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Cryp­to, Blockchain & Secu­ri­ty Token in 2021

 

Ener­gy Consumption

The begin­ning of the year was dom­i­nat­ed by news about ESG con­cerns over the envi­ron­men­tal foot­print of Bit­coin and oth­er cryp­tocur­ren­cies. Keep­ing the Bit­coin net­work up and run­ning con­sumes more ener­gy than small coun­tries, such as Fin­land. The Frank­furter All­ge­meine Zeitung (FAZ), even dubbed Bit­coin as “harm­ful” and there was talk of a “dirty cur­ren­cy”. Espe­cial­ly cur­ren­cies that use the proof-of-work mech­a­nism were part of this dis­cus­sion. Accord­ing to Pro­fes­sor Philipp Sand­ner, a well-known cryp­to researcher, the most impor­tant ques­tion is not whether Bit­coin uses a lot of elec­tric­i­ty, but what kind of elec­tric­i­ty is used for it, green or brown elec­tric­i­ty. “Today, it’s already the case that more than 50 per­cent of the elec­tric­i­ty con­sumed by Bit­coin is green, and that num­ber is ris­ing” Sand­ner said. “The prob­lem is not Bit­coin per se, but the brown elec­tric­i­ty that is used for it.”

 

First Bit­coin ETF

In Cana­da, the first Bit­coin ETF, named Pur­pose Bit­coin ETF, was suc­cess­ful­ly list­ed by Pur­pose Invest­ments Inc. The Bit­coin ETF was approved by the Ontario Secu­ri­ties Com­mis­sion (OSC)  in Feb­ru­ary 2021. The fund tracks the per­for­mance of the bit­coin price by actu­al­ly hold­ing Bit­coin. Short­ly after the mar­ket launch, the ETF is already worth Can$ 1 bil­lion, FAZ report­ed. The prod­uct is one of the best per­form­ing ETFs at Pur­pose Invest­ments Inc.

 

Non-Fun­gi­ble-Token (NFT)

The NFT boom is anoth­er fac­tor that has made this year. The NFT itself is essen­tial­ly a blockchain-based token that proves you are the sole own­er of a unique dig­i­tal item. This time last year, NFTs were a niche. Now they’re a main­stream phe­nom­e­non. Ear­li­er this year, celebri­ties and artists cre­at­ed a stir in the NFT space, but it was dig­i­tal artist Beeple who made a splash in ear­ly March by sell­ing a sin­gle NFT for US$ 69.3 mil­lion at a Christie’s auc­tion, fuel­ing the NFT boom. In 12 months, the term has not only per­me­at­ed the broad­er mass­es and made own­er­ship of dig­i­tal assets a more famil­iar con­cept, but the indus­try has reached bil­lions of dol­lars in month­ly trad­ing volume.

 

El-Savador

On June 9 of this year, the par­lia­ment of the Cen­tral Amer­i­can nation of El Sal­vador vot­ed in favor of a law that would make Bit­coin the offi­cial nation­al cur­ren­cy along­side the U.S. dol­lar, which makes it the first coun­try to do so. Since Sep­tem­ber, Sal­vado­rans have been able to make trans­fers and trans­ac­tions via app. The law is his­toric, as no oth­er coun­try in the world has manda­to­ry accep­tance for pay­ments made with BTC.

 

Elec­tron­ic Secu­ri­ties Act (eWpG)

The year 2021 was also for­ma­tive for secu­ri­ty tokens and their issuance.  As named in the pre­vi­ous blog arti­cle, the Elec­tron­ic Secu­ri­ties Act (eWpG) came into force in Ger­many on June 10, 2021. Since then, com­pa­nies have had the option of issu­ing bonds and fund units as elec­tron­ic securities.

A spe­cial case of elec­tron­ic secu­ri­ties are cryp­to secu­ri­ties, which have to be reg­is­tered in a cryp­to secu­ri­ties reg­is­ter, which only means that they have to be kept on a forgery-proof record­ing sys­tem, such as a blockchain. The eWpG enables com­pa­nies to issue debt secu­ri­ties and fund shares with­out a phys­i­cal doc­u­ment. It is stip­u­lat­ed that elec­tron­ic secu­ri­ties are treat­ed as things, so that own­ers enjoy the same pro­tec­tion of own­er­ship as in the case of secu­ri­ties cer­tifi­cates. This is a key point of the Ger­man gov­ern­men­t’s blockchain strat­e­gy and a first step towards a future in which all secu­ri­ties, includ­ing shares, are issued in the form of a pure­ly dig­i­tal secu­ri­ty and take advan­tage of the many effi­cien­cies of this form of representation.

 

All-Time-Highs

After the first all-time highs (ATH) at the begin­ning of the year, many oth­er cryp­tocur­ren­cies such as Ethereum (ETH), Binance Coin (BNB), Poly­gon (Mat­ic) or Solana (SOL) reached new highs in Novem­ber in addi­tion to Bit­coin (BTC). The top coins achieved an annu­al gain to date between about 400% (ETH) and 11,000% (Mat­ic).

In 2020, Bit­coin sur­passed US$ 20,000 and reached an all-time high of near­ly US$ 30,000. This year, Bit­coin exceed­ed expec­ta­tions and reached an ATH of near­ly US$ 70,000. Ethereum achieved a record price increase, from US$ 730 at the begin­ning of the year to US$ 4,870 in Novem­ber. By the end of the year, how­ev­er, these prices had fall­en again by 20–30% in some cas­es and have been mov­ing side­ways since then.

Under the point ATH, NFTs must also be dis­cussed again. While in the first two quar­ters of 2021 the mar­ket turned over US$ 2.5 bil­lion in total trans­ac­tions, the trad­ing vol­ume in quar­ter 3 was already US$ 10.67 bil­lion, lead­ing to an esti­mat­ed total year-to-date vol­ume of US$ 22 bil­lion, per data from Dap­pRadar. The NFT mar­ket is there­fore flourishing.

 

Chi­na Cryp­to Ban

After Chi­na already legal­ly banned cryp­tocur­ren­cy trad­ing in 2019 and closed cryp­to mines in the Sichuan region in June 2021, the nation­al gov­ern­ment announced a cryp­to ban in Sep­tem­ber, ban­ning and crim­i­nal­iz­ing all trans­ac­tions. This also affects for­eign ser­vices. At the same time, the Chi­nese gov­ern­ment empha­sized that from now on, in addi­tion to the Sichuan region, a nation­wide ban on cryp­tocur­ren­cy min­ing would apply.

The prices react­ed mod­er­ate­ly to this announce­ment. Bit­coin lost just 9%. One rea­son is that the announce­ment essen­tial­ly con­tained noth­ing new. Cryp­to trans­ac­tions were already banned in Chi­na before, and min­ing was already being fought before.

 

Bit­coin ETF

Octo­ber saw the debut of the ProShares Bit­coin Strat­e­gy ETF in the US. It took just two days for the fund to amass US$ 1 bil­lion, mak­ing it one of the busiest launch­es for an ETF ever. It is impor­tant to note that the ETF does not buy and own Bit­coin direct­ly, as com­pared to the ETF from Pur­pose Invest­ments Inc, but buys futures con­tracts, i.e. agree­ments to buy or sell the asset lat­er at an agreed price.

Direct­ly after this first Bit­coin ETF, two more, the Valkyrie Bit­coin Strat­e­gy ETF and the VanEck Bit­coin Strat­e­gy ETF, ETFs with Bit­coin futures as under­ly­ing were launched, which sug­gests that fur­ther ETFs track­ing cryp­to assets will follow.

 

WEB 3.0

2021 was also the year in which Web 3.0 went from buzz­word to main­stream. Web 3.0 aims to be the rad­i­cal counter-design to the Inter­net as we know it today. Web 3.0 is an evo­lu­tion of the Inter­net in which new social net­works, search engines, and mar­ket­places are emerg­ing that are not dom­i­nat­ed by cor­po­ra­tions. Instead, they are decen­tral­ized and based on blockchain and cryptocurrencies.

In Web 2.0, users cre­ate con­tent, and com­pa­nies con­trol the con­tent and mar­ket and mon­e­tize it. In Web 3.0, users should cre­ate, con­trol, as well as mon­e­tize their own content.

As a prime exam­ple, Polka­dot intro­duces a ful­ly decen­tral­ized Inter­net through Parachains and lead the push into the Web 3.0 era. Parachains are unique in the Polka­dot ecosys­tem, offer­ing a high­ly scal­able and respon­sive way to con­nect appli­ca­tions togeth­er. Instead of host­ing all of its projects on one blockchain, Polka­dot gives each project its own chain that runs in par­al­lel with the rest.

 

Meta­verse

At least since Face­book rebrand­ed itself as Meta in Octo­ber and Mark Zucker­berg empha­sized bring­ing the Meta­verse to life as an over­ar­ch­ing cor­po­rate strat­e­gy, it was clear that the Meta­verse would matter.

In the Meta­verse, which is a 3D vir­tu­al online envi­ron­ment, users will be able to store, play games, com­mu­ni­cate, and attend con­certs or meet­ings. Meta has announced plans to invest a lot of cap­i­tal here. And this has caused the prices of Meta­verse tokens and gam­ing coins to lit­er­al­ly explode. Meta­verse cryp­tocur­ren­cies are cryp­to projects that are devel­op­ing a meta­verse them­selves. This is because, in all like­li­hood, there will not be just one meta­verse, but many dif­fer­ent ones that can be con­nect­ed in dif­fer­ent ways.

Numer­ous Meta­verse and gam­ing tokens are based on the Ethereum blockchain — for exam­ple, MANA, SAND and ENJ. The Meta­verse token MANA is a token of the vir­tu­al real­i­ty plat­form Decen­tra­land. The devel­op­ers have cre­at­ed a “Sec­ond Life”-like envi­ron­ment in which play­ers can move freely via avatar. The Meta­verse coin MANA is used to buy and sell vir­tu­al prop­er­ties in the blockchain-based online world.