The onset of the COVID-19 pandemic in early 2020 left no facet of life untouched, and the crypto world was no exception. As the world grappled with the crisis, the cryptocurrency market suffered a significant blow, experiencing a sharp decline in March of that year. Bitcoin saw a staggering 52% loss in its dollar value in a single day, while Ether plummeted by 43%, sending shockwaves through the decentralized finance (DeFi) sector.
However, the pandemic-induced lockdowns had a slower yet profound impact on the crypto industry. With people confined to their homes, screen time surged, leading to a surge in interest in cryptocurrency and subsequent market capitalizations. This surge in interest fueled the rapid development and implementation of emerging technologies, marking the beginning of the DeFi revolution.
The groundwork for decentralized finance was laid in 2017 with the introduction of smart contracts on the Ethereum blockchain. Early market leaders like MakerDAO and Compound Finance paved the way for innovations such as yield farming, also known as liquidity mining.
This method, introduced by Compound Finance in June 2020, involved shifting crypto assets to maximize interest, fees, and rewards, becoming a common practice within the DeFi ecosystem. Additionally, Compound Finance pioneered decentralization with its governance token COMP, enabling users to directly participate in DAO management.
By the end of 2020, the DeFi landscape had undergone significant decentralization, with decentralized autonomous organizations (DAOs) gaining momentum. These DAOs, which operate without hierarchical management, mirrored Bitcoin's ethos of eliminating intermediaries in transactions.
The third Bitcoin halving, occurring just before the DeFi Summer of 2020, further propelled the cryptocurrency's upward trajectory. With mining rewards reduced by 50%, Bitcoin's scarcity increased, driving up demand and prices.
In 2021, nonfungible tokens (NFTs) emerged as a groundbreaking trend, marking the year of their explosive growth. Originating from gaming, collectibles, and artwork, NFTs found diverse applications in ticketing, licensing, gaming, and identity verification. Early projects like CryptoKitties and CryptoPunks laid the groundwork for the NFT boom witnessed in 2021, which saw unprecedented user growth and revenue generation.
Despite a decline in NFT trading volume in 2022, revenue from NFTs continued to soar, with projections indicating further growth in the coming years. Platforms like OpenSea remained dominant in the NFT marketplace, underscoring the enduring appeal of digital collectibles and asset tokenization.
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