The Metamorphosis of Cryptocurrency

Cryptocurrency is constantly changing and to be fair no one really know the end result of its metamorphosis. The public progressively shifts their opinion about the real use case of the cryptocurrency and the technology behind it, blockchain. This paper will delve into the trends around cryptocurrency so far and discuss the possible trend for the upcoming 5 years.

2008-2011: Little Dirty Digital Money

Right in the middle 2008 subprime mortgage crisis, Satoshi Nakamoto laid one small idea of a peer-to-peer electronic cash system called Bitcoin to the world. For years no one knows about Bitcoin except for a few hardcore geeks who try to mine Bitcoin for fun.

It changes on May 22 2010 when a man called Laszlo Hanyecz agreed to pay 10,000 Bitcoins for 2 delivered Papa John’s pizzas. Suddenly market gives Bitcoin value. Moreover, Mt. Gox, one of the first cryptocurrency exchanges, opened. Now, people can trade cryptocurrency. There is a euphoria in the space when other ”-coins” started to arise: Litecoin, Peercoin, Namecoin, and Dogecoin.

All is fine until, in 2011, a website called Silk Road was created. This online marketplace sells everything (yes everything) and it uses Bitcoin as payment. Suddenly Bitcoin-the geek's money becomes Bitcoin-the criminal money. The arrest of Silk Road and the hack of Mt. Gox triggered the first major crash in cryptocurrency. And of course, some of the coins never bounced back.  

2017-2020: Wallstreet Money

After its first major crash in 2014, people started to think more seriously about how blockchain technology can really have a major impact. The wall street people also became interested in this space. In 2017-2018, there is an ICO (Initial Coin Offering) boom. It means the founder or the team of a project proposed a concept of their idea. However, to make those concepts a reality they need money and a lot of money.

Total Capital Raised During ICO 2017-2019 (Statistica)

As FOMO and greed become one, those People who missed Bitcoin and Ethereum are tempted by the promising next Ethereum or bitcoin killer project. In 2018, there are 482 ICOs every day.

Around this time, Ethereum and Bitcoin’s scalability started to concern, other people. There are many concepts of a new blockchain. While the others focus on the smart contract’s application layer. The concept of Defi applications like Uniswap and Aave started to emerge.

However, there are so many new projects that no one really understands. Because everything is new and everything looks promising, there is a lot of scams. Either the team disappear or the project was discontinued. China’s FUD and the fork of bitcoin triggered the second major crash.

2021-: Money in Waiting

And here we are. After billions of dollars have to pour into the space & years of research and developments, everyone waits for the end result of its metamorphosis. These 3 sectors might be worth paying attention to:

  1. DeFi (Decentralized Finance)

Finance is every activity associated with the flow of money from borrowing, lending, payment, savings to investment. Usually, all those activities are managed by a commission-based institution like banks. However, there is a pain point in the current financial system: expensive and slow.

At its core, DeFi replaced the institution with code and smart contracts. When someone can get all the features of the traditional financial system faster and cheaper, the appeal to change is very high. Even though DeFi projects like Uniswap started to launch around late 2020, the enthusiasm is high. In 2021, DeFi Total Value Locked (TVL), a measure of DeFi transaction value grew exponentially to $97.7B. This number is a peanut compared to the size of the finance and insurance market which contributed 7.4% (or $1.5 trillion) of U.S GDP in 2018.

  1. NFT (Non-Fungible Token)

2021 is the year of NFT. It might continue its bull run but not like the public expected. NFT is a combination of token + data that can be distinguished from each other. Like NIK in your KTP. This special characteristic can solve identity and copyrights problems.

So, the boom might not only be in JPEG and art anymore but in digital properties. Creators of digital products (music, art, movies, games, etc) can ensure their copyrights. The people who bought also get protection from counterfeit products. The concept of the metaverse is one of the promising ones where users can play numerous games and hang out with each other digitally (sounds like a digital mall).

However, this boom will likely come after 5G and VR devices are more common. The highly anticipated VR and AR devices from Apple are rumored to be launched sometime in 2022. When commoners own those devices, they can immerse themselves in virtual reality. That is when people can finally appreciate the metaverse and virtual reality.

  1. DAO (Decentralized Autonomous Organization)

The theme in cryptocurrency is decentralization. Everything from the technology itself to the application. But it is ridiculous if a certain individual owns a decentralized application. Therefore, the idea of using DAO become more popular.

DAO is a self-owned entity which means controlled by no one except itself. A DAO is a set of rules encoded in a code computer program that runs on a censorship-free and distributed network. Therefore, removing all bureaucracy and hierarchy. There are two-layer in DAO: the social layer and the automation layer. The automation layer ensures the transparency and self-enforcement of decentralization; the social layer keeps the legitimacy and adaptability of the project.


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