Compound

Uniswap

DeFi

CRYPTO

No Bull

The COVID-19 pandemic wreaked havoc on human lives and the world economy when it broke out in early 2020. The crypto world was battered as well, with the cryptocurrency market plummeting in March of that year. Bitcoin (<a href="https://cointelegraph.com/bitcoin-price">BTC</a>)&nbsp;<a href="https://cointelegraph.com/news/bitcoin-price-crashing-due-to-coronavirus-fear-but-will-btc-hit-2k">lost 52% of its dollar value</a> in a day, and Ether (<a href="https://cointelegraph.com/ethereum-price">ETH</a>) lost 43%, <a href="https://cointelegraph.com/news/as-ether-price-drop-pressures-defi-developers-remain-confident-in-its-success">shaking up decentralized finance (DeFi)</a>&nbsp;as it fell.
The resulting lockdowns had a slower but more profound effect on crypto. As the world became housebound, screen time rose steadily, and interest in cryptocurrency soared, along with market capitalizations. Soon, emerging technologies were undergoing development and implementation at a pace previously unseen. 
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<h2 data-ct-non-breakable="true" id="defi-goes-to-the-moon">DeFi goes to the moon</h2>
The first steps in DeFi were taken in 2017 with the development of smart contracts on the Ethereum blockchain. MakerDAO and Compound were early market leaders. In June 2020, Compound introduced <a href="https://cointelegraph.com/explained/defi-yield-farming-explained">yield farming</a>, also known as liquidity mining, a method of arbitrage that shifted crypto assets to attain the highest interest, fees and rewards. It is now common practice.
Related: <a href="https://cointelegraph.com/news/whales-profit-mightily-from-lucrative-defi-yield-farming-data-shows">Whales profit mightily from lucrative DeFi yield farming: Data shows</a>
Compound was also a pioneer in decentralization. COMP (<a href="https://cointelegraph.com/compound-price-index">COMP</a>) was also the first governance token, enabling users to participate directly in the management of the decentralized autonomous organization (DAO). By the end of the year, decentralization <a href="https://cointelegraph.com/magazine/dictators-turn-delegates-former-ceos-grapple-with-dao-governance/">was well underway</a> at many DAOs. 
<a href="https://cointelegraph.com/history-of-crypto">EXPLORE THE HISTORY OF CRYPTO</a>
A DAO is an organization governed by enforced digital rules, without hierarchical management. It’s similar to Bitcoin in its attempt to get rid of all middlemen in transactions.
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By September 2020, DeFi collateral levels had jumped to $9 billion from the $700 million seen at the beginning of the year. Around that time, Bloomberg <a href="https://www.bloomberg.com/news/articles/2020-09-22/defi-mania-puts-crypto-ahead-of-gold-as-2020-s-top-asset-so-far" target="_blank" rel="noopener nofollow">wrote</a>:
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 “A cryptocurrency mania known as decentralized finance has helped to turn digital currencies into this year’s best-performing asset by far.”
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<a href="https://cointelegraph.com/learn/what-are-decentralized-exchanges-and-how-do-dexs-work">Decentralized exchanges (DEXs)</a>&nbsp;also played an important role. These had already existed by 2020, with OasisDEX launching in 2016 and Uniswap appearing in 2018. A DEX allows users to trade crypto assets peer-to-peer— that is, without an intermediary. DEXs, in turn, gave rise to automatic market makers, which take advantage of yield farming. 
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 The Uniswap logo. Source: Uniswap
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Related: <a href="https://cointelegraph.com/magazine/trouble-with-crypto-automated-market-makers/">The trouble with automated market makers</a>
The result of all this activity was a <a href="https://www.sciencedirect.com/science/article/pii/S1544612321005341#fig1" target="_blank" rel="noopener nofollow">bubble</a>, or a “period of price explosion,” which the crypto world knows as the DeFi Summer of 2020.
<h2 id="the-third-bitcoin-halving">The third Bitcoin halving</h2>
The third Bitcoin&nbsp;halving occurred on May 11, 2020, just before the DeFi Summer commenced. The halving is an event where mining rewards are reduced by 50% after every 210,000 BTC is mined. In 2020, the reward for mining a block was reduced to 6.25 BTC. 
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Related: <a href="https://cointelegraph.com/news/lots-of-action-but-no-bull-rally-heres-how-the-bitcoin-halving-went-down">Lots of action but no bull rally: Here’s how the Bitcoin halving went down</a>
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 BTC/USD 1-month historical trading chart. Source: TradingView
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The halving is intended to prevent inflation by slowing the pace of mining, also increasing demand by slowing down production. BTC was selling for around $8,800 during the third halving. It saw small gains in July and August 2020 and began to see a significant upward price trajectory in October, rising to $63,000 by April 2021.
<h2 id="2021-the-year-of-the-nft">2021: The year of the NFT</h2>
<a href="https://cointelegraph.com/learn/what-are-nfts-and-why-are-they-revolutionizing-the-art-world"></a><a href="https://cointelegraph.com/learn/what-are-nfts-and-why-are-they-revolutionizing-the-art-world">Nonfungible tokens (NFTs)</a> are unique digital items on a blockchain. They, too, date back several years, but it wasn’t until 2021 that the market really took off. They are at the heart of today’s real-world asset tokenization boom and have been used for ticketing, licensing, gaming, identity verification, music and a host of other purposes. Their earliest uses were for gaming, collectibles and artwork.
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 CryptoKitties. Source: CryptoKitties
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CryptoKitties was an early look at things to come. The game, developed by Dapper Labs and launched in 2017, used NFTs to collect, trade and breed digital virtual cats. <a href="https://cointelegraph.com/news/how-to-play-and-earn-in-cryptokitties">Cointelegraph later noted</a><a href="https://cointelegraph.com/news/how-to-play-and-earn-in-cryptokitties"></a>:&nbsp;“This digital cat-breeding blockchain game caused quite a bit of congestion on the Ethereum blockchain, peaking in 2020.” The CryptoPunks series of collectibles also came out in 2017. 
Related: <a href="https://cointelegraph.com/news/what-remains-in-the-nft-market-now-that-the-dust-has-settled">What remains in the NFT market now that the dust has settled?</a>
The Bored Ape Yacht Club line was launched in April 2021. Creator Yuga Labs sold all 10,000 of them by the end of the month, raising $3 billion. It then launched the lower-cost Mutant Ape Yacht Club in August 2021, which is still being minted today.
<a href="https://cointelegraph.com/history-of-crypto">EXPLORE THE HISTORY OF CRYPTO</a>
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 Examples of Bored Ape Yacht Club and Mutant Ape Yacht Club NFTs. Source: BAYC
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In 2017, there were around 120,000 NFT users. Their numbers <a href="https://www.statista.com/outlook/fmo/digital-assets/nft/worldwide#users" target="_blank" rel="noopener nofollow">grew</a> to 1 million in 2020, 3.5 million in 2021, then 9.9 million the following year. Revenue from NFTs jumped nearly 40,000% from 2019 to 2021 but declined precipitously in 2022. OpenSea, a marketplace founded in 2017, held 87% of the NFT market at the beginning of 2022, but trading volume <a href="https://fortune.com/2022/08/29/nfts-opensea-crypto-winter-bubble-blockchain-web3/" target="_blank" rel="noopener nofollow">fell</a> by 99% in the course of the year. Regardless, revenue from NFTs continues to grow and is expected to reach $2.4 billion in 2024.
Magazine: <a href="https://cointelegraph.com/magazine/dont-be-angry-about-nfts/">You don’t need to be angry about NFTs</a>

History of Crypto: DeFi revolution during a global crisis

Table of Contents

Cointelegraph

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