Is this the beginning of another crypto revival?
The cryptocurrency market has been experiencing one of the harshest winters for well over a year, one that has led critics to discount the possibility of cryptocurrency ever making a comeback. But a recent market-wide recovery led by bitcoin — which briefly crossed the $35,000 mark — has reignited interest in alternative tokens of exchange.
Additionally, the world is currently anticipating a boom in Asian economic and industrial growth ahead of the region’s current robust development. Strong crypto uptake from a region set to produce 50% of global GDP by 2030 paints a promising picture of the technology’s future.
Decentralised finance (DeFi) and its associated terms (CeFi, TradeFi, gas fees, hot and cold wallets, the list goes on) can be tough to detangle when you’re new to the scene. But if you’re at all curious about what’s been happening in the crypto space and what it means for your financial investment options, read on as we bring you right up to speed.
Is crypto being adopted worldwide?
Stances on crypto vary widely around the world. It’s strictly outlawed in some countries, but accepted and legalised in others. In fact, as many as 130 countries have started developing their own central bank digital currencies (CBDCs), which are cryptocurrencies owned and distributed by banks.
How crypto promotes financial inclusivity in less developed economies
Indicatively, leading blockchain analytics firm Chainalysis’ annual Global Crypto Adoption Index reveals that lower-middle income (LMI) countries, particularly those in Central & Southern Asia and Oceania (CSAO), have demonstrated the highest grassroots crypto adoption rate this year.
These are countries where political and/or economic instability cause local currencies to falter and fluctuate unpredictably. On the other hand, cryptocurrencies have their value algorithmically pegged to USD. As such, stablecoins such as USD Tether (USDT) or USD Coin (USDC) help to safeguard the value of one’s assets. Ironically, cryptocurrencies can actually be a more secure store of value for people living in these locations, despite its portrayal of being volatile in mainstream media.
And if you thought that we’re just talking about fringe territories where conditions are more extreme, Chainalysis reports that 40% of the world lives in LMI countries. The strengthening grassroots adoption among them shows that a significant portion of the world population regards cryptocurrencies as a reliable hedge against weak or unreliable financial systems — which is the exact reason why Bitcoin was created in the first place.
Is cryptocurrency dangerous?
The crypto scene today is focused on addressing the ‘unsafe’ reputation that has tainted the blockchain industry over the years. Due to the technology’s relative youth, 2023 has seen multiple high-profile exploits draining substantial funds from several crypto exchanges. Prominent hackers, including the infamous Lazarus Group from North Korea, have been linked to hundreds of millions of dollars worth in scandals. Victims include HTX and CoinEx, which lost US$8 million and US$43 million respectively. While exchanges occasionally manage to recover their funds by offering hackers a bounty, like HTX, some aren’t so fortunate.
As such, the decentralised app (dApps) builders are focusing on curbing these threats through innovative yield-generating protocols, infrastructural applications such as anonymity solutions, or enhancing blockchain transaction speeds. This focus has also created somewhat of a turnaround for the crypto scene, with a favorable U.S. court ruling and an official institutional listing potentially driving in more investment and expediting the next generation of cybersecurity solutions.
How can crypto investors protect themselves?
Common crypto users can protect themselves by asserting ownership of their crypto assets.
Holding assets in centralised crypto exchanges (CEXs) means that your assets will only be as safe as the exchange institution itself. This is where non-custodial wallets come in.
Non-custodial wallets can store assets migrated from CEXs. They can only be accessed by seed phrases and keys, which owners should keep private. The risk of exploits occurring to non-custodial wallets is far lower than CEX because assets are spread out rather than concentrated.
What are some other use cases of crypto?
Unfortunately, the crypto collective certainly doesn’t seem ready to pivot its focus into applications outside the financial and infrastructural. Worry not, though—a few trailblazers are making headway in this area, and their early successes bode well for the future of crypto innovation. In the next few years, we might see unique dApps that service all kinds of industries.
Social Finance (SocialFi)
We can’t talk about SocialFi without mentioning its current frontrunner, Friend.tech. A juggernaut of the SocialFi arena, Friend.tech hit revenue of over US$16 million in October 2023, with three times that amount in total value locked (TVL) in their platform, serving as an indicator of Friend.tech’s trustworthiness.
Friend.tech lets creators connect to their online communities through tokenized attention, where a creator’s influence is quantified through “keys”. To draw a simple comparison, Friend.tech keys are akin to a company’s equity—they’re shares of people, and are similarly susceptible to price fluctuations. The decentralised social platform’s unprecedented success stunned its numerous critics and even inspired copies on other blockchains, like Stars Arena.
Game Finance (GameFi)
GameFi is hardly talked about, but has been stealthily attracting steady investment. Total GameFi funding amounts to about US$3.93 billion, with funding rounds in the past months alone amounting to hundreds of millions of dollars. Blockchain games take on a play-to-earn (P2E) model, which is regarded by some as an improvement over traditional pay-to-play game business models owing to its inclusivity. Axie Infinity is a well-known example of GameFi applications, with the game’s premise being somewhat similar to Pokemon. The player raises monsters called Axies, which are each non-fungible tokens (NFTs) that hold a value of their own. Breeding Axies with specific traits enhances their value with the eventual goal of selling them to profit, with the most expensive Axie ever sold having a valuation of US$130,000.
NFTs
NFTs are easily the most recognisable crypto use-case given how much media attention and controversy they elicited in the last few years. NFTs, as their name suggests, are tokens with unique attributes such that no two are fungible, or identical and interchangeable. Entire marketplaces are dedicated to NFT trading, with a prominent one being OpenSea. While GameFi is still a developing technology and has yet to establish clear outlines for decentralisation and profit, it’s certainly an interesting application of blockchain technology that warrants a close eye.
Keep an eye on DeFi with other freelancers!
As the DeFi sector solidifies its footing, diverse interpretations of blockchain technology begin to emerge. Given the vast potential of smart contracts, a dApp centred around freelance work is within the realm of possibility. We could witness dApps that facilitate timely payments using well-designed smart contracts, or credit rating systems that inform the trustworthiness of a potential partner in a similar manner to SocialFi’s individual quantification. The future of crypto is no doubt exciting!
If you’re a fellow freelancer, join the Freelancer Nation community to connect with local DeFi communities in your area and accelerate your personal finance journey. To learn more about next-gen money management as a self-employed individual, visit our Freelancing 101 Elearning platform or listen to our Freelance Creative Exchange Podcast on Spotify. Finally, you may stay updated on the latest in freelancing by subscribing to our monthly newsletter.