Cryptocurrencies are an emerging asset class with many new innovations. Beyond blue-chips like Bitcoin and Ethereum, many innovations within the cryptocurrency space change how we think and approach finance. Learning how to get involved with cryptocurrencies can seem intimidating for beginners. Thankfully, many communities and resources make the process accessible for everyone.
The ability to use blockchain technology continues to evolve at a rapid pace. Trends in the cryptocurrency asset class can quickly capture billions of dollars as innovations empower people to increase their yields. New discoveries in cryptocurrency also help solidify the asset class, increasing resilience to market drawdowns.
Let’s explore six emerging trends with the potential to advance the crypto asset class.
1. Decentralized Finance
Decentralized finance (DeFi) encompasses the financial activities in cryptocurrency ecosystems. DeFi allows regular people to participate in numerous financial markets without the help of a financial intermediary. The system uses smart contracts to automatically execute transactions as long as certain conditions are met.
One of the most common DeFi activities is providing liquidity to a liquidity pool. Users can supply two assets of equal value to a pool, giving other people liquidity to execute their trades. In exchange for providing these assets to the pool, users receive a portion of the transaction fees.
In addition, users may reap other potential rewards depending on the platform. Becoming a liquidity provider is an excellent way to make money without involving a financial intermediary.
2. Multi-Chain Bridges
The cryptocurrency world features many different blockchains, each with its own innovations and specializations. The blockchain best for you depends on your goals and how you want to use your money.
One of the most promising new trends in cryptocurrency is making it easy for people to access all these blockchains. Moving from blockchain to blockchain requires using a “bridge” to move your assets over. Synapse Protocol and Ren are examples of projects that are working to create interoperability between different blockchains.
Multi-chain bridges make it incredibly easy to transfer crypto from any blockchain for use at a BTC machine. The ability to seamlessly move funds across blockchains allows users to take advantage of the best yields. You can then deploy your assets in the most profitable areas.
3. Stable Coin Innovations
Currently, stablecoins are cryptocurrencies that peg their value to the US dollar or another nation’s dollar. Stablecoins maintain their peg to the dollar value by using fiat currency to back every minted stablecoin. People use stablecoins in cryptocurrency ecosystems when they no longer want exposure to a particular asset’s volatility. At the same time, they wish to keep the value of their dollars stable.
One of the newest innovations in stablecoins is using yield-bearing assets to maintain the peg at a dollar value. MIM is a stablecoin that allows you to create “dollars” by borrowing against your yield-bearing assets. The assets you use as collateral are constantly increasing in value. As such, MIM can maintain its peg without having a reserve of fiat dollars.
Gaming within cryptocurrency ecosystems is a trend slowly beginning to take off. Blockchain technology makes it easy to assign ownership to in-game objects, allowing gaming communities to allocate real-world value to their in-game assets. Gamers can now own land and other high-value items within the universe of their favourite video game.
The Sandbox is an excellent example of an online gaming community where players can own different plots of land. Even Snoop Dogg owns a piece of land where users can attend digital concerts if they meet the appropriate access requirements. In the future, gamers can sell their in-game assets and redeem them for cash at a BTC machine.
5. DAOs (Decentralized Autonomous Organizations)
Decentralized Autonomous Organizations (DAOs) are organizations guided by an ethos encoded in a smart contract. The philosophy, financial activity, and voting history of a DAO reside on the blockchain for everyone to review. DAOs can vote to fund different projects that address social, economic, or legal issues. Community members of a DAO can vote on a proposal using the tokens they hold to represent voting power.
Since all activities are conducted on the blockchain, it’s easy to discover fraud or malicious behaviour. DAOs are collections of technologically inclined individuals who rally around a shared vision. In the coming years, look for new innovations and products funded by DAOs.
Similar to the Airdrop function on your iPhone, airdrops occur in cryptocurrency ecosystems to reward community members. Instead of airdropping a file or image, developers will airdrop some tokens to their community as a way of fuelling engagement.
To receive an airdrop, users usually have to meet certain conditions. For example, you may receive an airdrop based on your trading activity or being an active user during a specified time. Uniswap is an example of an established cryptocurrency project that started out by airdropping tokens to Ethereum users.