The COVID-19 pandemic wreaked havoc on human lives and the world economy when it broke out in early 2020. The crypto world was battered as well, with the cryptocurrency market plummeting in March of that year. Bitcoin lost 52% of its dollar value in a day and Ether lost 43%, shaking up decentralized finance as it fell. 

The lockdown had a slower but more profound effect on crypto. As the world became housebound, screen time rose steadily, and interest in cryptocurrency soared, along with market capitalizations. Soon, emerging technologies were undergoing development and implementation at a pace previously unseen.

DeFi goes to the moon

The first steps in decentralized finance (DeFi) were taken in 2017 with the development of smart contracts on the Ethereum blockchain. MakerDAO (DAI) and Compound Finance (COMP) were early market leaders. In June 2020, Compound Finance introduced yield farming, also known as liquidity mining, a method of arbitrage that shifted crypto assets to attain the highest interest, fees and rewards. It is now common practice.

Related: Whales profit mightily from lucrative DeFi yield farming: Data shows

Compound Finance was also a pioneer in decentralization. COMP was also the first governance token, enabling users to participate directly in the management of the DAO. By the end of the year, decentralization was well underway at many DAOs.

EXPLORE THE HISTORY OF CRYPTO

A DAO, or Decentralized Autonomous Organization, is an idea for a firm that is ruled with enforced digital rules and without hierarchical management. DAO as an idea is very close to Bitcoin in its attempt to get rid of all middlemen in transactions.

By September 2020, DeFi collateral levels had jumped from $700 million at the beginning of the year to $9 billion. Bloomberg wrote:

“A cryptocurrency mania known as decentralized finance has helped to turn digital currencies into this year’s best-performing asset by far.”

Decentralized exchanges (DEXs) are another type of DAO that already existed by 2020 — OasisDEX was launched in 2016. Uniswap appeared in 2018. A DEX allows users to trade crypto assets peer-to-peer (P2P), that is, without an intermediary. DEXs, in turn, gave rise to automatic market makers, which take advantage of yield farming.

Related: The trouble with automated market makers

The result of all this activity was a bubble, or a “period of price explosion,” which the crypto world knows as the DeFi Summer of 2020.

The third BTC halving

The third Bitcoin (BTC) halving occurred just before the DeFi Summer commenced, on May 11, 2020. Mining rewards are reduced by 50% after every 210,000 BTC are mined. In 2020, the reward for mining a block was reduced to 6.25 BTC.

Related: Lots of Action but No Bull Rally: Here’s How the Bitcoin Halving Went Down

Halving is intended to prevent inflation by slowing the pace of mining. It also increases demand by slowing down production. BTC was selling for around $8,800 during the third halving. It saw small gains in July and August 2020 and began to see a significant upward price trajectory in October. It rose to $63,000 by April 2021.

2021: the year of the NFT

Nonfungible tokens (NFTs) are unique digital items on a blockchain. They, too, go back several years, but it wasn’t until 2021 that the market really took off. They are at the heart of today’s real-world asset tokenization boom and have been used for ticketing, licensing, gaming, identity verification, music and a host of other purposes. Their earliest uses were for gaming, collectibles and artwork.

CryptoKitties was an early look at things to come. The game, developed by Dapper Labs and launched in 2017, used NFTs to collect, trade and breed digital virtual cats. Cointelegraph later noted: “This digital cat-breeding blockchain game caused quite a bit of congestion on the Ethereum blockchain, peaking in 2020.” The CryptoPunks series of collectibles also came out in 2017.

Related: What remains in the NFT market now that the dust has settled?

The Bored Ape Yacht Club line was launched in April 2021. Creator Yuga Labs sold all 10,000 of them by the end of the month, raising $3 billion. They launched the lower-cost Mutant Ape Yacht Club in August 2021. Mutant Apes are still being minted today.

EXPLORE THE HISTORY OF CRYPTO

In 2017, there were around 120,000 NFT users. Their numbers grew to one million in 2020 and 3.5 million in 2021, then 9.9 million the following year. Revenue from NFTs jumped nearly 40,000% from 2019 to 2021, but declined precipitously in 2022. OpenSea, a marketplace founded in 2017, held 87% of the NFT market at the beginning of 2022, but trading volume fell by 99% in the course of the year. Regardless of that, revenue from NFTs continues to grow and is expected to reach $2.4 billion in 2024.

Magazine: You don’t need to be angry about NFTs