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Dive Into Five More Sectors of Crypto

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Previously we covered five of the largest sectors of cryptocurrency. But there are plenty more where those came from and today we will take a look at five more sectors that are changing the cryptocurrency world. If you have not read my first post, you can check it out here.

Decentralized Finance Tokens

We briefly touched on decentralized exchanges in the previous post but there is a lot more to them than meets the eye. At the end of 2020, there was an estimated $15b locked up in DeFi and that number has only grown since then. DeFi relies on automated market makers to handle transactions; AMMs are similar to order books. A more in-depth look at AMMs can be found here.

Liquidity pools and yield farming are two important features of DeFi platforms. Liquidity pools are community-driven pools of funds that facilitate trading and lending for trading pairs. Depositing a liquidity pair 1:1 gives a liquidity provider token. For example, if you deposit $50 of Uniswap and $50 of Ethereum you’d get a UNI-ETH provider token. Every time a trade occurs with this pair a platform-dependent portion of the fees goes back to the liquidity providers. This offers a way to earn returns on the tokens you deposit and can be very lucrative with the right pair.

Yield Farming also offers different returns based on the platform you’re using. We’ll use SushiSwap as an example here. Their SushiBar platform allows you to stake SUSHI tokens to gain xSUSHI tokens that appreciate in value from dividends (from a percentage of all transaction fees.) There is also their Onsen platform which allows users to add trading pairs for up and coming projects to boost their liquidity on the platform in exchange for a percentage of SUSHI.

Most DeFi platforms are built on Ethereum, which can be difficult for newer investors due to the high gas fees. PancakeSwap is the most popular DeFi built on an alternative chain, the Binance Smart Chain.

Examples of DeFi Tokens:

  • Uniswap

  • PancakeSwap

  • SushiSwap

  • Harvest Finance

  • Compound

Centralized Exchange Tokens

These tokens help power centralized exchanges, so the opposite end of the spectrum from the DEXs we looked at in the previous post. There is no shortage of cryptocurrency exchanges run by large centralized entities and they are currently the most popular way to buy crypto. Since they’re built around trusting a middleman to help facilitate trades, CEXs function similarly to mainstream financial investing institutions.

One hallmark feature of CEX tokens is that you can opt to pay transaction fees with them for a discount; Binance and Kucoin, for example, offer this. Other times they can offer staking opportunities or give access to other features. The trading value of these tokens is very dependent on how successful the exchange is, you can find this out by looking at the exchange’s daily trade volume.

Binance Coin (BNB) powers both their smart chain and offers a 25% discount on transaction fees for using the coin and more for just holding it. Crypto.com’s CRO token allows you unlock additional features if you stake at least $400 worth; Features of note include access to reward Visa cards and the ability to stake other coins, such as Bitcoin, for rewards. Worth noting is that Crypto.com recently launched their mainnet and the tokens can now be used to power their DeFi platform.

Examples of CEX tokens:

  • Binance Coin

  • Crypto.com Coin

  • KuCoin Token

  • Huobi Token

  • FTX Token

Storage

With the growth of cloud storage in the last few years, there is no surprise that blockchain has sights set on decentralizing it. The aim is to create decentralized cloud storage to compete with Google Drive, Dropbox, etc. Due to the nature of blockchain, this can be more reliable than other services since there are many copies of your data. And the biggest advantage is that blockchain significantly cuts down on the costs that are usually associated with cloud storage.

Although the sector as a whole is fairly new, Filecoin is the most popular right now. It offers peer-to-peer storage that, for the user, functions similarly to torrenting files. Multiple different nodes can store the same files which allow for a very resilient storage system that is resistant to file loss. These files can be accessed by any user that has access to the address and unique signature. Filecoin was only launched back in October 2020 and is built on its own blockchain as opposed to being powered by Ethereum.

Storj is a storage project that has gained traction lately. This project is Ethereum based and it uses file-sharding and fragmentation to facilitate storage while offering end-to-end encryption. BitTorrent, a classic service familiar to many, also offers its own blockchain solution to file storage.

Examples of storage coins:

  • Filecoin

  • BitTorrent

  • Storj

  • Sia

Oracle

Oracles are a unique type of blockchain. At their core, Oracles will retrieve a host of verified information for use with blockchains and smart contracts. The largest oracle project right now is Chainlink which feeds external data to smart contracts to improve usability. This data can cover a large range of information such as coin pricing, daily temperature, flight statuses, etc. It is built on the Ethereum network and offers network operators the native LINK token in exchange for their services.

Augur is another example of an oracle. It provides a platform for betting on real world events. On this platform, you’re able to bet on a variety of events within the political, sports, or even the cryptocurrency market itself.

Although they seem valuable to blockchain, there are arguments against oracles. Although decentralized on their own, they do essentially create a single entity that can control data. Trust issues are understandable, if the data the oracle is getting fed is inaccurate or hijacked it could create problems with the validity of smart contracts. This does require trust in the security and validity of oracles and is the largest argument against them.

Examples of oracles:

  • Chainlink

  • Augur

  • Band Protocol

  • Kylin Network

Non-Fungible Tokens

NFTs are all the rage lately and it’s hard to avoid it in the news. NFTs can cover a variety of unique items from digital art, videos, items in video games, and more. Essentially they function as proof of ownership over the unique items they are attached to. Although they were first created around 2015, this year has seen some monumental growth over the last few months. Beeple famously sold an NFT for $69m and many other artists or jumping on the hype train.

Enjin is currently the top blockchain platform that allows for backing the value of NFTs, but there exist some other ecosystems. WAX is a custom-built blockchain made to enable fast e-commerce transactions. It includes several developer tools that allow dApps to be built and also, of course, NFTs.

NBA Top Shot recently garnered significant attention for digitizing the classic sports trading cards concept using NFTs. The NFTs offered are NBA highlights from games that exist in a limited quantity. Although a majority sell for thousands of dollars, some have seen sales of over six figures.

Other exciting ways NFTs can be used are in blockchain video games. Decentraland offers a virtual world with parcels of LAND, an NFT, that players can purchase and build upon to suit their needs. Players can combine connecting parcels of land to create more valuable estates that can later be sold at a profit. The finite amount of LAND parcels makes them more valuable as they get bought up and more scarce. There are a few other virtual worlds that utilize NFTs: Sandbox, Alien Worlds, and Terra Virtua are examples.

Examples of NTF platforms:

  • Enjin

  • WAX

  • Decentraland

  • Flow

  • Ethernity Chain

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