Analyzing the cryptocurrency landscape as it was shaped during the last 3 years and some info on what could be the next important technological blockchain innovation.
Previous Bull Run / Economic Growth Triggers
2017 was the year of pumps and ICOs. Many cryptocurrencies saw growth from 5-10x up to 100x on their token’s price and market cap. Prices were easily increasing by 20-50% in a single day attracting investors as well as scammers to the space. You may wonder, what was this growth driven by? It was driven mostly by speculation and hopes of getting rich quick schemes.
Unfortunately, most of these coins have retraced 90-99% in some cases, leaving investors holding bags of worthless crypto coins while losing most of their fiat money. It was the time when everyone was creating a project and you could see 10 new ICOs pop up everyday. All this was done thanks to the Ethereum ERC20 protocol standard which made the creation of tokens easy and fast.
Despite these economic failures, many projects were legit and are still thriving to this day by offering disruptive decentralized technology.
Following the bull run of 2017 and the ICO craze, 2018 was the year of red candles and the market cycle led to the bear season. Seeing their gains evaporate, aspiring project creators were looking for a new way to fund their companies while people were looking for the next 100x investment.
Initial Coin Offerings (ICOs) gave their place to Initial Exchange Offerings (IEOs). In an attempt to adopt a fresh approach to the market, project teams along with exchanges created the first token sales which were run exclusively on these platforms. After a token sale was completed the coin was immediately listed on the exchange. Binance was one of the first and most prominent exchanges to launch IEOs. Projects like BitTorrent, Matic, Harmony and others have been successful and have delivered 2-10x returns for investors.
Some companies tried to take a more legal and regulated approach, by selling tokens classified as securities in Security Token Offerings (STOs). These are coins with mandatory KYC and permissioned blockchains. This went against the spirit of the cryptocurrency space which stands for freedom and decentralization, meaning it can’t be controlled by centralized authorities. STOs haven’t attracted a big interest from investors yet.
Decentralized Finance (DeFi) applications can be built on Ethereum which offers turing complete smart contracts. Most DeFi apps require tokens to be locked in, resulting in a decrease of the circulating supply, subsequently causing an increase in the coin’s price. Some successful projects are Synthetix Network and MakerDAO.
In addition, one of the most prominent players in DeFi is Cosmos. Projects like ThorChain, Iris and Kava, which are built on Cosmos, are already focused on providing liquidity solutions for decentralized exchanges and offer financial services like lending.
If you want to learn more about what these projects are building, you can watch Tyler from Chico Crypto share his thoughts about DeFi in this remarkably well made video: