What is the next cryptocurrency expected to explode in 2021?
The overall cryptocurrency market experienced tremendous growth in 2021, with the total market capitalization reaching over $2.5 trillion by May, reflecting a surge in mainstream adoption and increased interest from institutional investors.
Ethereum is notable for its smart contract functionality, which allows developers to create decentralized applications (dApps) directly on its blockchain, unlike Bitcoin which primarily serves as a store of value.
Bitcoin introduced the concept of proof-of-work (PoW) as a consensus mechanism, meaning that computing power is used to validate transactions and secure the network, contrasting with proof-of-stake (PoS), where validators are chosen based on the number of tokens they hold.
The “Ethereum killers” such as Solana and Cardano gained attention in 2021 due to their lower transaction fees and faster processing times, promising to alleviate some of the congestion and high costs associated with the Ethereum network.
The phenomenon of “meme coins” like Dogecoin skyrocketed in popularity in 2021, demonstrating the influence of social media and celebrity endorsements on cryptocurrency valuations, often leading to unprecedented price volatility.
NFTs (Non-Fungible Tokens) became mainstream in 2021, enabling digital ownership of unique assets like art and music, fundamentally changing the way creators monetize their work and how ownership is recorded on the blockchain.
The concept of “DeFi” (Decentralized Finance) gained traction, allowing traditional financial services such as lending and borrowing to occur on blockchain platforms without intermediaries, significantly altering how people think about financial transactions.
Central Bank Digital Currencies (CBDCs) began to gain traction globally, as countries like China and the Bahamas explored or launched their own digital currencies, reflecting a shift in how central banks view the digital economy and the need for digital payment solutions.
It was estimated that about 2% of the world's population owned cryptocurrency by the end of 2021, reflecting growing adoption but still indicating significant room for growth in terms of user base.
The environmental impact of cryptocurrency mining, especially Bitcoin’s PoW, attracted scrutiny, as the energy consumption for mining Bitcoin is comparable to that of some countries, prompting discussions on sustainability in the crypto ecosystem.
Layer 2 solutions like the Lightning Network for Bitcoin and Polygon (MATIC) for Ethereum emerged as important innovations, aiming to increase transaction speed and lower costs without sacrificing security by handling transactions off the main blockchain.
The concept of token burning, where a portion of tokens is permanently removed from circulation, was popularized as a deflationary mechanism to potentially increase the value of remaining tokens, as seen in projects like Ethereum Improvement Proposal 1559.
Regulatory scrutiny increased as governments began to address cryptocurrency concerns, with countries like the United States, India, and Australia proposing regulations that would impact trading, taxation, and the overall legality of different types of cryptocurrencies.
The rise of decentralized autonomous organizations (DAOs) in 2021 showcased an innovative governance structure where decisions are made collectively through smart contracts, allowing for more democratized control over projects.
Cryptographic hashing functions, essential for securing transactions on the blockchain, ensure data integrity and lead to the creation of a tamper-proof ledger by transforming transaction data into a fixed-size string of characters.
The concept of programmability in blockchains allowed developers to create innovative financial products, gamifying investment strategies or creating new markets within the decentralized finance space.
The use of oracles, which provide real-world data to blockchains, has been crucial for the operation of many DeFi applications, allowing them to make decisions based on external conditions, such as price feeds.
The rapid rise and subsequent fall of many meme coins highlighted the speculative nature of cryptocurrency investments, driven by social narratives rather than fundamental value, sometimes resulting in significant financial losses for unprepared investors.
The human-readable smart contracting language of Solidity is central to Ethereum’s infrastructure, enabling developers to write smart contracts that execute automatically upon certain conditions being met.
The Segregated Witness (SegWit) protocol update, implemented in 2017, has been essential for Bitcoin’s scalability, allowing more transactions to fit into a block by separating transaction signatures from transaction data, which is critical as the network continues to grow.