History of Crypto: DeFi revolution during a global crisis

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When the COVID-19 pandemic emerged in early 2020, it brought devastation to individual lives and global economics. The crypto sphere also took a hit as the cryptocurrency market crashed in March of that year. In just one day, Bitcoin’s value against the dollar dropped by 52%, while Ether saw a loss of 43%. This sudden decline caused turbulence within the decentralized finance sector.

During the lockdown, crypto experienced a deeper impact albeit more gradually. With people confined to their homes, screen time increased significantly, leading to a surge in cryptocurrency interest and market values. This surge paved the way for rapid advancements and implementations of emerging crypto technologies, unlike any other time before.

DeFi goes to the moon

The first steps in decentralized finance (DeFi) were taken in 2017 with the development of smart contracts on the Ethereum blockchain. MakerDAO (DAI) and Compound Finance (COMP) were early market leaders. In June 2020, Compound Finance introduced yield farming, also known as liquidity mining, a method of arbitrage that shifted crypto assets to attain the highest interest, fees and rewards. It is now common practice.

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At the forefront of decentralization, Compound Finance paved the way with their COMP token. This innovation allowed users an active role in governing the Decentralized Autonomous Organization (DAO), making them one of the first to adopt this approach by year-end. Many other DAOs followed suit, firmly establishing the decentralized trend.

EXPLORE THE HISTORY OF CRYPTO

A DAO, or Decentralized Autonomous Organization, represents a concept for a company governed by strict digital regulations, devoid of traditional hierarchical leadership. This concept shares significant similarities with Bitcoin as both aim to eliminate intermediaries from transactions.

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According to a report by Bloomberg, DeFi collateral grew significantly between January and September 2020, rising from $700 million to an impressive $9 billion.

“A cryptocurrency mania known as decentralized finance has helped to turn digital currencies into this year’s best-performing asset by far.”

Decentralized exchanges (DEXs) are a type of decentralized autonomous organization (DAO) that have been around since at least 2016. For instance, OasisDEX was launched in that year, and Uniswap emerged in 2018. Unlike traditional exchanges, DEXs enable users to trade cryptocurrencies directly with one another without the need for a central intermediary. This peer-to-peer (P2P) trading functionality gave rise to automatic market makers, which leverage yield farming to generate revenue.

During this time, there was an unprecedented surge in crypto activity, leading to a significant increase in prices – a phenomenon the crypto community refers to as the “DeFi Summer of 2020,” or simply a price bubble.

The third BTC halving

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The third reduction in Bitcoin (BTC) mining rewards happened right as DeFi Summer began, on May 11, 2020. Every 210,000 Bitcoins mined results in a 50% decrease in rewards for miners. In the year 2020, the reward for mining a single Bitcoin block was lowered to 6.25 BTC.

The purpose of halving is twofold: firstly, it helps control inflation by decreasing the mining reward rate. Consequently, this reduces the production speed and boosts demand for Bitcoin. In July and August of 2020, BTC was trading at approximately $8,800 during its third halving event. Subsequent small price increases followed in the summer months. However, a notable upward trend emerged in October, propelling the cryptocurrency to an all-time high of around $63,000 by April 2021.

2021: the year of the NFT

NFTs represent distinct digital assets stored on a blockchain, with a history tracing back to a few years ago. However, the market experienced significant growth only in 2021. These tokens play a crucial role in the current asset tokenization trend and are employed for various applications such as ticketing, licensing, gaming, identity verification, music, and more. The initial uses of NFTs were primarily focused on gaming items, collectibles, and artwork.

CryptoKitties was an early look at things to come. The game, developed by Dapper Labs and launched in 2017, used NFTs to collect, trade and breed digital virtual cats. CryptoMoon later noted: “This digital cat-breeding blockchain game caused quite a bit of congestion on the Ethereum blockchain, peaking in 2020.” The CryptoPunks series of collectibles also came out in 2017.

In April 2021, Yuga Labs introduced the Bored Ape Yacht Club collection, which sold out with all 10,000 units being bought by the end of the month, generating approximately $3 billion in revenue. Subsequently, in August 2021, they released the more affordable Mutant Ape Yacht Club series. Unlike the Bored Apes, Mutant Apes are still being minted and made available for purchase today.

EXPLORE THE HISTORY OF CRYPTO

By the end of 2017, approximately 120,000 individuals engaged with Non-Fungible Tokens (NFTs). Their numbers surged to one million by the end of 2020 and further expanded to 3.5 million in 2021, eventually reaching 9.9 million users in 2022. The revenue generated from NFT sales saw an astonishing increase of almost 40,000% between 2019 and 2021. However, this growth was followed by a significant decline in 2022. OpenSea, which was established in 2017, accounted for approximately 87% of the NFT market at the start of 2022. Unfortunately, trading volume on their platform plummeted by an astounding 99% throughout the year. Despite this setback, experts anticipate that revenue from NFT sales will continue to rise and reach an estimated $2.4 billion by 2024.

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2024-04-09 18:19