Here’re Some Things You Should Know about the Crypto Sector in 2020
2020 is a meaningful and significant year for the crypto space. As the price of Bitcoin skyrocketed and reached a new all-time high, this emerging industry finally began to receive mainstream attention. At the same time, the decentralized financial applications on Ethereum have also attracted many users to trade, loan, and borrow crypto assets, thereby pushing the Ethereum network to its limit. New projects attempt to achieve decentralization and autonomous governance in various ways.
From the following charts, we can get a clearer picture of what happened in the sector in 2020.
At the beginning of this year, the total trading volume of decentralized exchanges (DEXes) was not too high. However, by the end of summer, the volume had reached levels that can only be seen on centralized cryptocurrency exchanges. Some people believe that there are many reasons why DEXes cannot compete with CEXes in terms of trading volume. But now the data indicates that DEXes can fully adapt to the development of the crypto market.
It should be noted that the surge in DEXes’ trading volume in 2020 is actually due to the launch of a large number of new DeFi projects. It seems that everyone overnight wants to buy and use these new DeFi tokens. More importantly, the market infrastructure is now ready to meet market demand.
More broadly, it is feasible to adopt other crypto trading means in crypto ecosystem with financial infrastructure developing better than before. In fact, trading assets in a trustless, non-custodial manner has always been the core promise of crypto technology, and the era of decentralized exchanges has come to people’s sights.
Bitcoin and Ethereum: gas fees
Earlier the year, gas fees of Bitcoin and Ethereum reach hundreds of thousands of dollars, and sometimes even millions of dollars per week. Now the market seems to have entered a new normal, especially after the DeFi boom in the summer.
The DeFi boom drives Ethereum transaction fee to soar this summer, while Bitcoin network transaction fee did not fluctuate significantly. Nevertheless, people seem to be more willing to spend money on Bitcoin transactions in terms of trading volume even though fees are climbing due to the limited throughput on-chain.
There has been controversy in the cryptocurrency industry as to whether higher gas fees are good or bad. On the one hand, high gas fees always have a slight negative effect in that people generally believe that networks should not be expensive to use, otherwise it is easy to exclude most people and violates the original promise of inclusivity in cryptocurrency market as well.
On the other hand, high gas fees show that there is greater demand for using the network, even if the network may not be able to meet demands while keeping price acceptable for a certain period. If infrastructure upgrades can reduce transaction fees, it will be possible to carry out more activities.
Bitcoin and Ethereum addresses
As far as Bitcoin and Ethereum users are concerned, it appears that more and more people are willing to pay to transact. Despite the high prices, more people are joining and becoming active. As shown in the chart above, the number of daily active ETH addresses this year has doubled from 200,000 to 400,000. Bitcoin addresses have also increased from about 700,000 to nearly one million.
Many people are not satisfied with the services provided by the traditional financial systems. They usually hope to obtain higher returns, so they will actively look for innovative financial systems that can achieve this goal.
DeFi market cap
Decentralized finance is a “darling” of today’s cryptocurrency industry and developers. Many valuable projects launched in 2020 come from this emerging sector. Although more people are joining in DeFi market, the overall scale is still tiny.
Judging from the current overall market cap of DeFi, it seems unlikely to arouse the interest of the crypto community, but in fact, the community is concerned about this sector. Undoubtedly, it is a positive indicator for future development to gain attraction as it shows that many technologists are excited about the potential of the growing DeFi industry.
Decentralized Autonomous Organization (DAO)
The concept of DAO has been in crypto sector for some time, but 2020 should be the first year that this concept has flourished. According to the data, the total diluted market cap of the top 12 new DAOs this year reaches approximately $14 billion.
DAOs are really interesting not just because they are valuable now, but more importantly because DAOs have become a new type of institution. People need to gather online (while hoping to remain anonymous) to discuss and vote to change the software.
These new DAOs have fees or options to collect fees, and they have clear monetization plans. In 2018 and 2019, the most talked a lot about the thing that crypto assets are not backed by fundamentals, thus they are difficult to price. But now, if you follow some of the top DAOs, you will find that they all have strong fundamentals.
DAOs are protocols, that’s true, but they’re not just protocols. They’ve been democratized and governed by their communities. And those people have expectations, they vote, and they own it. Most of them cooperate and develop systems with people they’ve never met. These systems hold and move billions of dollars of value.
In the past, people always wanted to entitle a name to the community-owned and operated software. DAO can be the word for that thing and represent a new organizational structure that currently exists as well.