Balaji Srinivasan, the chief technical officer at a major crypto exchange Coinbase, has said that the industry is flourishing with innovation even though the value of crypto assets is declining rapidly.
Every leading public blockchain network in the likes of Bitcoin, Ethereum, and Litecoin have seen significant improvements in scalability, fungibility, and privacy
“It may be the crypto winter for price, but it feels like the the summer for innovation. Decentralized lending, interest, derivatives, prediction markets, Lightning and L2, zk-SNARKS/STARKS, bulletproofs, staking, stablecoins…lot of good things happening across the ecosystem, Srinivasan said.
Why it is a Good Sign of Long-Term Growth For Crypto
As Ivey Business School professor JP Vergne discovered in a study, developer activity has served as an accurate indicator for the price trend of crypto assets.
Throughout the past several months, Bitcoin has seen the emergence of Taproot for smart contract flexibility and privacy, Ethereum has prioritized the integration of zk-SNARKs, and the overall quality of decentralized applications (DApp) has improved.
Ethereum specifically has went through noticeable changes in the last quarter of 2018 as the open source community began to focus on the implementation of zk-SNARKs.
While the core function of zk-SNARKs, the main technology used by a privacy-focused cryptocurrency Zcash, is to provide anonymity on a blockchain network, it can also increase the transaction capacity of a blockchain protocol.
Essentially, private transactions mean less information are being shown to users on the network and as such, transactions are typically smaller.
In September 2018, Ethereum co-creator Vitalik Buterin suggested that with zk-SNARKs, Ethereum could achieve 500 transactions a second, up by more than 50-fold from its current capacity.
According to Etherscan, the daily transaction volume of Ethereum averages at around 500,000, down by three times since its peak in January last year. But, if the price of major crypto assets recovers, the usage of DApps will also increase, which will require a bigger transaction capacity.
“We can actually scale asset transfer transactions on ethereum by a huge amount, without using layer 2s that introduce liveness assumptions (eg. channels, plasma), by using zk-SNARKs to mass-validate transactions,” Buterin said.
Earlier this week, Charlie Lee, the creator of Litecoin, also revealed that confidential transactions is expected to be live on the Litecoin blockchain protocol by the year’s end, improving the privacy of Litecoin transactions.
Fungibility is the only property of sound money that is missing from Bitcoin & Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy.
I am now focused on making Litecoin more fungible by adding Confidential Transactions. ?
— Charlie Lee [LTC⚡] (@SatoshiLite) January 28, 2019
Crypto Markets go by Cycles
In mid-2018, prior to the steep sell-off cryptocurrencies experienced in November which led the valuation of digital assets to drop from over $250 billion to $110 billion, Coinbase CTO Balaji Srinivasan said that cryptocurrency markets move by cycles.
In a bear market, any type of news or development whether it is negative or positive tend to have less impact on the price trend of cryptocurrencies.
Hence, he emphasized that amidst a market downturn, it is of the utmost importance for developers and companies to keep building to support the next wave of investors, users, developers, and projects.
The reason this thing [cryptocurrencies] really had legs was after 2011 when there was a bubble and it went up, and it came down, and it didn’t go to zero. It kind of stabilized and kept coming back up. Around that time was basically when I said ‘okay, this is going to stick around, it’s got legs, it’s not going to zero.’ That was kind of a buidl year. We have this kind of bubble-crash-build phases in crypto, and that is really when i start to get involved.
For large-scale institutions and high-profile investors, it is crucial that cryptocurrencies as an asset class prove it is not a fad and a short-term trend. Every bear market strengthens the foundation of digital assets as an emerging asset class.
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