The cryptocurrency landscape is continuously changing. Very visible is the all-time high of bitcoin. Another development that caught the attention of media is the breakthrough of non-fungible tokens for selling unique art items using ethereum smart contracts based on the ERC-721 or ERC-1155 standard. The sales of the first tweet by Twitter founder Jack Dorsey – “just setting up my twttr” published on March 21, 2006 – for 2.9 million USD caught the public’s imagination.
What has further changed in the cryptocurrency landscape from the previous hype cycle to the current one? First of all, political scrutiny has led to increased regulation in the US, EU, China, and other major crypto markets. Next, big business from Facebook to Tesla has embraced the crypto space, one way or the other. Below a few of the developments around alternative blockchains.
The new hype cycle led to new blockchain network congestions and exploding transaction costs, called “gas.” This put a brake on low-value transactions like the successful ICURY airdrops on the ethereum network. The evolution of ethereum from a Proof Of Work to a Proof Of Stake protocol is a multi-year project and goes too slow to resolve congestion and gas price explosions. Let alone resolving the obscene electricity use associated with bitcoin and ethereum.
What can we learn from the current phase of cryptos other than that bitcoin, altcoins, and stablecoins have carved out their niches in the financial market? On the one hand, the number of successful blockchain applications outside this niche seems to be very sparse. On the other hand, the pace of innovation within this fintech niche is very high.
Let’s discuss a few of the newer, successful altcoins that became prominent on coinmarketcap.com to understand the ideas behind them.
Cardano is set up by former Ethereum developers and reached a market cap of around 40 billion USD. It has started from the beginning as a smart-contract platform like Ethereum. The main difference is that it embraces Proof-Of-Stake from the start and is therefore far more efficient and less energy-consuming. The latter is the main and unsustainable drawback of bitcoin and any other Proof-Of-Work protocol. Currently, Cardano is, like Ethereum, starting to support the creation of non-native tokens. Till today, most altcoins are on Ethereum’s network, and Cardano still has to prove itself. Chainlink seems to be similar to Cardano but generates less traction. Also, Avalanche and Algorand focus on replacing Ethereum with a higher-performance transaction network supporting smart contracts.
Not new, but in the midst of an inspiring transformation, is IOTA. The blockchain-less distributed ledger has included support of smart contracts and tokenization on its roadmap. Better, late than never. IOTA’s directed acyclic graph technology resulted in a hyperefficient lightweight protocol with near-zero transaction costs. It thus resolved the sustainability issues related to Proof-Of-Work-based distributed ledger technologies.
With a current market cap of 32 billion USD, Polkadot is devised as a cross-platform configurable blockchain that builds bridges between other blockchains and technologies. For example, to cross-connect Ethereum’s world of smart contracts, with bitcoin’s store of value space. Polkadot is very much a tech project that directs towards building a successful open-source platform. Convincing use cases are yet to see the light. Also, Cosmos has a similar aim with building the internet of blockchains.
Uniswap, in the meantime, has become the leading decentralized platform for the exchange of ethereum-based tokens. It’s a leader in the so-called Decentralized Finance (DeFi) space as it is now processing around 1 billion USD in value transactions per day! This and other decentralized exchanges are plagued by Ethereum’s high gas prices, which can be up to 10 USD. Banks do better!
Wrapped Bitcoin is an Ethereum-based token that wraps bitcoin and keeps bitcoins in custody. Basically, it is tokenizing tokens. The advantage is that Ethereum smart contracts functionalities become available. And lower transaction fees than on the bitcoin network are applicable, although it thus still suffers from the increase in Ethereum gas fees. This same principle can be applied to any token or real-world value object. The tokenization of everything.
Theta token is a decentralized blockchain to reward users that provide capacity for streaming video. It appeals to the success of peer-to-peer video and audio sharing via tor-networks. But, it probably suffers from the same legal hurdles: illegal downloads. Filecoin is a bit similar concept but then focused on sharing file storage capacity in return for tokens.
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Founder and CEO of Icecat NV. Investor. Ph.D.
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