In his monthly crypto column, Israeli serial entrepreneur Ariel Shapira highlights new technologies in cryptocurrencies, decentralized finance (DeFi) and blockchain and their role in shaping the economy of the 21st century.
The posthumous consensus regarding the collapse of the cryptocurrency market among industry leaders, from Polygon co-founder Mihailo Bjelic to billionaire crypto investor Mark Cuban, is that bear markets are a healthy way to clear the market. The latter even referred to a phrase used by longtime crypto critic Warren Buffett to express his opinion on the matter.
“Only when the tide subsides will you discover who has been swimming naked.”
Of course, no one in the industry would dispute the claim that bear markets weed out the weak or, in this case, the overtly corrupt. But it would be a mistake to leave the analysis at that, as if over $700 billion destroyed overnight is what we should continue to accept in the crypto markets. It is important to understand the underlying factors behind this latest bull run that led to its massive downfall and how to contribute to a more stable market going forward.
NFC: blessing or past?
It was five years before the first massive cryptocurrency crash, triggered by the infamous Initial Coin Offering (ICO) boom in 2017. Since the industry is still in its infancy, most of the projects that emerged during this period and attracted investment were random coins purporting to be the next bitcoin (BTC). Since then, the industry has evolved significantly, and this time around, other blockchain applications have created a buzz.
So what was the latest ICO scam? Several factors contributed to the latest market boom that saw bitcoin rise to almost $70,000 per coin. But perhaps most similar in nature — and yet often more ridiculous — to the ICOs of yesteryear have been non-fungible tokens (NFTs), a market that reached a whopping $25 billion in 2021. The industry may have reached the height of the hype when The Bored Collection Ape Yacht Club (BAYC) NFTs were selling for hundreds of thousands and later millions of dollars in Ether (ETH). It was attended by celebrities as well as industry icons such as Adidas, Coachella and even the Super Bowl.
Related: Beyond the hype: NFTs could lead the way in transforming the business experience
Then things went awry when everyone discovered that over 80% of the NFTs created for free on OpenSea were either scams or scams. The cash culture was fully showcased in person at the NFT.NYC event at the end of June.
That being said, it’s not that many in cryptography deny that the technology behind NFTs will redefine ownership and play an important role in Web3. But how can we move towards this future without Sams riding on the tail of innovation?
It’s actually pretty clear. The way forward for NFTs and the technology behind them is to link them to desired physical assets and leverage their ability to authenticate and secure products.
For example, companies in the luxury goods industry are exploring the use of NFTs as a means to combat the proliferation of counterfeit goods. Projects such as the Aura Blockchain Consortium, led by luxury giants LVMH and Prada Group, are leveraging the power of NFT technology for product authentication, supply chain transparency, and data ownership for their physical products.
It’s not necessarily about selling digital sneakers, but about enhancing the quality of the product and brand for their affluent clientele. Jewelery company Yvel, for example, launched a securities trading platform pegged to jewelry and precious metals as guarantees, effectively pegging NFTs to tangible products rather than JPEGS.
Related: NFT 2.0: The next generation of NFTs will be streamlined and trustworthy
Greener blockchain pastures
Survival in a bear market is an imperative not only for NFTs, but also for more fundamental crypto assets, which, by the way, have also not fully corrected their propensity to cheat. The collapse of algorithmic stablecoins is likely to cause serious distaste among casual holders and companies to meaningfully explore how to link cryptocurrencies to traditional assets, but this does not mean that all hope is lost. The way forward here really is to focus on building a product that meets a real, tangible need in the marketplace — which isn’t all that different from tackling the collapse of the NFT market.
Related: What can other algorithmic stablecoins learn from the collapse of Terra?
It’s a take we’ve all heard before. So how do we meaningfully get there this time? Everything goes back to the basics of business. To thrive, startups need to find the problem they’re trying to solve, and that problem can’t just be the founder’s lack of wealth. So, what sectors can significant coins focus on?
Minimizing environmental impact and sustainable operation has long been a white whale for crypto and blockchain projects. A constant criticism of cryptocurrencies and blockchain in general is that they cause serious environmental damage due to emissions caused by token mining and other by-products of cryptocurrencies. So far, most projects have failed to rid themselves of this stigma, but new developments can help bring significant changes to this narrative.
In the wider business world, sustainability has quickly become a core value for today’s company. While many of these corporate commitments are either superficial or contain vague promises to cut carbon emissions by a certain year, there are more concrete moves that the cryptocurrency can borrow from. One such advance has been the introduction of corporate carbon credits, which, while imperfect, are a decent way for corporations to offset their emissions and environmental footprint.
RELATED: Green Finance Needs Working Voluntary Carbon Markets
While big blockchains like Cardano and Algorand are leading the way in green operations, giving cryptocurrency holders the opportunity to join the carbon market is another way to encourage sustainability. Projects offering crypto-specific carbon credits or tokens linked to external carbon credits, such as CC Token, which opens up carbon credit futures investments to businesses and individuals, provide tangible value to investors. Others are working to make the second-largest Ethereum blockchain by market cap greener.
The cryptocurrency and blockchain industry is characterized by its exuberant nature and revolutionary ambition. While any emerging industry is inevitably subject to volatility, downturns, and headwinds, the latest bear market should send a clear signal to projects: it’s all about finding a problem to solve and actually using your product to solve it.
This article does not contain investment advice or recommendations. Every investment and trading step involves risk, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed here are those of the author only and do not necessarily reflect or represent the views and opinions of .
Ariel Shapira is a father, entrepreneur, speaker and cyclist, and the founder and CEO of Social-Wisdom, a consulting agency that works with Israeli startups and helps them connect with international markets.