Crypto 2022 Year in Review: The Good (Part 1 of 3)
It’s been a whirlwind of a year for the blockchain industry, with both extreme highs and even lower lows. In this three-part series, we’ll examine the significant events and trends that shaped the industry in 2022 and look ahead to what we can expect in 2023. Let’s start on a positive note and delve into the good news of the year and the developments that helped to keep the promise of blockchain technology alive.
Even though this current bear market feels like it has been going on for years, 2022 began with $4,000 Ethereum and a near-$50,000 Bitcoin. The bull market was still roaring on at this time, and though the market was down from all-time highs, mainstream sentiment was still quite positive. The beginning of this year saw one of the most notable marketing efforts in cryptocurrency history: several companies, including Coinbase, Crypto.com, and FTX, had ads featured in the Super Bowl, an event watched by over 100 million people around the world. Coinbase’s ad was particularly notable and praised for its simplicity: it was a QR code that bounced around the screen with no graphics. This minimalist advertising strategy worked, as over 20 million viewers scanned the code, propelling the Coinbase app to the second spot in the Apple App Store overnight. This may seem like a shallow victory, given how the rest of the year went. Still, the normalization of cryptocurrencies and their slow integration into everyday life is a massive victory for the industry.
The recognition of cryptocurrencies by central world governments, while certainly frightening due to the potential for strict regulation, is still a step in the right direction. For example, Ukraine began accepting cryptocurrency donations to help with its war effort and was able to raise over $60 million. Additionally, President Biden signed an executive order in March calling for the United States to evaluate the benefits and risks of cryptocurrencies. Both events signal that world powers are beginning to accept that cryptocurrencies are not a fad and will be a significant economic force going forward, regardless of their short-term issues and volatility.
Ethereum had two consequential upgrades this year, the first being the implementation of EIP-1559. This improvement to Ethereum made a change to the way that transaction fees were handled. Before EIP-1559, all transaction fees paid by users went to miners. EIP-1559 introduced a dynamic base fee that changes based on demand and an optional priority fee that can be paid to make transactions go through faster. In this model, the base fee gets burned, meaning the ETH is removed from the overall supply, while the priority fee is distributed to miners. If demand for the Ethereum blockchain is high enough, it could make the supply of Ethereum deflationary, and the digital asset could become analogous to digital oil. Ethereum has become deflationary on a few occasions already, and the supply is significantly lower than it would be without EIP-1559.
Arguably the most significant event of the year was Ethereum’s Merge, which took place on September 15. The Merge was a milestone event that saw Ethereum’s blockchain transition from a proof of work consensus mechanism to proof of stake. Not only did this pave the way for greater Ethereum scalability in the future, but it also reduced Ethereum’s energy consumption by 99.97%, which caused the world’s energy consumption to decrease by 0.2%. Additionally, the Merge reduced block rewards, and alongside EIP-1559 could help make ETH deflationary. The Merge was a technological feat that was worked on for several years and was described as being as difficult as changing the engines in an airplane mid-flight without any of the passengers knowing. The success of the Merge has paved the path for Ethereum to be adopted by environmentally-conscious corporations and individuals and helps bring Ethereum closer to its goal of being a global settlement layer.
Although it may seem like the entire cryptocurrency market took a major step backward this year, some positive developments in the space are helping to keep hope alive among enthusiasts. Hopefully, 2023 will see more adoption, recognition, and sensible regulation of blockchain and cryptocurrencies that will propel the industry forward.
Stay tuned for parts 2 and 3, in which we will look at all the negative events from the past year and what 2023 could look like!
By Lincoln Murr
