TruBit - The 2022 Year in Review
ETH 2.0, NFT, Regulation, Mining, Blowups, Regulation, Layer 2, GameFi, Multi-Chain, Metaverse and 2023 Outlook
The year 2022 was one of the most turbulent years for financial markets. In addition to the ongoing interest rate hikes by the U.S. Federal Reserve, central banks around the world began to follow the lead of the U.S. in raising interest rates to slow inflation and reduce the rate of economic expansion. The tightening of monetary and fiscal policy has greatly reduced investors' appetite for risky and speculative investment strategies.
This macroeconomic downward pressure has affected traditional finance and digital assets with no exception. With the blowup of projects, cryptocurrency exchanges and digital asset lending platforms, the crypto industry has entered a bear market. More specifically, the total market capitalization of crypto assets shrank by more than $2.2 trillion, and CeFi's institutional business size dropped by approximately 71.4%.
Nevertheless, though the market has taken a sudden turn in this year, blockchain technology developments have also brought some positive impacts in 2022. For example, Ethereum successfully "merged" from a proof-of-work to a proof-of-stake mechanism. This will benefit the future of the Ethereum ecosystem. Also, many governments around the world are recognizing the value of cryptocurrency because of conflicts, wars and inflation. Indeed, blockchain technology continues to evolve many features and has proven to be a monumental history in this year. In the below contents, TruBit takes readers on a tour of the crypto horizon, summarizing the most important market developments we are tracking from ETH 2.0, NFT, Government, Mining, Blowups, Regulation, Layer 2, GameFi, Multi-Chain, Metaverse and some relevant topics.
The rapid expansion of the crypto market also brings TruBit new horizons: completed rebranding from Mexo to TruBit, launch of TruBit App, support buy & sell with 30+ Fiat with credit/debit card, introduce Reward Center etc. As we head into 2023, the TruBit team revisited some of the past year’s most notable market events and provided an outlook of what may be expected in the year ahead.
The Merge upgrade is Ethereum's long-awaited migration from its current "Proof-of-Work" consensus mechanism to a "Proof-of-Stake" system. The Merge actually happens in a two-step process, which has been named the Bellatrix & Paris upgrades. The merger is a combination of two existing independent blockchains in the Ethereum ecosystem, the Ethererum Mainnet and the Beacon Chain, enabling the exchange of consensus mechanisms while retaining the original function of executing intelligent contracts with full historical data and user status. After the merge, the number of verifiers on the chain increased by 13.3%, with a total of over 484k verifiers since the Ethereum merger. It brings the total ETH betting volume to 15.618 million ETH, equivalent to 12.89% of the circulation.
Ethereum: Poof-of-Stake Change in Active Validators
More and more people are paying attention to NFT in 2022 because NFT can be well integrated with various industries such as sports, arts, entertainment, and cultural creation. In addition to the unique community culture and wealth effect of NFT, which makes NFT spread rapidly around the world. In terms of collectibles, the top 3 are BAYC, CryptoPunks, and Otherside's land. Yuga Labs' acquisition of Larva Labs' CryptoPunks and Meebits series in March crowned Yuga as one of the top NFT companies in the world. When ApeCoin fell in the following week, members of the Bored Ape community received the biggest airdrop of the year, with holders of the original tokenized monkey images receiving a six-figure payout.
In addition, Starbucks offers U.S. members the ability to earn and purchase digital collectible stamps in the form of NFTs. Recognizing that NFTs can provide a way for brands to generate incremental growth and revenue, Starbucks wanted to enter the Web3 space earlier than the rest of the retail industry and deepen its members' interaction with Starbucks. Starbucks' vision is to create a place where the digital community can drink coffee and enjoy an immersive experience.
Starbucks partnered with Polygon as a blockchain supporter to build its web3 program, Starbucks Odyssey
Therefore, NFT(Non-Fungible Token) has become an integral part of the crypto world and now NFT has evolved from a pure PFP project to a more advanced form, combining gaming, meta-universe, and mortgages to form a new model of NFT + decentralized financing. Finally, there are three NFT liquidity solutions that are currently gaining traction. First, Fractional NFT improves the trading experience and capital utilization by converting NFT into fungible tokens with higher trading precision. It qualifies for various financial instruments such as collateral and leverage that can replace tokens or equity. Second, crowdfunding protocol cleverly addresses the excessive threshold for users to hold NFT from the demand side of the market, enabling participants to pool funds and co-manage NFT in a multi-Sig environment. Third, liquidity pooling protocols collect NFT near the floor price, providing users with a stable market-making platform.
The Monthly NFT Loan Volume Source: Dune
At the beginning of January 22, Canadian Prime Minister Justin Trudeau ordered Canadian financial institutions to freeze the bank accounts of protesters - and anyone who supports them through donations - in order to cut their funds. After that, the demonstrators switch to cryptocurrency for their funding activities. The protesters turned to alternative financing methods. They raised more than 20 bitcoins in a few days, worth about $900,000. It is proven that cryptocurrency offers a permissionless, censorship-resistant global payment system as an alternative to state-controlled banking networks.
The Ukrainian government raised more than $60 million worth of BTC, ETH, DOT, and other crypto assets in three days to fund the conflict between Russia and Ukraine. More specifically, the Ukrainian government and a non-governmental organization supporting the military have raised $63.8 million through more than 120,000 crypto asset donations since the Russian invasion began. This includes $5.8 million from Polkadot founder Gavin Wood and more than $200,000 worth of CryptoPunk NFT. On February 26, a request for crypto asset donations was released from a Twitter account belonging to the Ukrainian government. So far, the Bitcoin, Ether, TRON, Polkadot, Dogecoin and Solana addresses listed in the tweet have received $54.4 million worth of donations. These donations include a single transaction worth $1.86 million that appears to have come from proceeds from the sale of NFT established by Julian Assange and digital artist Pak. About $200,000 worth of CryptoPunk NFTs have also been sent to the Ukrainian government's Ethereum account.
$63.8 million in cryptocurrency donations
Approximately 105 countries around the world are actively exploring or developing CBDC. 10 of these countries have launched CBDC, including Nigeria, the Bahamas, and several Caribbean island countries. Jamaica, however, is the first country to legalize CBDC. The Central Bank of Jamaica has officially legalized the "Jam-Dex" Central Bank Digital Currency (CBDC) as a legal currency. The CBDC is now expected to reduce the difficulties posed by Jamaica's cash-based economy. The digital Jamaican dollar is a safer and more convenient alternative to traditional banknotes and coins and does not require a bank account to be used.
On August 8, the U.S. Department of the Treasury's Office of Foreign Assets Control announced that it had placed Tornado Cash on its sanctions list. In an announcement, the agency claimed that cybercriminals, including North Korean state-sponsored hackers, were using tornado cash as a tool for money laundering. The ban angered the crypto industry, and some Crypto companies such as Circle and Infura immediately took action to blacklist Ether addresses that interacted with Tornado Cash and immediately complied with the sanctions.
November 29, 2022 was a historic day for the Brazilian cryptocurrency market because federal representatives approved the first laws for cryptocurrency in Brazil (PL4401/21). Brazil is one of the countries with the most traded cryptocurrency in the world, and the Brazilian government says the future of the Brazilian economy is cryptoeconomics. This historic moment ensures that Brazilian society has taken the first step towards the security and development of cryptocurrency. Many people believe that Brazil is very optimistic in the cryptocurrency market and understand that this is an important milestone in Brazil's move towards cryptoeconomics.
2022 is a tough year for Mining business. The efficiency of bitcoin mining depends on three main factors: hashing power, difficulty, and bitcoin price. In 2022, the cumulative hash power of the Bitcoin network is approximately 200 EH/s, and the difficulty of mining has escalated. In addition, upgrades in mining methods and hardware have even accelerated the increase in hashing power and mining costs, leaving miners with diminishing margins.
Many mining companies are facing financial difficulties this year. Since mid-June, the bitcoin price has fallen below $25,000, close to the closing price for most miners. Core Science (CORZ), the world's largest bitcoin mining company, sold 7,202 bitcoins in June 2022 and has only 24 bitcoins in its wallet. It seems like they are preparing for bankruptcy and liquidation to reorganize their company. Moreover, Marathon Digital Holdings and Riot Blockchain posted net losses of $192 million and $366 million on their financial statements, respectively. Ultimately, other cryptocurrency mining companies such as Bitfarms and Greenidge Generation Holdings have also lost their benefits on their financial statements in 2022.
Bitcoin: Miner Hash Price (Revenue Per Exahash) Source: Glassnode
In May 2022, Terra lost support as some users dumped USTs in the market, taking the UST losing pegged from the US Dollar, and the UST price dropped dramatically. It is because Terra’s algorithm changed LUNA into a large issue phase; as a result, both LUNA and UST went into a death spiral. Terra's collapse caused countless losses in the market as UST's price dropped to $0.20 and LUNA's price dropped to almost zero within a few days. Terra’s $40 billion market capitalization evaporated and many investors witnessed severe losses.
On June 14, 2022, Three Arrows Capital was forced to liquidate and many companies like Genesis Global Trading, BlockFi, BitMex, FTX and Blockchain asked Three Arrows Capital to repay their debts. Therefore, Three Arrows Capital sold 80,000 stETH/ETH (over $84 million) in the stETH/ETH pool, resulting in stETH losing pegged on the market. Three Arrows Capital exposed the risk in the cryptocurrency market that had big negative consequences. Due to a lack of transparency, no one knew who was the next one to go bankrupt. More and more institutions revealed the bad debts of Three Arrows Capital, and the entire industry was in a panic environment.
In November, the entire cryptocurrency market was further destabilized when FTX went bankrupt after a run on its users depleted its liquidity. The FTX incident could be called the "Lehman Moment" and its impact and losses were far more devastating than the LUNA collapse and 3AC bankruptcy. In addition to the collapse of the market and the loss of related companies and projects, the event had a serious impact on the entire ecosystem, with centralized exchanges being the most directly affected and facing an unprecedented level of mistrust. Since the outbreak, all major exchanges have been under pressure from massive withdrawals by users, revealing a huge distrust of centralized exchanges by current users under the influence of panic.
If you have come out of Luna, 3AC, BlockFi, Celsius, Voyager, and FTX unscathed, you are doing better than most people and are in a good position to capitalize and position yourself for the coming years.
To give you peace of mind and for the avoidance of doubt, TruBit & TruBit Pro had no exposure to FTT tokens or in any association with Alameda and/or no position exposure in FTX, Genesis whatsoever.
From the beginning, we have prioritized the security of our customers’ assets, all user funds stored on Trubit & Trubit Pro are held 1:1 and available for withdrawal at any time. We never have and never will compromise on that point. As the crypto ecosystem emerges from infancy into adolescence, we are more confident than ever that it will continue to be the central pillar of how we run our exchange business.
In the year 2022, the industry exposed many problems with Centralized Finance (CeFi). It will set back the crypto industry for some time. We will definitely expect more regulations on the crypto market and we believe this is not a bad thing, it will bring a more healthy environment for users in the long term.
The biggest event in Layer2 in 2022 was the issuance of OP by the mainstream Optimistic Rollup protocol, Optimism, driving growth along with the Layer2 segment against the overall market conditions. Optimism's total number of addresses increased significantly by 7% from 327,000 to 350,000. In addition, the number of daily transactions on the Optimism network increased by 56% from 45,000 to 70,000. Essentially, Optimism is a cross-domain interactive system composed of Layer 1 and Layer 2 software and hardware. The logic is to construct an enantiomorphic version of the Layer 2 blocks on Ethereum to transfer information across domains.
TVL Changes of the Top 10 Layer 2 Projects
With 1 million active users and 4.72 million registered users with up to $122.5 million profit in a quarter, STEPN was one of the most remarkable projects of GameFi and Play to Earn in 2022 you should know about. But STEPN eventually entered a bottleneck, and fell into a death spiral, burying the boom of Play to Earn in 2022.
In July 2022, STEPN was clearing users in Mainland China due to users dumping crypto assets relevant to STEPN. GST, as STEPN’s utility token, lost control during descending demand, causing a plummet in price.
Number of active Users on Stepn Source: Dune Analytics
Cosmos Polkadot, BNB Chain, Avalanche, Octopus are currently in the network, and possibly Polygon in the future will join the multi-chain as well. This trend is inevitable. All these blockchains can provide established modularization tools for their subnets/zones/parallel chains, but differ in terms of shared security and cross-chain capability.
The advantages of a multi-chain network are:
1. modularization tools are provided for the convenience of developers;
2. Cross-chain security, fast confirmation and higher composability;
3. Each sub-chain carries out specialized execution and application, forming a Dapp-specific chain that provides unbiased performance.
Therefore, MultiChain is an open-source blockchain platform that allows users to construct and deploy private blockchain applications that work within or across businesses. The platform comes with a simple API and command-line interface that may be used to conduct financial transactions. Permissions management, data streams, native assets, data streams, and simple per-chain settings are just a few of the features included in the multi-chain.
The future is multi-chain: the bridge of major projects
The Internet is currently an oligopoly. Most social media giants make huge profits by monopolizing the social identities and data of users. They can also change the rules of the game at any time, which negates the original spirit of the Internet, where transparency and sharing were the core principles. When it comes to building Web 3.0 and developing a large-scale creator economy in the Metaverse, we need a new social infrastructure that embodies the original elements of the Internet.
With an economic value of $47.448 billion by 2022, the Metaverse is a new type of Internet application and social presence that combines many innovative technologies to integrate the real and virtual worlds into a whole. At the industrial level, the metaverse's foundational technologies involve a range of cutting-edge technologies including, 5G, cloud computing, expansion kit displays, robotics, neural interfaces, artificial intelligence and blockchain.
Metaverse Market Size: 2021 to 2030
Source: Precedence Research
2023 Outlook - Where are we going?
For the upcoming 2023, where are we going? We listed a few things we need to pay attention to in the upcoming year.
- Crypto-Native Neobanks: Most banks don’t seamlessly bridge traditional banking rails and crypto. In particular, many people who live in LATAM find it hard to even have their own bank accounts. Crypto-Native banks should be able to allow users to manage their money seamlessly across traditional and crypto rails. Argentina is the second country with the highest increase in the CPI. Their prices increased by 56.4% and they have suffered a very strong devaluation of their currency, which has resulted in more and more people seeking refuge in digital currencies to face the situation. Users resident in countries like Argentina can have easier access to more stable currencies such as US dollars. Mexico and Brazil residents might not have such a strong desire for dollars, but with the help of crypto, it can be a channel for them to manage wealth globally.
- Crypto Payments: Payments over crypto rails naturally solve certain payment scenarios such as the Content creator economy. Today, creators don’t yet expect transparency or timely payment flows. We expect that over the next few years some new creator monetization tools that are built on crypto rails will break out, and this will reshape norms and expectations across the industry. We are close to the explosion of crypto-enabled payment protocols and businesses.
- Zero-Knowledge: We will see significant adoption and use cases for Zero Knowledge technology, which essentially uses provers, verifiers and mathematical algorithms. Since blockchains are inherently transparent, ZK technology can be very useful for blockchains allowing for more interaction on the chain in a private manner. It would be fantastic to see more constructions for zk-proofs that fill the gaps in the multidimensional space of these tradeoffs.
- Real-World Assets: Cryptocurrencies symbolically represent Real World Assets (RWA) and will unlock a lot of liquidity and utility. Stablecoins are definitely the most popular application of RWA in crypto markets such as USDC and DAI, remaining top-tier stable currencies with little volatility throughout the bear market. Therefore, 2023 will bring growth in Real World Assets applications such as lending and real estate transactions in the real-world asset trends.
Undoubtedly, the LATAM region has the biggest use case for crypto, attracting the interest of crypto enthusiasts and encouraging technological development and proactive thinking of how to use this new generation of technology to revolutionize the world. We do believe over the next few years, these crypto-native banks will come to represent billions in spending, and will unlock more new uses for payments over crypto rails.
When markets turn and bull markets return the only thing we regret is that we didn’t have more. This story will always repeat itself. Whatever you do, do not become discouraged and leave at this stage. This is when the winners are forged as you can benefit strongly from this period in the long run. When people around you give up or check out, that is the time to believe again. That’s how you get ahead. TruBit will be here with all of you together to wait for the next bull market to come back.
We're constantly amazed at how quickly the TruBit ecosystem and community have grown, and we're grateful for the support from our users, employees and community members. We're excited to continue helping you to build the crypto exchange and wallet that safely stores value, grows your wealth and sparks the joy of trading every day.
We hope you find the yearly review useful. If you have questions or want to understand how TruBit can help your firm engage with the crypto markets, please feel free to contact us through our communities, social media channels and customer service.
Stay True and make things better, bit by bit.
-- The TruBit Team