This article is a non-exhaustive report of highlights taken place in the cryptocurrency industry during 2021. These highlights have drawn attention, capital, and publicity to the crypto industry. The events listed here created market fluctuations, investor interest, and public awareness. Headpieces of these highlights are listed as:
- Notable Price Movements
- Smart Contract Platforms
- Governments on Crypto
- Institutional Interest
- Metaverse Trend
- NFT Summer
Notable Price Movements
Bitcoin reached the 1 trillion market cap for the first time. This was a psychological breakthrough for Bitcoin investors and its avid believers, which was fulfilled in early 2021, specifically in February. In the same year, Q4 of 2021, the Total Cryptocurrency market cap reached 3 trillion, a little more than a quarter of the whole market cap of Gold.
The crypto enthusiasts and the prices of coins sure had a manic year but according to some people, the cryptocurrency market is in an ever-ending bubble and it is highly unstable.
Smart Contract Platforms
Ethereum is the first and most popular smart contract platform and this year it had a critical software update: London Hard Fork, EIP 1559. It changed the fee structure of Ethereum, made the Ethereum protocol deflationary. Ethereum also started its migration towards Proof of Stake where the ETH’s chain becomes 99.95% energy efficient compared to its current Proof of Work algorithm ending the controversy around climate issues.
When The NFT Boom happened, the Ethereum network has gotten too expensive by the overload of collectors to use. A standard gas fee for a single transaction was averaging above $100, which is extremely high for an average user. As a result, Bridge Season started.
Smart Contract Platforms that are alternatives to Ethereum started getting attention because of overflowing demand where Ethereum network couldn’t meet users’ needs who cannot afford to pay such high fees. A couple of those projects that were alternatives as another smart contract platform were: Avalanche, Solana, Fantom, etc. Cheaper and faster transactions were provided, the second-tier collectors that can’t afford high gas fees flocked to these alternative platforms.
Governments on Crypto
Governments against crypto in 2021 were a mixed subject. Some developments were positive, some of them are negative, and the overall signal of the entire year was puzzling.
The Chinese government declared cryptocurrency mining as harmful to the environment in pursuit of carbon neutrality, then illegalized it. After the ban, the US quickly became the country that hosts the most Bitcoin mining in the world by having a share of 35.4% of all mining hash according to BBC. China didn’t stop at mining they also deemed all crypto trading activity illegal which a lot of exchanges ceased their support for customers in China.
Bitcoin became a legal tender in El Salvador on 7th September 2021. This was a historic moment because one narrative of Bitcoin is that the currency will replace fiat for a better global financial system. If that is ever going to happen, El Salvador is going to have a lot of bragging rights in the future provided by being the first government to take initiative.
A tax reporting proposal in the US caused crypto enthusiasts to lobby against a probable harmful policy that could hurt the crypto industry’s innovation. Essentially, the senator’s definition of broker was too broad and it could hold accountable Software Developers to provide tax reports who deploy decentralized applications. Those applications do not collect user information as designed. Not allowing those applications to be developed in the US could drive a lot of business opportunities outside of the country’s borders. The tax report proposal didn’t fully form as harmful as it was expected yet.
Coinbase’s(one of the most trusted exchanges) Initial Public Offering occurred on 14th April last year. It was a huge success and the market capitalization of the company passed 90 billion for a brief time in 2021, almost hitting 100 billion. This is good news because the existence of a publicly-traded Crypto Exchange is a good practice to associate cryptocurrencies with traditional financial entities.
Elon Musk has created a lot of media clout this year and one of his sensational moves was disclosing 1,5 billion worth of bitcoin holdings on Tesla’s balance sheet. Tesla even accepted Bitcoin payments for a brief time frame but then it shut down its Bitcoin support because of climate concerns.
Twitter brought tips feature for everyone where people can tip each other Bitcoins, instantly and for free! This is groundbreaking for a couple of reasons: First, your Twitter account is now your tipping jar. Second, you can make global payments seamlessly for free. Third, the entire Twitter user base is now a potential Bitcoin user by default.
Metaverse is a virtual reality where people are going to experience the networks they are a part of in a more immersive setup with a VR set of some sort. This year’s highlight about metaverses was Facebook’s rebrand to Meta where this vote of confidence from the tremendous company, substantially boosted crypto-related metaverses projects.
Another definition of Metaverse is the notion that virtual universes can coherently communicate with each other by a common standard, thus interoperability. (Interoperability is a fancy word for scaled coherence of decentralized applications.)
For interoperability to happen, there should be a decentralized standard as cryptocurrency is trying to build, so no company would hold the keys to a whole alternative reality that connects all humanity without boundaries on the open internet. Now it will turn to open metaverse.
An artist called Beeple(his real name is Mike Winkelmann) sold an NFT for 69 million dollars, that called Everydays: The First 5000 Days. It is the NFT sold with the most expensive price tag so far. Then Jack Dorsey sold the first-ever tweet of Twitter as an NFT. VISA buys a Cryptopunk, as a result, a crazy NFT run starts in August that clogged the whole Ethereum network for weeks, which resulted in NFT space generating over $23 billion trading volume in 2021.
The biggest cryptocurrency hack ever happened was Poly Network exploit with the amount of 610 billion. The interesting part is, they refunded all the funds because the hacker was a “white hat”, which means those hackers hack to patch up exploitable systems instead of taking advantage of them.
There has been 4 billion dollars worth of hack that happened in Crypto during 2021 only.
These hack reports don’t give us the whole story about the security of crypto solutions but this new industry is not completely protected against exploits and there are more savvy security solutions with a better user interface that is needed.
2021 was an exciting year for crypto. A lot of people made a lot of money, the NFT boom created a new generation of wealthy artists and innovation never stopped. Governments took cryptocurrencies a bit more seriously, institutions started to feel safe investing in crypto-assets and smart contract platforms have gotten better and more competitive.
In the light of it all, the industry matured a lot more than its previous runs, and cryptocurrencies are now globally accepted legitimate investing instruments.