2021 has been a crazy year in the crypto space — at one point, the crypto market cap tripled from under $1 trillion to reach nearly $3 trillion. As we step into 2022, we see the crypto market cap slumping, which hints that crypto winter is coming.
But if we look at the price of Bitcoin, we can see that crypto winters are getting shorter and prices are recovering more quickly now.
In these final days of 2021, we’ve decided to give you a round-up of the happenings in 2021 that made an impact in the crypto space.
BTC started 2021 with a dominance of 72%, which meant that the majority of the cryptocurrencies being bought at the time were BTC. And at that time, BTC was trading in the $40,000 range.
The first quarter of 2021 made many enthusiasts and speculators a lot of money, with BTC surging to $63,000 to hit an all-time high for the first time in its history. Subsequently, it tumbled down to the $29,000 range in July before proceeding to climb back up to $66,000, breaking its all-time high for the second time in a year.
However, towards Q4, BTC prices continued going downwards, settling at around $49,000 at the time of writing.
Still, 2022 could be the year for Bitcoin. In 2021, we saw El Salvador making BTC legal tender so its citizens could use it to pay for their daily necessities. Furthermore, big corporations like MicroStrategy (NASDAQ: MSTR), Tesla (NASDAQ: TSLA), Galaxy Digital, Voyager Digital and Square — which changed its name to Block Inc. — (NASDAQ: SQ) all purchased huge amounts of BTC.
Altogether, these 5 companies own 188,581 BTC, accounting for almost 1% of the total global circulating supply of BTC.
Ethereum killer SOL is probably the hottest token on the market now. Starting at $1.20 in Jan 2021, SOL grew 150 times to end the year at $180.
Solana, though younger than Ethereum, has the ability to provide faster transaction speeds over the old guard. Ethereum takes 10 to 15 seconds to process a single transaction and can only handle 15 to 45 transactions per second (TPS), compared to Solana, which uses proof of history as a consensus mechanism to enable the network to mine a block in 0.4 seconds and handle up to 50,000 TPS.
Where Solana really shines, however, is its low fee of $0.00025 per transaction, which has opened a whole new world for projects to be built on Solana instead of Ethereum.
Still, it is important to note that currently, many apps (dapps included) are built on Ethereum. Being the first mover in deploying smart contracts on the blockchain gives it a huge advantage to continue innovating and creating better solutions in the crypto space.
The old guard of smart contracts has seen a few upgrades in 2021, the biggest of which was the London hard fork that happened in August — a significant step on the path to Ethereum 2.0.
A total of 5 proposals were implemented but the most controversial one was EIP-1559, which introduced a burning mechanism. In the past, miners were paid transaction fees for mining block or verifying transactions but after the upgrade, transaction fees are now sent back to the Ethereum network to be burnt.
This helps control the circulating supply of ETH. Unlike BTC, which has a cap of 21 million tokens, ETH’s circulating supply is growing every day without a cap. The implementation of the burn mechanism significantly reduces the amount of ETH being generated; ideally, it should reach an equilibrium or have the burning outpace the mining and reduce the supply of ETH available on the market.
The next upgrade, Altair, introduced in Oct 2021, implemented ‘slashing penalties’ and support for light clients. Slashing penalties will reduce rewards for inactive stakers on the network, and will be crucial for the Beacon Chain to encourage participation.
At the same time, the Light Wallet is an attractive tool for validators who do not want to maintain a constant connection with the blockchain because it’s just too cumbersome and requires a lot of data storage.
Going into 2022, with the impending Ethereum 2.0 upgrade, this could increase the transaction speed to almost 100,000 TPS.
Dogecoin killer Shiba Inu outpaced its ‘predecessor’ DOGE in 2021, minting overnight millionaires in the process. SHIB started at $0.000000000110 and rose to a whopping all-time high of $0.00008616 — a 86,160 % growth, essentially. If you had bought $100 worth of SHIB in Jan 2021, you would have made an impressive gain of $8.6 million.
With memecoins gaining more popularity, more and more investors are also holding such tokens and hoping for a moonshot.
2021 seems to be the year for tokens to compete with ETH on the smart contract platform. Unlike ETH, which uses proof-of-work, AVAX operates on proof-of-stake consensus, which uses less computational power and is often considered a cleaner solution for blockchains. Additionally, AVAX can process over 4,500 TPS, dwarfing ETH’s 10 to 15 TPS.
In Jan 2021, AVAX traded at $2.90 per token and at the time of writing, it had soared to $125, giving investors 45 times growth or 4,500% gains over a period of 12 months.
AVAX designed 3 interoperable blockchains, one of which is the exchange chain X-Chain, which allows the exchange of Native AVAX for other tokens.
The contract chain, C-Chain, hosts smart contracts and dapps using the Avalanche Virtual Machine, which is similar to the Ethereum Virtual Machine.
Lastly, the P-Chain coordinates network validators, tracks active subnets and enables the creation of new subnets.
By dividing computing tasks, AVAX allows for higher throughput without compromising on decentralization.
We are excited to see what 2022 will bring to the crypto space. Will these tokens be able to innovate and introduce new products that could help the space grow? Watch this space as Huobi Learn continues to bring you insights into the world of crypto.