BeInCrypto presents its annual summary of developments in the major cryptocurrency market sectors over the course of the past year.
1- DeFi
Unlike the prosperous DeFi summer of 2021, the past year has been marked by meltdowns and stagnation, though signs of growth persist.By the beginning of the year, there was already a decline in the number of users of decentralized applications.DApp Radar attributed this February drop to the outbreak of war in Ukraine.
The industry was significantly impacted by the decoupling of Terra’s TerraUSD (UST) and its subsequent collapse and resulting market downturn.One of DeFi’s most important indicators is total locked value, which fell sharply after the events of TerraUSD.The total TVL in DeFi dropped from $158 billion in April to $89 billion in the days following the collapse a month later.
Meanwhile, Layer 1 DeFi protocols also experienced falling TVL, with Ethereum dropping to $32 billion and BNB Chain to $6.5 billion.These represent a year-on-year decline of 74.56% and 62.5% respectively.On the other hand, Layer-2 protocols fared slightly better, with significant growth for Ethereum-based solutions Optimism and Arbitrum.
Displacing other blockchains from leading positions, many projects have actively integrated these networks with users using them to test their products.
Despite the success of these protocols, DeFi ultimately struggled in 2022, with total TVL falling from $211.4 billion in January to $55 billion in December, a loss of 73.97%.But while investment has declined, utilization appears to have improved.The number of unique active wallets increased 50% year over year from 1.58 million in 2021 to an average of 2.37 million in 2022.
2- Proof of stake
One of the most important cryptocurrency events of the past year was the Merge, Ethereum’s transition to a proof-of-stake system.Not only did this upgrade bring significant savings to Ethereum, but it also brought proof of stake to the forefront.
The Merge took place between September 14 and 15 and was accompanied by several hardforks that continued to enable proof-of-work.While the performance of these networks turned out to be much worse than expected, Ethereum’s oldest hard fork, Ethereum Classic, thrived.This was probably because miners switched their equipment to the classic network in anticipation of the Merger.
However, it was difficult to determine which other proof-of-work blockchains the excess capacity of Ethereum miners was distributed to.As a result of the merger, many miners can forego mining, sell their equipment and look for other sources of income.
One of the popular alternatives could be Ethereum staking, which has lower returns but is more sustainable in the long run.
3- Non-fungible tokens
While cryptocurrency prices plummeted over the course of the past year, non-exchangeable tokens have been doing quite well.According to on-chain stats, NFT trading volume has largely stagnated, rising just 0.41% year-over-year.
However, the number of unique traders skyrocketed by 876%, reaching 10.6 million users, while total NFT revenue increased 10.6% to $68.35 million.
The most significant development for NFTs over the past year has to be increased adoption by popular consumer brands.Twitter started recording NFTs in January, while PayPal announced an integration with MetaMask.Over the spring and summer, Meta made several moves regarding NFT integration.It partnered with Polygon to support this in May, which then enabled Instagram to support NFTs.
Meta also launched an NFT integration across multiple wallets in August.
4-Web3
While investments in cryptocurrencies may have dropped this year, the same cannot be said for other blockchain-based developments, or Web3.An important metric in determining Web3’s progress is the number of downloads of two all-important programming libraries: Ethers.js and Web3.js.
In the third quarter of this year, Web3 developers downloaded the Ethers.js and Web3.js libraries more than 1,536,548 times per week.This is an increase of 178% year-on-year.Since 2018, the number of developers installing one of these libraries on a weekly basis has increased every year.Now, in 2022, that number has increased tenfold since its 2018 peak of 145,799 weekly downloads.
In addition, Web3 metaverse projects brought in $10 billion by 2022, almost tripling last year.
For example, in November, Nike launched a new Web3 platform called Swoosh that offers Polygon-based NFT products.Earlier in April, Nike acquired Web3 studio RTFKT in 2021 and released digital Nike sneakers as Ethereum NFTs.This is a promising sign for the industry as it will increase the exposure of NFTs and Web3 technologies to a wider audience.
5- Stable coins
Despite being at the bottom of the list, stablecoins ended up playing one of the biggest roles in crypto developments in 2022.Aside from falling crypto prices, the biggest contributing factor to last year’s major market trials was the depegging and collapse of the TerraUSD stable mint.In addition to losses of up to $40 billion, the collapse also caused successive crypto companies to go bankrupt.
But while algorithmic stablecoins like TerraUSD have lost much of their appeal, fiat-based stablecoins continue to thrive.
Circle, which issues USD Coin, maintains $45 billion in the stablecoin and has Blackrock and BNY Mellon as custodians.Paxos’ Binance USD stablecoin and Paxos dollar together have about $20 billion in circulation.
Despite gains in market share, Tether still remains about 50% larger.
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