies from using it.
The most famous example is Facebook, which infamously rebranded the company name to Meta — a move that was widely criticized by many. Despite that, however, this single change spiked Google searches for the word “Metaverse” by over 14,000%. Though it wasn’t Facebook that ignited the Metaverse trend, it certainly brought the concept to the mainstream.
The Metaverse itself has also proved to be a divisive topic; proponents argue that it’s one of the biggest innovations that blockchain has put forth, whereas opponents argue that an alternate reality would shift people’s focus towards an indifferent and unnatural world.
Regardless of this debate, the technology is still in its infancy, and very few projects have a clear-cut vision of how to utilize it and bring it to life. That being said, it is still a captivating area that has proven to be one worthy of keeping an eye on, if not for its potential, then at least for its ambition.
In November, Bitcoin received its biggest upgrade in 4 years! Known as the Taproot upgrade, the changes and improvements introduced provide better performance, scalability and privacy. The most important aspect of this upgrade however is how it optimizes smart contract functionality on the Bitcoin network.
DeFi users of other blockchains tend to view Bitcoin as outdated, but the Taproot upgrade goes to show that Bitcoin’s slow and steady approach is not to be confused with obsolescence. Although the current go-to for smart contracts on Bitcoin is the Lightning Network — a layer-2 solution — Taproot paves the way for a base layer rich and active in smart contract functionality.
Supply and Lots of Demand
Many sources report that popular cryptocurrencies — most notably BTC and ETH — are at a record-level low among centralized exchanges. In the case of Bitcoin, it is partly due to the mining rewards halving sometime last year, and partly due to a growing demand that supply cannot keep up with. One can only look back to when dozens of BTCs or ETHs were casually withdrawn into cold wallets, but now, doing that en masse has serious implications.
Between countries planning to adopt BTC and new wealth flooding into the market, and with regulations falling into place upon centralized exchanges, one can only expect a supply shock to occur, sending the market into a frenzy. It’s not a question of if, rather, a question of when.
2021 has shown that as long as something is fundamentally sound, there is an upside at the end of every setback. When a company rejects BTC, a country adopts it. When the market crashes, it unexpectedly recovers a few months later with new all-time highs. When mining is banned, miners simply relocate and continue supporting the network.
This is why 2021 can be considered the year of perseverance for crypto, a year we can all look back on as a key piece of the decades-long puzzle — a crucial step to a distant yet impeccably clear goal. As a project born in such a time, we find ourselves inspired, and hope to take on the attributes displayed by this year to etch a deep, lasting and prominent mark on this grand and marvellous wall.
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