The world of blockchain is changing fast as more people become involved in the community and begin investing in crypto-currencies. Below we take a quick run through of some of the major trends that are currently driving community development around blockchain in 2021.
People are quite rightly wondering whether novelty coins are a fad that will pass, or whether the “meme-ification” of crypto-currencies is here to stay. As anyone can mint a new crypto currency on the chain, this has led to hundreds of “fun” coins popping up. While this fact itself is immaterial, some, such as the extremely popular Dogecoin, have attracted major investment and are currently outperforming their more serious rivals. Fans of this trend argue that coins like Dogecoin are as valid as any other and deserve the place they occupy in the stock market. Others point to the fact that, due to the nature of these coins and the fact that they derive their value from a novelty factor, rather than any tangible base like fiat currency or mining, they are extremely volatile and prone to large fluctuations in their price.
As more people invest in coins like Doge, this volatility ends up impacting the wider crypto market, and this is where analysts take issue with them. Elon Musk drew widespread criticism over the course of 2021 for being perceived to irresponsibly modulate the price of Dogecoin by posting viral tweets in support of the novelty currency. It is too early to say whether novelty coins will fizzle out, experience some kind of regulation, or go on to impact the markets. What we do know is that serious investors who want Bitcoin, Etherium and other established coins to garner wider public acceptance do not look too kindly on the rise of the novelty coin.
NFTs (Non-Fungible Tokens)
Perhaps the best known new trend in the world of Blockchain is that of non-fungible tokens. They’ve caused quite a stir, not all of it positive. Criticisms range from the risk of fraud, to the possibility that the feverish speculation around them may lead to a new tech bubble crash. Recently, a fake Banksy NFT was sold to an investor for $200,000, highlighting the need for more checks and balances in the minting and retail process that surrounds NFTs. People also question whether the valuations of NFTs are realistic. Should they prove not to be, this could precipitate a recession in this corner of the market, echoing the dot com crash of the early 2000s. In spite of these concerns, NFTs are proving to be extremely popular with artists and musicians who are able to re-inject value into their creative products in a world where everything can be streamed, downloaded and copied ad-nauseum.
Beeple became one of the world’s most valuable artists overnight when he sold an NFT of his entire art collection for $69 million. Elsewhere, musicians such as Kings of Leon and Grimez are experimenting with the release of NFT albums with special perks that they hope will encourage people to pay a premium for their music. The flexibility of NFTs means things people didn’t think you could put a price-tag on have been sold, including the source-code for the internet, the first ever Tweet, and classic NBA trick-shot footage. It will be some time before the dust settles and we see how, and in what ways, NFTs will go on to impact these industries into the future.
Many of the major crypto-currencies generate their base value through a process referred to as mining. In this process, high powered computers are used to crack sophisticated algorithms. The energy and time put into this complex computing process serves as the base of the currency’s value. The problem with this method is that it is extremely energy intensive. In February, the BBC broke that Bitcoin mining alone consumes more electricity than the country of Argentina. At a time when all sectors and industries are being motivated to consider their environmental impact, this is a significant blow to the crypto-currency project.
In many parts of the world, energy for crypto-mining is derived from fossil fuel sources such as coal and gas, further impacting the green credentials of Etherium, Bitcoin and the like. In the summer, electric car company Tesla briefly began accepting Bitcoin as a payment option before, in a sudden U-turn, removing this option citing environmental concerns over the currency. In this climate, we’re seeing special interest placed on lower-power coins, such as Cardano, that use a fraction of the energy of Bitcoin. Still more novel are currencies like Solarcoin, that derive their value based on hours of solar energy produced.