To Evolve or Die: How Smart Contracts Are Changing the Balance of Power in Crypto

In previous crypto market cycles, a common theme has been changes in the market capitalization, popularity, and ranking of Top 10 projects that have seen significant growth during bull markets but faded into obscurity during bear markets. For many of these projects, they went through a distinct boom-to-bust cycle and never returned to their former glory.

During the 2017-2018 bull market and the initial coin offering (ICO) boom fueled by projects based on the ethereum network, various small smart contract-oriented projects rose by thousands of percent to unexpected highs.

During this period, projects like Bitcoin Cash (BCH), Litecoin (LTC), Monero (XMR) and ZCash (ZEC) also alternated in the top 10 rankings, but investors are still arguing to this day Which project actually presents a "useful" use case.

While all of these tokens are still billion-dollar unicorn-level projects, these high-cap giants have come a long way from their former glory and are now struggling to gain a foothold in the current ecosystem.

Let’s take a look at some of the projects currently threatening to bring these obsolete tokens down from their perch.

Dollar-pegged stablecoin emerges as most 'tradable' currency

Bitcoin's original use case stated that it would simplify the transaction process, however, the network's "slow" transaction times and associated costs of sending funds make it a better value when one considers alternative blockchain networks A method of storage, not a medium of exchange.

The Terra (LUNA) protocol, which focuses on creating a global payment structure through the use of fiat-pegged stablecoins, has emerged as a possible solution to the problems faced when using top proof-of-work (PoW) projects as payment currencies.

Besides LUNA, the primary token used to trade value on Terra is TerraUSD (UST), an algorithmic stablecoin pegged to the U.S. dollar that forms the basis of Terra’s decentralized finance (DeFi) ecosystem. UST's market capitalization has been growing steadily throughout 2021 as the number of activities and users in this ecosystem has increased.

Source of UST supply change: SmartStake

Ethereum (ETH) was recently added to the Anchor protocol as a collateral option for minting UST, which allows token holders to gain value in their ETH holdings without having to sell and create a taxable event.

This opens up the possibility for other tokens like BTC to be used as collateral to mint UST that can be used for everyday purchases.

Currently, the UST borrowing APR on Anchor is 25.85%, while the issuing APR is 40.67%, which means that users who borrow UST with LUNA or ETH actually get benefits when they borrow with their tokens.

From Privacy Coins to Privacy Protocols

Privacy is also a fundamental feature of the cryptocurrency space, with privacy-focused projects such as XMR and ZEC offering obfuscation techniques that enable transactions that are concealed or considered untraceable for a period of time.

Unfortunately, regulatory concerns have made it harder for users to acquire these tokens, as many exchanges have delisted them, fearing the wrath of regulators, and overall demand from crypto users has declined along with their reduced availability.

Its lack of smart contract functionality also limits the capabilities of these protocols, and so far users seem less interested in using Wrapped Monero (WXMR) in DeFi, as the token loses its privacy features in the process.

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

Privacy features are uncommon in smart contract platforms in the crypto ecosystem, making Secret an experimental case in the growing Web 3.0 space.

DApp on Secret Network Source: Secret

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

The network’s native token, SCRT, can be used as a value transfer medium on the platform and can also interact with protocols running on the network, including the Secret DeFi application and the network’s NFT product, Secret Heroes.

New enterprise solutions aren't better, but they're not controversial

One of the ways cryptocurrency projects seek to differentiate themselves from the “medium of exchange” label is by offering enterprise solutions to help businesses smoothly transition to blockchain-based infrastructure.

XRP and Stellar (XLM) are two veteran protocols that fit the bill, but ongoing controversy and slow development has led to these early movers now catching up to newer networks that also don’t have the same multi-year laws surrounding Ripple dispute.

Hedera Hashgraph has become a competitor in this field. According to data, the network can process more than 10,000 transactions per second, with an average transaction fee of $0.0001 and a transaction confirmation time of 3 to 5 seconds.

The figures are competitive with XRP and XLM, which say their ledgers have a consensus time of 3 to 5 seconds for all outstanding transactions and an average transaction fee of 0.00001 XRP/XLM.

Hedera also features smart contracts, meaning users can also create fungible and non-fungible tokens, and developers can build decentralized applications in addition to the decentralized file storage services the network provides.

For each area (stablecoins, privacy, and enterprise solutions), the main difference between next-generation and older-generation projects is the introduction of smart contract functionality, as well as plans to develop in the sidechain and DeFi space. This provides additional utility to new projects, allowing them to meet the needs of investors and developers, thereby increasing their token value and market capitalization.

With smart contracts, the ability to interact with the growing DeFi space is built in, while traditional tokens such as LTC, XMR, and BCH require special wrapping services, which insert middlemen, adding additional fees in the process, Rigor and risk.

The new protocol also employs a greener proof-of-stake consensus mechanism, which is in line with a larger global shift towards environmental awareness and sustainability. As an added bonus, holders can also stake their tokens directly on the network for yield.

Whether the slow passage of time will eventually lead to a shift of capital from established mega-projects to newer generation protocols, or whether these legacy blue chips will find a way to progress and survive into the future remains to be seen.

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