Five Elements Strongly propping up the Crypto EcosystemNovember 30, 2021
With the Thanksgiving season in the US coming to a close for 2021, there are some big reasons why the crypto community should be grateful. These do not include only the regular elements of the same ecosystem, like the flexibility and decentralized nature of the blockchain-based cryptocurrencies, but also some factors that are very unique for the present moment. Because of that, early investors in things like Crypto Punk NFTs, but also SOL or ether, or even the biggest one of them all, bitcoin’s BTC token all have plenty of things to be thankful for.
But, that is not the scope of all of the good news coming from the cryptocurrency markets. There have also been a lot of different tech developments and improvements in the crypto sector that all enforce the notion of evolving digital economics and the transformative nature of crypto. That, in turn, pulls a huge relevance inside of the social spheres that surround economics and are becoming radically more inclusive. The same processes are pulling away from the old idea that crypto is exclusionary and something designed to help the wealthy get more access to financial opportunities. Because of all those financial, economical, and social changes, as well as many big improvements to the tech of crypto, 2021 is for sure a year all should be thankful for.
Scaling and Layer 2
The biggest development for crypto in 2021 in many ways was also the thing that got the least among global public exposure. That included some important answers on the issue of whether or not cryptocurrencies can act as a player on a wider scale as their impact and relevance grow from mainly investment and market activity. In practice, that means the problem of scaling which has already put the screws on networks like ethereum, which should be in theory much more capable of transforming in the presence of a rising user base. However, like it often happens in domains like esports and social media, that did not go according to plan.
So, years ago, developers working on blockchain cryptocurrencies figured out that there needs to be a system of transmitting these transactions outside of the main network. The best example of this is the bitcoin Lightning network, which started as a project back in 2016. It moves small transactions away from the core blockchain of bitcoin and allows them to pass more quickly and with less waste in terms of end-users. Today, Lighting is the key component of El Salvador’s bitcoin policy and national adoption, where ordinary Salvadorians can send small payments without huge processing fees using these layer 2 techs. However, there are also other examples of these technologies coming into their own in 2021, including protocols like that of Polygon and other setups that use ethereum network basis, but take it to a new level. Many of these hold the promise of a crypto ecosystem that allows for segmented scaling and where the issues of 2010s that plagued so many cryptocurrencies are no longer a chokepoint for further adoption.
Additional Tech Innovation
In the current year, many companies working in the US and other developed nations created a flood of institutional investment into things like bitcoin. Companies including Tesla Motors and MicroStrategy put billions of USD into mainly BTC tokens and this allowed the price to explode, much more than instances of individual whales buying tokens. While these were here as well, the confidence that comes from businesses that operate across the globe is much higher for the public mindset than millions of USD from individuals who are both anonymous and without a clear geographical location. But, the ongoing period also allowed for adoption and innovation to take place outside of these heavy-hitter circles.
Across the world and the developing nations, cryptocurrencies made a much bigger footprint than they did only a year ago. Bitcoin funds move constantly in cross-border remittance systems and crypto payments are of ever-rising importance for ordinary people in places like Argentina, Turkey, or Hong Kong. That spurred on additional innovations, like Nigeria’s DeFi projects, crypto gaming models that pay their participants in thousands in places like the Philippines. All of this shows that the developing world is not just taking notice of the changes in the crypto ecosystem, but blending these changes with their individual regional characteristics, and more importantly, the needs of the local economy and its populations.
Institutions in the Driving Seat
Many crypto maximalists likely do not appreciate the fact that people like Elon Musk presently control something like the 4th or 5th biggest holding of BTC tokens in the world. But, there is no denying the fact that institutions have arrived in crypto and they seem eager to stay, even during troubling periods of a sudden loss of value. Even big-name investors, like George Soros, who are practically institutions in their own right, are now holding bitcoin and other digital currencies.
Pension funds are making crypto investments and even more, unexpected players are joining the market of cryptocurrency investment. What ties them all together is the fact that they have all been around for decades and that all of them are run by otherwise very conservative investors and wealth management. None of these are headed by 20-something-olds who want to become bitcoin millionaires. Instead, all of this simply means that Wall Street is now exposed to crypto and that makes one of the oldest fears less likely – a sudden and drastic mainstream regulatory shutdown.
While investors from the institutional domain might steal the limelight, the 2021 most thankful factor remains the technical advancements of cryptocurrencies. Besides layer 2 tech and widespread global projects based on cryptocurrencies, both bitcoin and ethereum had their massive hard fork upgrades this year. For ETH that was the London hard fork, while bitcoin had its Taproot. Both once again went without any issue whatsoever and showed that the baseline maturity of these cryptocurrencies is something all take for granted. That might end up being the most important thing in 2021 that all crypto investors, traders, and supporters should be grateful for.