2021 was an eventful year for the cryptocurrency sector. We saw Bitcoin and several altcoins hit all-time highs, the likes of China and India introduce bans, and the NFT market hit a value of $22 billion.
The cryptocurrency world in 2021
Yet behind the headlines, there have been other things happening in the crypto world that you might not know about. Some of it good news, some of it bad news – either way, you’ll want to know these five interesting facts that we found out about digital currencies in 2021.
90% of Bitcoin has now been mined
We all know that Bitcoin (BTC) is the original and most powerful cryptocurrency: the coin is now widely accepted by websites ranging from internet supermarkets to bitcoin-friendly online casinos and El Salvador even recognises it as an official currency – but did you know there’s only 10% of BTC left to mine?
As of mid-December 2021, 90% of the total bitcoin supply of 21 million has been mined, according to data from Blockchain.com. The remaining 10%, though, is not expected to be mined until February 2140 due to the halving process. Halving acts as an inflation tool by reducing the number of BTC in circulation, thus increasing demand and pushing up the coin’s price.
The coin also operates on a proof-of-work model, which means that miners must solve complex math problems to validate transactions. It’s a difficult task and encourages intense competition between miners.
It’s just as ‘scammable’ than ever
One of crypto’s biggest attractions is also one of its key dangers. All transactions are confidential – great for fans of online privacy, but bad for victims of scamming.
Cyber crooks pulled in $7.7 billion in crypto scams in 2021, an 81% increase on the previous year. The largest example was Ponzi scheme called Finiko, which took more than $1.1 billion off users in Eastern Europe.
The main reason behind 2021’s resurgence has been a new type of scam, known as a ‘rug pull’. To do this, criminals lure investors into a new crypto project – normally on the DeFi system – and then abandon it without warning, or ‘pull the rug’, and take all the money.
The people behind the scams can’t be tracked because of the confidential payments, meaning many scammers are still in operation.
There’s a growing crypto divide between countries
The world is split into three crypto camps: those who embrace it, those who aren’t sure, and those who hate it.
El Salvador made history in 2021 by becoming the first nation to list Bitcoin as an official currency. The experiment has had mixed results: several glitches in payment systems led to public protests, but many people have also hailed BTC as the future.
China, on the other hand, completely banned the use of crypto within its borders. Users could face prison for buying or trading with the coins. India, too, took significant steps towards outlawing crypto.
It all points to a huge difference of opinion between nations. Could crypto fuel tension between them as it becomes more mainstream? 2022 will gives us more clues.
Bitcoin ETFs are looking very likely
2021 saw the concept of a Bitcoin ETF gain momentum, but wait a second: what’s an ETF?
Standing for Exchange Traded Fund, it’s a package of bonds and shares that allows you to invest in many things all at once. The EFT then tracks a specific market, such as the FTSE 100.
Bitcoin came a step closer to its own ETF in 2021 when the US Securites and Exchange Commission gave the green light for a crypto package from major issuer ProShares. This ETF will track Bitcoin futures contracts – derivatives that oblige and investor to buy or sell an asset at a later date – rather than Bitcoin itself.
The move could prompt major investors to convert BTC funds into ETFs, including the likes of Grayscale Investments who are said to hold $37.2 billion in Bitcoin assets.
Defi is stepping up to the plate
Bitcoin has dominated the crypto story so far, but 2021 was the year that decentralized finance (DeFi) made big moves.
DeFi services have received over $200 billion in deposits over the last 12 months. Altcoins such as Ethereum and Cardano are built on DeFi blockchains, which are part of a broader tech trend called Web3. The Web3 movement is responsible for technology such as NFTs and Smart Contracts as it bids to make the internet more decentralized.
Investors are sensing that the tide is turning, and many are converting BTC funds into DeFi currencies. 2022 may be their year. Although it does have its sceptics: the likes of Elon Musk and Jack Dorsey have urged caution recently.
*This article has been paid. The Cryptonomist didn’t write the article nor has tested the platform.