Crypto is experiencing growing pains. What comes next?
It’s no secret that the bad actors lurking in the crypto industry have been exposed over the past year, and while troubling, these downsides may actually be a sign of better, healthier times ahead. Despite the collapse of FTX and other crypto companies as well as sour bear market conditions, the industry is on its way to coming out the other side and transitioning into something stronger and more resilient.
Crypto turns 15 later this year (counting from the Bitcoin white paper’s debut in October 2008), and just like any teenager, the industry is bound to experience rough patches and growing pains. These pitfalls prove that crypto is evolving – shaking off the dead weight of the industry and picking up important lessons that will help it mature into a more legitimate space. Weeding out the scammers along with baseless projects will only allow room for stronger utilitarian protocols to thrive and usher crypto into young adulthood.
Survival of the fittest
Once lauded for being adamant against traditional financial market conditions, the past year has proven otherwise for decentralized finance (DeFi) and the larger crypto industry. We understand that the crypto market is cyclical, and although we endured a trough of falling prices, there are several signals that indicate a bullish future. In the midst of a depressed market, building is the best thing anyone can do in preparation for a more crypto-friendly future.
The advantage of a cold market is that fewer projects that lack value or utility succeed. This is quite a different reality from the DeFi summer of 2021, where it felt like anyone could build something and win over users based solely on broad vision statements, promises, or even just memes.
According to CoinGecko, of the over 8,000 cryptocurrencies listed on the platform in 2021, nearly 40% of them have failed and been delisted – that leaves over 3,000 dead tokens. In 2022, the same statistic was closer to 12%. While bull markets produce inflated prices, they also give rise to projects without lasting power in a way that directly pits markets against each other.
The past year featured one of the most important crypto milestones since its invention, Ethereum’s transition to proof of stake (PoS). In addition to a variety of improvements, from increasing decentralization to laying the foundation for future technological advancement, Ethereum now qualifies as an energy-efficient blockchain, having cut over 99% of its energy footprint.
Crypto Philanthropy
FTX founder Sam Bankman-Fried may have muddled the reputation of effective altruism and crypto-giving thanks to his efforts to oust Bernie Madoff, but this does not negate the good created by crypto-philanthropy. In many ways, blockchain makes charitable giving better, and it will only continue to do so, with a focus on transparency.
Projects like Endaoment, one of the first 501(c)3 nonprofits built entirely on the Ethereum blockchain, hit 50 million dollars donations since January 2021, and The Giving Block has seen over $100 million in donations from January to October 2022 alone. On a human level, those affected and enduring the violence in Ukraine were able to receive over $135 million in donations since the start of the war through crypto distributions, including NFTs. The growing popularity of on-chain donations is not only impactful, but it has made philanthropic giving safer by making the process more transparent through the use of on-chain rails.
Unfortunately, there will always be bad actors in our and any industry, but that does not label the technology as evil or ineffective. As we throw out the bad eggs, the best will be left to build out their verticals within this decentralized ecosystem and shepherd the light back into the market.
What about NFTs?
NFTs, or non-fungible tokens, may have fallen from the height of their heyday, but they’re not dead – just evolving.
NFTs may have fallen from the height of their heyday, but they are not dead – just evolving. NFTs performed surprisingly well in 2022 compared to previous years, reaching 101 million in sales – a 68% increase from 2021 according to DappRadar
NFTs are also transforming into tools that connect collectors with more experiential benefits and/or physical activations and merchandise. Dibbs found that 64% of NFTs have two or more tools, moving beyond the one-dimensional perception of digital assets, and BanklessTimes.com found that laundry trades fell by 59% during the second half of 2022. If anything, NFTs -is becoming an even more formidable and functional asset class in its own right.
On to young adulthood
2023 offers a clean slate for crypto to push past growing pains and support projects of tangible value. It’s an opportunistic mindset the community should adopt when observing crypto’s rise and fall over the past year. Many jaw-dropping moments surprised us, but with the goodwill of those who survived the years of struggle, the ecosystem will surely refine itself as it grows into young adulthood. If we can embrace the mistakes and see crypto as a young teenager breaking with identity and purpose (and maturing along the way), then the bear market and the challenges that come with it don’t feel catastrophic – it’s just a stepping stone to a brighter future.
