Many exciting events took place in the crypto market in 2022. Terra Luna's collapse and the FTX exchange's bankruptcy were among the most important. A large number of crypto financial institutions also went bankrupt. With the increase in interest rates and the adverse effects experienced in crypto, prices dropped dramatically. So much so that even Bitcoin and Ethereum lost two-thirds of their value. Can we still talk about a bright future for cryptocurrencies?
In many science fiction works written in the 1970s and 80s, it was assumed that space travel would quickly become cheaper. As of the first quarter of the 21st century, this prediction has yet to be realized. For people like us, space travel is still a distant dream.
Before making predictions about their future, let's discuss the functions of cryptocurrencies. Cryptocurrencies solve the problem of trust in the digital environment. Because it is essential to determine who will keep the digital records, and it is necessary to reach an agreement between the parties. Before blockchains, this function was undertaken by banks, tech companies, and public institutions. Blockchains enable individuals who do not know each other to do business together. Thus, digital communities can build self-sufficient economies. Cryptocurrencies representing blockchains form the basis of these economies.
Blockchains and cryptocurrencies perform several functions together. Thanks to these infrastructures, we can store cryptocurrencies and NFTs, convert them into investments, use them for payment and transfer them. The expectation that their value will increase also plays a vital role in the interest shown in cryptocurrencies.
As the example of Bitcoin shows, one of the features of cryptocurrencies is that they are limited in number. This situation allows the price to increase along with the increasing demand. As participation in a network increases, the added value created by that network increases exponentially. That is why, for example, the price of Bitcoin has been growing exponentially over the years. This situation does not prevent the value of cryptocurrencies from falling dramatically in specific periods.
One of the main features of blockchains is that they are decentralized. In decentralized structures, a community performs the management function instead of a single person or institution. Therefore, the risks arising from a single point of failure are eliminated. This year, a significant part of the problems experienced in the crypto market stemmed from central exchanges and financial institutions. These companies invested using funds they handed over to clients for safekeeping. When the value of the investments decreased, they stopped the withdrawals. Users did not encounter such problems, as transactions were carried out transparently in decentralized financial institutions.
Predicting The Future
"The future is already here; it is just not evenly distributed," said science fiction writer William Gibson. This quote applies to cryptocurrencies as well.
Blockchains will turn into used infrastructures rather than being a means of investment. In terms of the Ethereum network, this has already become a reality. Users can buy and sell NFTs, play games and perform various decentralized financial transactions on the Ethereum network. Therefore, instead of buying cryptocurrencies from a centralized exchange and waiting for their value to increase, the crypto investor uses the infrastructure they invest in.
In the Hive blockchain, a significant portion of users is also investors. Users blog, share videos and images, play games, and earn money from each of these transactions on the blockchain. The network is run by a group of 20 witnesses chosen by community members. Despite the falling cryptocurrency prices, over 300 thousand users still operate on the Hive network.
It is easy to predict that decentralized finance will occupy an important place in the future of the crypto market. In first-generation decentralized finance applications, platforms had highly inflationary cryptocurrencies. New-generation applications give importance to sustainability. The revenues generated by the platforms are accumulated on the protocol, and these funds are used to support the value of the platform's cryptocurrency.
In the next-generation crypto ecosystems, management is carried out through DAOs. DAO, which stands for decentralized autonomous organization, allows decisions to be made with broad participation and prevents founders and early-stage investors from taking a disproportionate share of the value created in the network.
The focus of the first blockchains was financial transactions. Over time, social media, web components, and entertainment have also become the subject of blockchains. Computer games, art, and sports have become activities that can run on crypto networks today. Hundreds of thousands of players still play the sci-fi game Alien Worlds and the fantasy card game Splinterlands. Digital art has been executed mainly on blockchains via NFTs. Projects such as Chiliz fan tokens and NBA Top Shots NFTs show that the use of blockchains in sports will become widespread.
Problems to Overcome
Crypto networks have their problems as well as the obvious advantages they provide. Web2 platforms are more practical than these networks. Moreover, while using networks such as Facebook, Twitter, and Youtube is primarily free, it is necessary to pay a transaction fee for blockchain-based systems. Also, blockchains have scaling problems and security issues.
The cost of the components that form the basis of information technology has been getting cheaper exponentially over the years. So as the years progress, many digital transactions become feasible for blockchains. Time is working in favor of crypto networks.
It is incorrect to think that the crypto market is moving towards a predetermined goal. The concepts that work are added to the solution pool of the crypto world. The use of many technologies to support each other makes today's mobile devices indispensable. A similar situation will likely occur in crypto.
So, when will the masses use crypto ecosystems? Necessary components for this adaptation are being developed. Scaling solutions that increase the transaction capacity of blockchains by tens of times have already been introduced. These solutions also ensure that transaction fees approach zero. Thanks to cold wallets, security problems have been largely overcome. The most critical barrier to adaptation is the knowledge required to use applications. Making apps practical and increasing crypto literacy can quickly close this knowledge gap. As the potential benefit grows, people will be more motivated to improve themselves.
Conclusion
Problems experienced in the crypto market have shown the importance of decentralization. The sentence "Not your keys, not your crypto" has been confirmed again. It is difficult to predict how long the effects of the problems experienced will last. On the other hand, by 2030, I expect the crypto industry to reach maturity to serve large masses. It might be a good idea to acquire deep crypto knowledge and invest early accordingly.
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