The Rise and Rise of Cryptocurrencies

Bitcoin as an idea that developed in a working product, it quickly became a subject of speculation. Some very intelligent people discovered Bitcoin very early and had the guts to invest in it at a very low price between 2009-2012.

Moreover, a few tech-savvy programmers and enthusiasts were mining Bitcoin with their CPUs in the early days, before the ASIC mining hardware took over. They were investing their electricity bill in Bitcoin.

Of course, it wasn't easy for anyone to "hodl" their investment and not be shaken out during difficult times.

Bitcoin crashed to zero more than once on the MtGox exchange. In the early days, security was terrible and all platforms were very amateurish.

But, if you study closer the early bitcoin forum posts and messages, the feeling about Bitcoin was excitement. A booming market was certain to follow with more cryptocurrencies and serious projects.

Image from: BBC

Two major reasons Bitcoin took off from very early were:

• Wikileaks
• The darknet marketplace of Silk Road

Both these websites applied Bitcoin's use case. Bitcoin was following the whitepaper title and growing to become digital cash.

Bitcoin was used as P2P electronic cash for donations to a website that was cut off from traditional finances (Wikileaks).

Beyond that, Bitcoin since 2011 was used as digital cash in the dark part of the internet. The dark web, or darknet, was gaining popularity since there were markets trading anything illegal. Drugs and guns are legal to possess in some places of the world.

Rosh Ulbricht (founder and admin of the Silk Road website) was arrested in 2013 and sentenced to double life imprisonment.

The media reacted angrily and featured Ulbricht as a drug overlord, and the sentence was very strict for most that observed the legal proceedings. Ulbricht and the Silk Road were made an example.

Silk Road, no matter its illegal nature, it became the reason for Bitcoin to increase Bitcoin's userbase and attracted new investors, since it was proven to have potential as a digital currency. To many, it seemed that Bitcoin was working and adoption started outside of the darknet markets too.

2013 was the year Bitcoin almost went mainstream and the beginning of the cryptocurrency industry. Cryptocurrencies with the synthetic word "coin" were appearing in hundreds for the following years. Almost all of them are worthless today and it was the reason for Bitcoiners to create the term "shitcoin".

Since then a lot has changed. Even the term altcoin doesn't do justice to some projects that have reached tens of billions of dollars in total market cap terms.

There is a cryptocurrency industry that is currently booming but it is also subject to boom and bust cycles mainly due to extreme speculation and the unregulated nature of the market.

These cycles are based on a consensus rule inside the Bitcoin code. This is dubbed as the halving or the "halvening" by crypto enthusiasts.

The halving occurs every 210,000 blocks in the Bitcoin blockchain. What it does is cut the new supply of BTC by half.

The inflation of BTC is reduced by 50% every 210,000 blocks, and this results in less supply of new Bitcoins in the markets. A Coinbase transaction used to provide 50 BTC when a block was mined until 28 November 2012. The date of the first halving reduced the newfound BTC down to 25 and the result was a bullish cycle that started from ~$10 and ended at $1200 one year later.

Image from: Steemit

Then it corrected and the MtGox exchange collapsed having lost hundreds of thousands of Bitcoins to hackers throughout the three years it was running.

Bitcoin during 2014-2016 entered a long bear market, with interest fading away. At that point, there were no more major investments in BTC. Bitcoin lost all mainstream media attention after MtGox collapsed at the beginning of 2014.

By 2015, Bitcoin was already split into two opposing groups. The scaling debate was quite a drama that ended with the split of 2017 and the creation of Bitcoin Cash.

Bitcoin Cash followed the path of increasing block size to help Bitcoin scale, while Bitcoin Core followed the path of Blockstream funded developers. A path that did not help Bitcoin scale and deviated from the guidelines and vision of Satoshi and the early devs. Bitcoin under the BTC ticker wasn't following the whitepaper anymore, the currency features were abandoned, and the Bitcoin Core community decided to name Bitcoin "digital gold" and "store of value".

Image from: Coincentral

BTC in 2017 reached high adoption, but also its weakness was validated. Fees reached $20 and everyone that entered Bitcoin after watching a few documentaries and reading the whitepaper abandoned it.

By the end of 2017, some very potent projects were already gaining a user base as alternatives to BTC.

Ethereum reached a point to challenge BTC's dominance and later it was Bitcoin Cash and Ripple's XRP that tried the same. These three "flippening" attempts were a result of Bitcoin's development stagnation.

A whole new industry was in the making. Ethereum, Bitcoin Cash, Monero, ZCash, and hundreds of more cryptocurrencies, were now looking as better options, and investors were flocking into them.

Image from: Source

Last year, we witnessed the third halving for BTC was again met with extreme speculation. A huge dip in March 2020 and an immediate bounce due to the covid lockdowns was another indication that the 2020 halving was going to initiate a bull run.

In my opinion, it is still early, and while this cycle seems to be in trouble after the market dropped by 50% in May, still we notice that BTC's dominance is currently at very weak levels. (~40%).

The new investors bought BTC with billions of dollars. Since BTC has the most coverage from all other cryptocurrencies. After buying BTC, almost every investor starts looking for other assets with potential.

This led Ethereum to rise to a new all-time high and two more projects that were marketed heavily to rise parabolically (Cardano, Polkadot). Many newcomers appeared in the top ten above some established assets and all had serious marketing and managed to increase their communities very fast.

Doge received media attention as Musk suddenly supported a meme cryptocurrency. A very sad moment for crypto as there were projects developing solutions that could help Musk's industries way more than Doge which was abandoned for years and only pump and dumped throughout its existence.

Image from: Source

The cryptocurrency market in 2021 did not evolve in the same way as the previous bullish cycle. The ICO craze that created thousands of scams and useless ERC20 tokens was not repeated.

Instead, we have two better alternatives from ICOs:

• DeFi
• NFTs

This bullish cycle has already completed its purpose. It has given something that could have real-life utility and create the basis for a digital financial revolution for this and the next decade.

DeFi is still in a very raw phase and is mostly about recycling tokens and putting them in use for liquidity. There have been errors and scams, but unlike the ICO days, this time the benefits and potential of this technology outweigh all the drawbacks.

NFTs were more closer to the ICO craze and for most crypto enthusiasts it was looking like a pointless waste of resources. NFTs were sold for millions of dollars and everyone is still rushing to create digital art. Of course, everyone likes a quick cash-grab but NFTs wasn't just about that.

The main reason for NFTs' existence was the tokenization of digital assets. Digital art is a small part of what NFTs can do. Ownership of a digital asset means you hold the private key to accounts, digital items, in the digital world. Gaming is a huge industry with a lot of upside potential. 3D virtual worlds are in the making and there is this issue of digital asset ownership.

The obstacle here was from the big gaming corporations that still do not enjoy the idea of giving too much financial power to the gamers.

Also in Cryptoverse, we have a few 3D platforms that could have been better though. Platforms like Decentraland have a limited user base and the blockchain games are still having very little appeal to the public. Most of the blockchain industry is developing simple games that have very limited gameplay and do not attract gamers.

Image from Medium, by Akane Yokoo

This round of the crypto cycle brought on the frontline these two very interesting concepts (DeFi, NFTs) that won't vanish like the ICOs.

Moreover, established networks like Bitcoin Cash have increased their user base and proven to the crypto community the ability to scale and reach to millions of users.

The industry seems to be maturing and finally giving results of modern blockchain networks that scale to reach mass adoption. There will be slowing down in prices and investment, since the market is still heavily correlated to the BTC price swings. But, I'm expecting this to change within the next four years.

This was probably the final cycle where BTC movement decided how the whole market will perform. The industry needs to decouple from BTC and this can be achieved easier with the exchanges cooperation.

Lead Image from: IBM (modified)

Originally posted on read.cash

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