It’s no secret that the bad actors lurking within the crypto industry were exposed this past year, and while distressing, these demerits may actually be a signal of better and healthier times ahead. In spite of the collapse of FTX and other crypto companies as well as sour bear market conditions, the industry is on track to make it out the other side and restructure into something stronger and more robust.
Crypto will turn 15 later this year (counting from the Bitcoin whitepaper’s October 2008 debut), 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 industry’s dead weight and picking up key learnings that will help it to mature into a more legitimate space. Weeding out the fraudsters alongside baseless projects will only leave room for stronger utilitarian protocols to thrive and lead crypto into young-adulthood.
Survival of the fittest
Once praised for being unshakeable against traditional financial market conditions, this 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 valley of depreciating 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-favorable future.
The benefit of a cold market is that fewer projects that lack value or utility find success. This is a quite different reality than the DeFi Summer of 2021, where it felt like anyone could build something and win users based solely on broad vision statements, promises, or even just memes.
According to CoinGecko, out of the over 8,000 cryptocurrencies listed on the platform in 2021, nearly 40% of them have failed and gotten delisted — that makes for over 3,000 dead tokens. In 2022, that same statistic was closer to 12%. While bull markets bring inflated prices, they also give rise to projects without lasting power in a way that bear markets directly combat.
This past year contained one of the most important crypto milestones since its invention, Ethereum’s switch to proof of stake (PoS). In addition to a number of different improvements, from increasing decentralization to laying the groundwork for future technological advancement, Ethereum now qualifies as an energy-efficient blockchain, having cut over 99% of its energy footprint.
FTX founder Sam Bankman-Fried may have muddied the reputation of effective altruism and crypto giving, thanks to his attempt to out Madoff Bernie, but this doesn’t negate the good created by crypto philanthropy. In many ways, the blockchain makes charitable giving better and it will only continue to do so, focused keenly on transparency.
Projects like Endaoment, one of the first 501(c)3 nonprofit built entirely on the Ethereum blockchain, hit US$50 million donations since January of 2021, and The Giving Block has seen over US$100 million in donations as of October 2022 alone. On a human level, those affected and enduring the violence in Ukraine were able to receive over US$135M in donations since the start of the war through crypto giving, 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 use of on-chain rails.
Unfortunately, there will always be bad actors in our and every industry, but that doesn’t 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 light back into the market.
What about NFTs?
NFTs, or non-fungible tokens, may have fallen from the heights of their heyday, but they are not dead — just evolving.
NFTs may have fallen from the heights 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 morphing into tools that connect collectors with more experiential perks and/or physical activations and merchandise. Dibbs found that 64% of NFTs have two or more utilities, moving past the unidimensional perception of digital assets, and BanklessTimes.com found that wash trading declined by 59% over the second half of 2022. If anything, NFTs are leveling up to become an even more formidable and functional asset class of their own.
Onward to young adulthood
2023 offers a clean slate for crypto to push past its growing pains and support projects with tangible value. There is an opportunistic mindset the community should adopt when observing crypto’s rise and fall of the past year. Many jaw-dropping moments took us by surprise, but with the goodwill of those surviving the battle years, the ecosystem will surely refine itself as it grows into young adulthood. If we can embrace the failures and view crypto as a young teen wrestling with identity and purpose (and maturing along the way), then the bear market and the challenges that accompany it don’t feel catastrophic — it’s only a stepping stone to a brighter future.
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- Source: https://forkast.news/crypto-is-experiencing-growing-pains-what-lies-ahead/