In his monthly column on cryptographic technology, Israeli serial entrepreneur Ariel Shapira discusses new technologies in cryptography, distributed finance (DeFi) and blockchain space, as well as their role in shaping the 21st century economy.
The post-slaughter consensus on the collapse of the cryptocurrency market among industry leaders, from Polygon co-founder Mihailo Bjelic to billionaire cryptocurrency investor Mark Cuban, is that bear markets are a healthy way to clean up the market. The latter even referred to a line used by Warren Buffet, a long-time cryptographer, to comment on the matter.
“Only when the flood goes out will you discover who has swum naked.
Of course, no one in the industry would object to the claim that bear markets eradicate the sick, or, in this case, the naked corrupt. But we will be wrong to leave the analysis as if more than $ 700 billion wiped out overnight is something we should continue to accept from cryptocurrencies. It is important to understand the key elements of this latest bull run that led to its massive collapse and how to promote a stable market in the future.
NFTs: Blessing or the Past?
We are five years away from the first massive cryptocurrency collapse caused by the infamous initial public offering (ICO) boom of 2017. As an industry still in its infancy, most of the projects that sprang up during this period were encouraging random currency investments that claim to be the next Bitcoin (BTC). The industry has developed considerably since then and this time other blockchain applications pushed for promotion.
So, what was the version of the last bull run of ICO cheating? Several factors were involved in the latest market upswing that pushed Bitcoin to nearly $ 70,000 per currency. But perhaps those who resembled their core – and yet often more ridiculous – and ICOs of previous years were inflexible tokens (NFT), a market that reached a whopping $ 25 billion in 2021. The industry may have peaked when NFTs from the Ape Yacht Club (BAYC) boredom museum sold for hundreds of thousands – and later millions – of dollars in Ether (ETH). Celebrities took part, as well as industry icons such as Adidas, Coachella and even the Super Bowl.
Connected: Outside of hype: NFTs can lead the way in transforming the business experience
Then everything went south when everyone realized that more than 80% of the NFT documents created for free on OpenSea were either fraud or deception. The money-grabbing culture was shown in full in person at the NFT.NYC event in late June.
That being said, it’s not like many people in cryptocurrency deny that the technology behind NFTs will redefine ownership and play a major role in Web3. But how can we move toward that future without riding the cloak of innovation?
That’s actually quite clear. The way forward for NFT and the technology behind it is to tie them to desirable physical assets and activate their ability to authenticate and secure products.
For example, companies in the luxury goods industry have explored the use of NFT as a means of combating the proliferation of counterfeit products. Projects such as the Aura Blockchain Consortium, led by the luxury hotspots LVMH and Prada Group, harness the power of NFT technology for product identification, supply chain transparency and data ownership for their tangible products.
It’s not necessarily about selling digital sneakers, but enhancing the branding and branding experience for their wealthy customers. The jewelry company Yvel, for example, launched a securities and trading platform linked to fine jewelry and precious metals as collateral – which effectively attaches NFT to tangible products instead of JPEGS.
Connected: NFT 2.0: The next generation NFT will be streamlined and reliable
Greener pastures Blockchain
Surviving the bear market is not only an urgent necessity for NFTs, but also for more basic cryptocurrencies – which, by the way, have not completely corrected for their propensity for fraud either. The fall of algorithmic stablecoins is likely to arouse serious hostility among freeholders and companies from systematically exploring how to encrypt traditional assets, but that does not mean that all hope is lost. The way forward here is, in fact, to focus on creating a product that meets a real, tangible market need – not unlike the solution to the NFT market collapse.
Connected: What can other algorithms of stablecoins learn from the collapse of Terra?
It’s an opinion we’ve all heard before. So, how do we get there this time? It all goes back to the basics of business. To thrive, start-ups need to find problems that they are trying to solve, and that problem cannot simply be that the founder is not rich enough. So, what are the sectors that a significant currency can focus on?
Minimizing environmental impact and operating sustainably has long been a white whale for cryptocurrency and blockchain projects. Repeated criticism of cryptocurrencies and the blockchain as a whole is that they cause serious damage to the environment due to emissions caused by token mining and other cryptographic by-products. As things stand now, the majority of projects have failed to shake off this prejudice, but new developments can help bring about a significant change in this narrative.
In the wider business world, sustainability has quickly become a core value for modern companies to implement. While many of these companies’ commitments are either superficial or involve vague promises to reduce carbon emissions by a given year, there are more tangible steps that cryptocurrencies can borrow from. One such development has been the adoption of carbon-neutral companies, which, although imperfect, are a valuable way for companies to offset their emissions and ecological footprints.
Connected: Green finance needs a free carbon market that works
While there have been large blockchains leading the charge on environmentally friendly activities, such as Cardano and Algorand, another way of encouraging sustainable development is to allow cryptocurrency holders the opportunity to participate in the carbon market. Projects that offer cryptocurrency-specific carbon units or tokens related to external carbon credits, such as CC Token, which opens up access to investments in the carbon loan future for companies and individuals, provide investors with tangible value. Others are working to make the second largest blockchain by market value, Ethereum, more environmentally friendly.
The cryptocurrency and blockchain industry has been defined by its terrible nature and revolutionary ambition. While every new industry faces instability, downturns and obstacles, the latest bear market should send a clear signal to projects: It’s all about finding problems that need to be solved and actually using your product to solve them.
This article does not include investment advice or advice. Every investment and business move involves risk and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the authors only and do not necessarily reflect or represent the views and opinions of the Cointelegraph.
Ariel Shapira is a father, entrepreneur, lecturer and cyclist and works as the founder and CEO of Social-Wisdom, a consulting firm that works with Israeli start-ups and helps them establish links with the international market.
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