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Cryptocurrency: Redefining the Future of Finance

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Cryptocurrency: Redefining the Future of Finance

Cryptocurrency is a thriving ecosystem, quietly encroaching on conventional finance’s territory.

Over the last five years, Bitcoin users and transactions have averaged a growth rate of nearly 60% per year. Similarly, private and public investors have deepened their commitment to cryptocurrencies including Ethereum, Ripple (XRP), and Stellar—and a number of others across the industry.

Today’s infographic unpacks a cross-section of cryptocurrencies, stakeholders, and core applications across a sector that’s continuing to grow in importance.

The Evolution of Cryptocurrency

Cryptocurrency has erupted into a $200 billion industry, sparking a wave of global disruption.

At the heart of cryptocurrency is a rich history of innovation. It extends back to the 1980s with advances in the field of cryptography—eventually leading to the technology that forms encryption techniques designed to protect the network.

Since then, a series of key events have continued to shape the sector.

Year
Event
2009Satoshi Nakamoto mines the first Bitcoin on a decentralized network
2011Litecoin launches
2012Ripple is founded
2013The price of a single Bitcoin reaches $1,000
2015Ethereum launches, introducing smart contracts into the crypto ecosystem
2017Over 1,000 cryptocurrencies listed
2017Bitcoin's price rockets past $10,000, reaching a peak just shy of $20,000
2018EOS offers a blockchain-based infrastructure for decentralized apps (DApps)

Now, there are over 5,000 cryptocurrencies in circulation, with many built on innovative applications and use-cases as the ecosystem rapidly evolves.

The Value of Cryptocurrencies

Today, crypto offers cutting-edge advances that are diverse and transformative. In addition, it could also be considered an investment in tomorrow’s financial system—decentralized finance (DeFi).

DeFi is an emerging alternative financial system that is built on a public blockchain, which enables greater accessibility because anyone has the ability to connect to it. Additionally, transactions are publicly visible, enabling greater transparency across the system.

Here is a refresher on some of the practical advantages being applied across cryptocurrencies.

Use CasesNameDescription
PaymentsBitcoin
Ripple (XRP)
Stellar
Dash
Used for purchasing goods without the need of a trusted third-party
Value Storage
Bitcoin
Litecoin
As the total supply of many cryptocurrencies are limited, this scarcity influences their value
Stablecoins
DAI
USDC
GeminiUSD
Digital money that is typically pegged to a currency or commodity, such as gold
Privacy Monero
Zcash
Cryptography, the technology behind crypto, can enable the anonymity of its owners
Digital Ownership
Bitcoin
Ripple (XRP)
Stellar
Can empower those without access to a bank to enter the financial system
Digital Gold
BitcoinBitcoin shares similar attributes to money: a medium of exchange, unit of account, and store of value
Decentralized Apps (DApps)
EOS
Tezos
Ethereum (ETH)
Enable individuals to create apps without a central authority, directly connecting the user and creator

The Key Players in the Crypto Landscape

The cryptocurrency ecosystem is growing rapidly. Worldwide, private and public actors recognize its potential across many domains.

Who are the primary participants in the field today?

Private Actors

  1. Institutional Investors
    Harvard Endowment Fund, Crypto Hedge Funds
  2. Cryptocurrency Exchanges
    Coinbase, Bitstamp
  3. Banks & Finance
    J.P. Morgan, Fidelity Investments, Swissquote
  4. Tech
    IBM, Microsoft
  5. Power & Utilities
    RWE

Public Actors

  1. Governments
    Venezuela
  2. Central Banks
    China, Sweden, Saudi Arabia
  3. Organizations
    Crypto Valley Association, Global Digital Finance

The rising popularity of crypto is bolstering new policies and adoption, as evidenced by the many players trying to break into the space.

The Big Picture:

As crypto continues to gain momentum, its longer-term implications will come into focus. Crucially, its cryptographic foundation sets the stage for future advances in finance.

  1. Privacy
    Anonymized transactions protect users data through cryptographic techniques
  2. Access
    Providing a new financial model for 1.7B unbanked individuals around the world
  3. Efficiency
    Steep reductions in settlement time and efficacy could save consumers $16 billion annually
  4. Security
    Providing immutable, traceable records of security-rich transactional networks
  5. Programmable Money
    Smart contracts could drastically eliminate manual and administrative work⁠— ultimately bypassing them altogether

Rooted in decentralized and autonomous systems, cryptocurrencies are creating second-order effects in the financial world. Ultimately, cryptocurrencies are helping to transform finance as we know it—unlocking countless investment opportunities across the global economy.

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Technology

Visualized: The State of Central Bank Digital Currencies

Central bank digital currencies are coming, but progress varies greatly from country to country. View the infographic to learn more.

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Visualized: The State of Central Bank Digital Currencies

Central banks around the world are getting involved in digital currencies, but some are further ahead than others.

In this map, we used data from the Atlantic Council’s Currency Tracker to visualize the state of each central banks’ digital currency effort.

Digital Currency – The Basics

Digital currencies have been around since the 1980s, but didn’t become widely popular until the launch of Bitcoin in 2009. Today, there are thousands of digital currencies in existence, also referred to as “cryptocurrencies”.

A defining feature of cryptocurrencies is that they are based on a blockchain ledger. Blockchains can be either decentralized or centralized, but the most known cryptocurrencies today (Bitcoin, Ethereum, etc.) tend to be decentralized in nature. This makes transfers and payments very difficult to trace because there is no single entity with full control.

Government-issued digital currencies, on the other hand, will be controlled by a central bank and are likely to be easily trackable. They would have the same value as the local cash currency, but instead issued digitally with no physical form.

Central Bank Digital Currencies Worldwide

105 countries are currently exploring centralized digital currencies. Together, they represent 95% of global GDP. The table below lists the data used in the infographic.

CountryStatusUse Case
NigeriaLaunchedRetail
The BahamasLaunchedRetail
JamaicaLaunchedRetail
AnguilaLaunchedRetail
Saint Kitts and NevisLaunchedRetail
Antigua and BarbudaLaunchedRetail
MontserratLaunchedRetail
DominicaLaunchedRetail
Saint LuciaLaunchedRetail
Saint Vincent and the GrenadinesLaunchedRetail
GrenadaLaunchedRetail
SwedenPilotRetail
LithuaniaPilotRetail
UkrainePilotUndecided
KazakhstanPilotRetail
RussiaPilotRetail
ChinaPilotBoth
ThailandPilotBoth
Hong KongPilotBoth
South KoreaPilotRetail
Saudi ArabiaPilotWholesale
United Arab EmiratesPilotWholesale
SingaporePilotWholesale
MalaysiaPilotWholesale
South AfricaPilotBoth
CanadaDevelopmentBoth
BelizeDevelopmentUndecided
HaitiDevelopmentBoth
VenezuelaDevelopmentBoth
BrazilDevelopmentRetail
TurkeyDevelopmentRetail
IranDevelopmentRetail
BahrainDevelopmentWholesale
IndiaDevelopmentBoth
MauritiusDevelopmentBoth
BhutanDevelopmentBoth
CambodiaDevelopmentRetail
IndonesiaDevelopmentBoth
PalauDevelopmentBoth
AustraliaDevelopmentBoth
JapanDevelopmentBoth
SpainDevelopmentRetail
FranceDevelopmentBoth
NetherlandsDevelopmentRetail
SwitzerlandDevelopmentWholesale
ItalyDevelopmentUndecided
GermanyDevelopmentUndecided
EstoniaDevelopmentRetail
LebanonDevelopmentRetail
IsraelDevelopmentRetail
Euro AreaDevelopmentBoth
United StatesResearchRetail
MexicoResearchRetail
GuatemalaResearchUndecided
HondurasResearchUndecided
Trinidad andd TobagoResearchUndecided
ColombiaResearchUndecided
PeruResearchUndecided
ParaguayResearchUndecided
ChileResearchRetail
IcelandResearchRetail
UKResearchBoth
MoroccoResearchRetail
GhanaResearchRetail
NamibiaResearchUndecided
EswatiniResearchBoth
MadagastarResearchRetail
ZimbabweResearchUndecided
ZambiaResearchUndecided
TanzaniaResearchUndecided
RwandaResearchUndecided
UgandaResearchUndecided
KenyaResearchRetail
TunisiaResearchWholesale
OmanResearchUndecided
KuwaitResearchRetail
JordanResearchUndecided
GeorgiaResearchRetail
BelarusResearchUndecided
NorwayResearchRetail
Czech RepublichResearchUndecided
PakistanResearchRetail
NepalResearchUndecided
BangladeshResearchUndecided
MyanmarResearchUndecided
LaosResearchBoth
VietnamResearchUndecided
MacauResearchUndecided
TaiwanResearchBoth
PhilippinesResearchRetail
New ZealandResearchRetail
VanuatuResearchUndecided
FijiResearchUndecided
TongaResearchUndecided
PalestineResearchRetail
JordanResearchUndecided
AustriaResearchWholesale
HungaryResearchRetail
BermudaInactiveUndecided
Sint MaartenInactiveRetail
CuraçaoInactiveRetail
ArgentinaInactiveUndecided
UruguayInactiveRetail
DenmarkInactiveRetail
AzerbaijanInactiveUndecided
EgyptInactiveUndecided
North KoreaInactiveUndecided
FinlandInactiveRetail
EcuadorCancelledRetail
SenegalCancelledRetail

When aggregated, we can see that the majority of countries are in the research stage.

central bank digital currencies by status

We’ve also divided the map by region to make viewing easier.

Africa

Africa digital currencies

Asia

Asia digital currencies

Europe

Europe digital currencies

Middle East

Middle East digital currencies

South America

South America digital currencies

North America

North American digital currencies

What are the Benefits?

A major benefit of government-issued digital currencies is that they can improve access for underbanked people.

This is not a huge issue in developed countries like the U.S., but many people in developing nations have no access to banks and other financial services (hence the term underbanked). As the number of internet users continues to climb, digital currencies represent a sound solution.

To learn more about this topic, visit this article from Global Finance, which lists the world’s most underbanked countries in 2021.

The 9%

Just 9% of countries have launched a digital currency to date.

This includes Nigeria, which became the first African country to do so in October 2021. Half of the country’s 200 million population is believed to have no access to bank accounts.

Adoption of the eNaira (the digital version of the naira) has so far been relatively sluggish. The eNaira app has accumulated 700,000 downloads as of April 2022. That’s equal to 0.35% of the population, though not all of the downloads are users in Nigeria.

Conversely, 33.4 million Nigerians were reported to be trading or owning crypto assets, despite the Central Bank of Nigeria’s attempts to restrict usage.

Status in the U.S.

America’s central bank, the Federal Reserve, has not decided on whether it will implement a central bank digital currency (CBDC).

Our key focus is on whether and how a CBDC could improve on an already safe and efficient U.S. domestic payments system.
– Federal Reserve

To learn more, check out the Federal Reserve’s January 2022 paper on the pros and cons of CBDCs.

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Markets

How the Top Cryptocurrencies Performed in 2021

Cryptocurrencies had a breakout year in 2021, providing plenty of volatility and strong returns across crypto’s various sectors.

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crypto prices 2021

The Returns of Top Cryptocurrencies in 2021

2021 saw the crypto markets boom and mature, with different sectors flourishing and largely outperforming the market leader, bitcoin.

While bitcoin only managed to return 59.8% last year, the crypto sector’s total market cap grew by 187.5%, with many of the top coins offering four and even five-digit percentage returns.

2021 Crypto Market Roundup

Last year wasn’t just a breakout year for crypto in terms of returns, but also the growing infrastructure’s maturity and resulting decorrelation of individual crypto industries and coins.

Crypto’s infrastructure has developed significantly, and there are now many more onramps for people to buy altcoins that don’t require purchasing and using bitcoin in the process. As a result, many cryptocurrency prices were more dictated by the value and functionality of their protocol and applications rather than their correlation to bitcoin.

CryptocurrencyCategory2021 Returns
BitcoinCryptocurrency59.8%
EthereumSmart Contract Platform399.2%
Binance CoinExchange Token1,268.9%
SolanaSmart Contract Platform11,177.8%
CardanoSmart Contract Platform621.3%
XRPCryptocurrency277.8%
TerraSmart Contract Platform12,967.3%
AvalancheSmart Contract Platform3,334.8%
PolkadotSmart Contract Platform187.9%
DogecoinMeme Coin3,546.0%

Sources: TradingView, Binance, Uniswap, FTX, Bittrex

Bitcoin wasn’t the only cryptocurrency that didn’t manage to reach triple-digit returns in 2021. Litecoin and Bitcoin Cash also provided meagre double-digit percentage returns, as payment-focused cryptocurrencies were largely ignored for projects with smart contract capabilities.

Other older projects like Stellar Lumens (109%) and XRP (278%) provided triple-digit returns, with Cardano (621%) being the best performer of the old guard despite not managing to ship its smart contract functionality last year.

The Rise of the Ethereum Competitors

Ethereum greatly outpaced bitcoin in 2021, returning 399.2% as the popularity boom of NFTs and creation of DeFi 2.0 protocols like Olympus (OHM) expanded possible use-cases.

But with the rise of network activity, a 50% increase in transfers in 2021, Ethereum gas fees surged. From minimums of $20 for a single transaction, to NFT mint prices starting around $40 and going into the hundreds on congested network days, crypto’s retail crowd migrated to other smart contract platforms with lower fees.

Alternative budding smart contract platforms like Solana (11,178%), Avalanche (3,335%), and Fantom (13,207%) all had 4-5 digit percentage returns, as these protocols built out their own decentralized finance ecosystems and NFT markets.

With Ethereum set to merge onto the beacon chain this year, which uses proof of stake instead of proof of work, we’ll see if 2022 brings lower gas fees and retail’s return to Ethereum if the merge is successful.

Dog Coins Meme their Way to the Top

While many new cryptocurrencies with strong functionality and unique use-cases were rewarded with strong returns, it was memes that powered the greatest returns in cryptocurrencies this past year.

Dogecoin’s surge after Elon Musk’s “adoption” saw many other dog coins follow, with SHIB benefitting the most and returning an astounding 19.85 million percent.

But ever since Dogecoin’s run from $0.07 to a high of $0.74 in Q2 of last year, the original meme coin’s price has slowly bled -77% down to $0.17 at the time of writing. After the roller coaster ride of last year, 2022 started with a positive catalyst for Dogecoin holders as Elon Musk announced DOGE can be used to purchase Tesla merchandise.

Gamifying the Crypto Industry

The intersection between crypto, games, and the metaverse became more than just a pipe dream in 2021. Axie Infinity was the first crypto native game to successfully establish a play to earn structure that combines its native token (AXS) and in-game NFTs, becoming a sensation and source of income for many in the Philippines.

Other crypto gaming projects like Defi Kingdoms are putting recognizable game interfaces on decentralized finance applications, with the decentralized exchange becoming the town’s “marketplace” and yield farms being the “gardens” where yield is harvested. This fantasy aesthetic is more than just a new coat of paint, as the project with $1.04B of total value locked is developing an underlying play-to-earn game.

Along with gamification, 2021 saw crypto native and non-crypto developers put a big emphasis on the digital worlds or metaverses users will inhabit. Facebook’s name change to Meta resulted in the two prominent metaverse projects The Sandbox (SAND) and Decentraland (MANA) surge another few hundred percent to finish off the year at 16,261% and 4,104% returns respectively.

With so many eyes on the crypto sector after the 2021’s breakout year, we’ll see how developing U.S. regulation and changing macro conditions affect cryptocurrencies in 2022.

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