The capabilities of smart contracts make old-fashioned crypto projects obsolete as blockchains continue to evolve, not just a medium of exchange.
One of the familiar themes from previous crypto market cycles was the change in market capitalization, popularity and ranking of the top 10 projects, which saw significant gains in upward phases but ultimately failed to withstand the bear market. For many of these projects, they follow a recognizable cycle of boom and bust and never return to their former glory.
During the market boom and ICO from 2017-2018, driven by projects based on the Ethereum network, all small, smart contract-oriented projects grew to a great surprise by thousands of percent.
During this time, projects such as Bitcoin Cash (BCH), Litecoin (LTC), Monero (XMR) and ZCash (ZEC) also entered and exited the top 10 rankings, but to this day investors are still discussing which projects are actually a “useful” use case.
While all of these tokens are still unicorn-level projects valued at billions of dollars, these older projects are far from their former glory and are now struggling to stay relevant in the ecosystem.
Let’s take a look at how some current projects threaten the old-fashioned.
Dollar-linked stablecoins are the “most tradable” currencies
Bitcoin’s original use case was to simplify transaction execution, but the network’s “slow” transaction times and the cost of sending money make it a good store of value as a medium of exchange when other blockchain networks are viewed as the more optimal choice will.
Terra (LUNA), a protocol that focuses on creating a global payment structure through the use of fiat-backed stablecoins, has emerged as a potential solution to the problems one faces in attempting leading proof-of- Work projects (PoW) to use currencies as a means of payment.
Next to LUNA, TerraUSD (UST) is the main token used for trading values on Terra, an algorithmic stablecoin that is pegged to US dollars and forms the basis of Terra’s DeFi ecosystem. UST’s market capitalization has steadily increased over the course of 2021 as the activity and number of users in the ecosystem increase.
Tax supply changes | Source: SmartStake
The recent addition of Ether as a collateral option for the minting of UST on the Anchor Log has given holders the ability to access the value of their Ethers without having to sell and create a bearer event.
This opens up the possibility that other tokens such as Bitcoin, which are used as security for the minting of UST, can be used in everyday purchases.
As it stands, the UST bond APR on Anchor is 25.85% while the distribution APR is 40.67%.
From privacy coins to security protocols
Privacy is also a fundamental characteristic of the cryptocurrency industry, and privacy-focused projects like XMR and ZEC offer obfuscation technologies that make the translation of transactions untraceable.
Unfortunately, regulatory concerns have made it more difficult for users to gain access to these tokens as many exchanges are removing them for fear of regulatory objections and general demand, and the potential among cryptocurrency users has declined with their availability.
Their lack of smart contract functionality has limited the capabilities of these protocols as well, and so far users don’t seem too excited about using Wrapped Monero (WXMR) for use in DeFi, as it becomes less secure in the process.
These limitations have led to the development of privacy-oriented protocols such as the Secret Network that allow users to create and use decentralized applications (dApps) in a privacy-enforcing environment.
Security features are unusual on platforms that support smart contracts in the crypto ecosystem, making Secret a test case in the constantly evolving Web 3.0 landscape.
Secret network dApps | Source: Secret
Secret is also part of the Cosmos ecosystem, which means 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 value carrier on the platform as well as to interact with the protocols operating on the network, including Secret DeFi applications and the network’s NFT service, Secret Heroes.
New business solutions are no better, but they are not controversial
One of the ways that crypto projects with the label “medium of exchange” want to differentiate themselves is to provide enterprise solutions to help companies transition to a digital currency exchange.
XRP and Stellar (XLM) are two of the veteran protocols that go with this idea, but controversy and slow development have given early impetus to pursue newer networks that also don’t have legal controversies like Ripple.
Hedera Hashgraph has emerged as a competitor in this space, and data shows that the network is capable of processing over 10,000 transactions per second (TPS) with an average transaction fee of $ 0.0001 and a duration of 3-5 seconds.
These statistics are comparable to both XRP and XLM, which have shown their ledger reaching consensus on all outstanding transactions every 3-5 seconds, with average transaction costs averaging 0.00001 XRP / XLM.
Hedera also has smart contract capabilities, which means users can create both fungible and non-fungible tokens, and developers can create dApps to accompany file hosting services.
For each area (stablecoins, data protection and enterprise solutions), the main difference between legacy and next-generation projects is the introduction of smart contract functions and development plans in the side-chain and DeFi sectors where leading protocols exist . This gives added value to new projects so that they can meet the needs of investors and developers, resulting in increased token value and their market capitalization.
With smart contracts, interoperability is built into the growing DeFi market landscape, while legacy tokens such as LTC, XMR and BCH require wrapping services that integrate more middlemen, thereby adding fees, rigor and risk to the process.
Newer protocols have also introduced a greener proof-of-stake (POS) consensus model that is in line with environmental awareness and sustainability. A plus is that holders can also use their tokens profitably directly in the network.
It remains to be seen whether this will ultimately lead to an outflow of funds from large legacy projects that migrate to the newer generation of protocols, or whether these old blue chips will find a way to develop differently and exist in the future.
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According to Cointelegraph