How smart contracts are changing the balance of power in the crypto industry

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One of the familiar themes seen in previous cycles of the crypto market is the evolution of market caps, popularity and ranking of the top 10 projects that make big gains during bullish phases, only to fade into obscurity for a while. bear markets. For many of these projects, they follow a recognizable boom-bust cycle and never regain their former glory.

During the 2017-2018 bull market boom and initial coin offering (ICO), which was driven by projects based on the Ethereum network, all kinds of smart small contract-driven projects grew by thousands of dollars. percentages to reach unexpected highs.

Meanwhile, projects like Bitcoin Cash (BCH), Litecoin (LTC), Monero (XMR) and ZCash (ZEC) have also entered and left the top 10, but to this day investors are still arguing over which project actually present. a “useful” use case.

While all of these tokens are still unicorn-level projects with billion dollar valuations, these large-cap megaliths are far from their past glory and are now struggling to remain relevant in today’s ecosystem.

Let’s take a look at some of the ongoing projects that threaten to knock these dinosaur tokens off their perch.

Stable coins indexed to the dollar take center stage as the most “tradable” currency

Bitcoin’s original use case (BTC) stated that it would simplify the process of executing transactions, but the network’s “slow” transaction time and the cost associated with sending funds make it a better reserve of. value as a medium of exchange when other blockchain networks are viewed as options.

Terra (LUNA), a protocol focused on creating a global payment structure through the use of fiat-anchored stablecoins, emerged as a possible solution to the problems encountered when trying to use the best projects. proof of work (PoW) as a means of payment. currencies.

The primary token used for value trading on Terra outside of LUNA is TerraUSD (UST), an algorithmic stablecoin pegged to the US dollar that forms the basis of Terra’s Decentralized Finance (DeFi) ecosystem. UST’s market capitalization has grown steadily throughout 2021 as activity and the number of users in the ecosystem increased.

Modifications to the UST offer. Source: SmartStake

The recent addition of Ether (ETH) as a collateral choice for the UST’s mint on the Anchor Protocol has given token holders a way to access the value of their Ether without having to sell and sell. create a taxable event.

This opens up the possibility for other tokens such as BTC to be used as collateral to cash in UST which can be used in daily purchases.

As it stands, the loan APR for UST on Anchor is 25.85%, while the distribution APR is 40.67%, which means users who borrow UST against their LUNA or Ether actually earn a return by borrowing against their tokens.

From privacy pieces to privacy protocols

Privacy is also a fundamental feature of the cryptocurrency industry, and privacy-focused projects like XMR and ZEC offer obfuscation technologies that support covert transactions or what, for some time, was considered not found.

Unfortunately, regulatory issues have made it more difficult for users to access these tokens as many exchanges have removed them for fear of angering regulators and overall demand among crypto users has declined alongside their availability. .

Their lack of smart contract capabilities has also limited what these protocols are capable of and, so far, users don’t seem too excited to use Wrapped Monero (WXMR) for use in DeFi, as the token loses its privacy capabilities during the process. .

These limitations have led to the development of privacy-focused protocols such as Secret Network, which allows users to build and use decentralized applications (DApps) in a privacy-preserving environment.

Privacy features are not common among smart contract-enabled platforms in the crypto ecosystem, making Secret an experimental case in the ever-changing Web 3.0 landscape.

Decentralized applications on the secret network. Source: Secret

Secret is also part of the Cosmos ecosystem, which means that it can use the Inter-blockchain Communication (IBC) protocol to seamlessly interact with other protocols in the ecosystem.

The network’s native SCRT can be used as a medium for transferring value on the platform as well as interacting with protocols that work on the network, including Secret DeFi applications and the network’s NFT offering, Secret Heroes.

New business solutions aren’t better, but they come without controversy

One of the ways that cryptocurrency projects sought to differentiate themselves from the ‘medium of exchange’ label was by offering enterprise solutions as a way to help businesses navigate the transition to an infrastructure based. on the blockchain.

XRP and Stellar (XLM) are two of the veteran protocols that fit this bill, but continued controversy and slow development has led these early players to catch up with newer networks which also lack the legal controversy that followed. Ripple for years.

Hedera Hashgraph has become a competitor in this arena and data shows the network is capable of processing over 10,000 transactions per second (TPS), with an average transaction fee of $ 0.0001 and a delay of 3-5 seconds. .

These statistics are comparable to those of XRP and XLM, which indicated that their ledgers reach consensus on all open trades every 3-5 seconds with an average transaction cost of 0.00001 XRP / XLM.

Hedera is also smart contract compatible, which means users can create fungible and non-fungible tokens, and developers can build decentralized applications to accompany decentralized file storage services on the network.

For each sector (stablecoins, privacy and enterprise solutions), the main difference between old school and next generation projects has been the introduction of smart contract capabilities and development plans in the sectors of the side chain and DeFi where the best protocols exist. . This gives new projects additional utility, enabling them to meet investor and developer demand, thereby increasing their token value and market capitalization.

With smart contracts, the ability to interact with the growing DeFi landscape is built in, while legacy tokens such as LTC, XMR, and BCH require special packaging services that insert intermediaries and thus insert additional fees, rigor and risks in the process.

The most recent protocols also adopted the more environmentally friendly proof-of-stake consensus model that aligns with the broader global shift towards environmental awareness and sustainability. One advantage is that holders can also wager their tokens directly on the network for a return.

It remains to be seen whether the slow pace of time will eventually lead to a migration of capital from old large-cap projects to next-gen protocols or whether these legacy blue chips will find a way to evolve and survive in the future.

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The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.


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