2021 was known as a blooming year for the crypto industry when many companies and venture have invested about 30 billion USD in crypto. That’s more than the investment of the previous eight years combined. Everyone is looking forward to the boom for the next year 2022.
However, the boom has not come. Instead, we can see a lot of unexpected Events in this Crypto Recap 2022.
Below, we will review notable Crypto 2022 events.
Crypto Recap 2022: A sad year of the fledgling industry
The collapse of Terraform Labs: LUNA and UST
Time: May 2022
This is considered the first bankruptcy and the most influential first domino in 2022.
White hat hacker group Tree of Alpha called this is ‘one of the biggest Death Spirals in the history of the cryptocurrency market’.
The two tokens UST and LUNA were founded by Daniel Shin and Do Kwon. The price of LUNA from the peak of $120 on April 5 fell vertically down to $0.000119 as of the morning of May 18. ‘Stablecoin’ UST has dropped to as low as $0.23. The drop cost investors billions of dollars.
The source of LUNA’s crisis can begin with the wrong move from the leadership with the head of Do Kwon. They had design flaws and Anchor Protocol’s 20%/year deposit interest rate made the project a giant ponzi scheme. Before the crash, TerraForm Labs’ interest-paying reserves were almost empty.
In March 2022, Anchor passed a resolution to replace the 20% fixed rate with a floating rate. Later, the Wall Street Journal reported that a large amount of UST was withdrawn from Anchor, a domino effect that made investors nervous and withdrew UST.
People started looking for an exit by selling UST in exchange for LUNA. The supply of LUNA skyrocketed causing the price to plummet. As more and more people try to sell UST, the equalization mechanism stops working – UST loses peg. In the end, Terra collapsed.
Korea prosecutors said on December 12 that Terraform Labs founder Do Kwon was in Serbia, when they sought to arrest him on charges of fraud and market manipulation related to the collapse of Luna and UST. The office is currently in the process of asking the Serbian authorities to transfer Do Kwon to South Korea, even though it does not have an extradition treaty with Serbia.
The collapse of Luna and TerraUSD not only caused investors to lose all their money, caused the price of Bitcoin to drop, the crypto market plummeted, but also cast a dark cloud over the future of this market. dark. A series of subsequent collapses occurred for companies related to TerraForm Labs such as: Three Arrows Capital, Voyager Digital, BlockFi.
3AC: When a capital is also liquidated by Futures
Time: July 2022
At the beginning of March 2022, this investment fund is known to be managing capital up to 10 billion USD.
Cryptocurrency investment fund Three Arrows Capital (3AC) filed for bankruptcy in the US, deepening the liquidity crisis in the market. Three Arrows Capital’s downhill start can be linked to the demise of LUNA-UST.
3AC is said to have borrowed money from investors and deposited it in Anchor without informing them). They did not hesitate to spend $560 million to buy 10.9 million $LUNA tokens. When UST lost the peg, this $LUNA was only 600 USD.
In addition, 3AC is also accused of using partner funds to invest billions of UST in Anchor. After that, exchanges simultaneously liquidated 3AC’s positions. Cryptocurrency exchange Blockchain.com faces $270 million in damages for lending to 3AC. Meanwhile, digital asset brokerage Voyager Digital filed for bankruptcy protection after 3AC failed to pay back $670 million in debt. Lending companies Genesis and BlockFi, platforms BitMEX and FTX are also victims.
In the end, 3AC was unable to pay off its mounting debt. They declared bankruptcy in July 2022.
FTX – the Biggest Bank Run in Crypto History
Time: November 2022
FTX is known as the 2nd largest exchange in the world regarding cryptocurrencies. However, by early November 2022, FTX had begun to collapse.
The leading reason for this failure is the fact that FTX has engaged in risky ventures with client assets.
The beginning of this collapse was when Alameda Research’s balance sheet was exposed to the public and showed signs of misalignment. Alameda Research is a crypto hedge fund that Bankman-Fried founded prior to the launch of FTX. The two companies have close financial ties to each other.
A few days later, Binance – the world’s largest cryptocurrency exchange started selling off the FTT tokens they received after previous investment rounds. This makes the market even more confused. Traders also rushed to move their cryptocurrencies off FTX’s platform, fearing that FTX could be the next on a list of famous crypto companies to collapse.
FTX had a serious liquidity crisis, they had to ask Binance for help. On November 8, Binance announced it would buy back FTX, but the next day Binance responded that it would not continue to buy FTX because of weaknesses in the financial statements. FTX was brought into the sights of transparent investigations by the authorities.
Sam Bankman-Fried – founder and CEO of FTX at that time publicly sought a rescue package worth more than $9 billion, but failed. The company filed for bankruptcy protection on 11/11 and Sam resigned. The incident caused a domino effect on the companies involved.
In less than 2 weeks (November 2-14, 2022), the Crypto market capitalization has evaporated over $200 billion.
Then the undesirable consequences in the market began to occur:
Alameda Research also filed for bankruptcy on Nov.
On November 28, Blockfi, a cryptocurrency lending and financial services company with close ties to FTX, declared bankruptcy.
Genesis Global Capital, another crypto lender, halted withdrawals in November because of liquidity issues. And now they are on the verge of bankruptcy. We still don’t have a final official answer from Genesis.
Next, Gemini announced the postponement of customer withdrawals. Other well-known funds that have invested in FTX including Sequoia Capital, SoftBank and BlackRock also have trouble with investors.
The bankruptcy of FTX will go down in history as one of the most complex ever, and that is likely to cause the crypto market to crash and never recover.
Biggest hacks of 2022: Technological or human error?
January 2022: Qubit Finance – $80M
Qubit Finance said on January 28 that it was exploited by an attacker who stole 206,809 $BNB from the QBridge protocol. Total damage was valued at $80 million.
According to security firm Certik, the attacker took advantage of the escrow option in the QBridge contract to mint 77,162 $qXETH – a number of cryptocurrencies used to represent Ethereum bridged over Qubit. The attacker fooled the platform into believing that he was staked. After fooling the platform several times, the attacker changed the assets to $BNB and disappeared.
February 2022: Wormhole Bridge – $320M
On February 2, an attacker extracted over 320 million $WETH from the Wormhole protocol, a popular cross-chain cryptographic bridge between Solana, Ethereum, Avalanche, and others.
Wormhole users are required to stake $ETH to mint $WETH , a cryptocurrency pegged to the price of Ethereum.
Analytics firm Elliptic blamed the exploit on Wormhole’s failure to authenticate the “guardian” account. allows the attacker to earn 120,000 $WETH that no ethereum backs up. The hacker then exchanged 93,750 $WETH for $ETH and exchanged the rest for $SOL. The total value of damage at that time was more than 320 million USD.
March 2022: Ronin Network – $614M
The biggest crypto heist of all time, measured by the value of crypto assets at the time they were stolen, was the March 2022 raid on the Ronin Network, an exchange that allows users to Axie Infinity video game players exchange their in-game tokens for other people’s crypto.
On March 30, the network revealed that an attacker had stolen the private keys needed to authenticate transactions and transferred 173,600 $ETH and 25.5 million USDC, a stable coin pegged to with US dollars, into their own wallets. Using the conversion rate at the time, this valued the theft at $614 million. The theft was discovered when a customer attempted to make a legitimate withdrawal.
April 2022: Beanstalk Farms – $182M
In April, an attacker withdrew $182 million in crypto from Beanstalk Farms, a DeFi protocol that aims to balance the supply and demand of various crypto assets.
PeckShield said the attacker exploited Beanstalk’s majority vote management system and voted to send him $182 million. The company says the attacker used a flash loan to get a controlling stake in the protocol, but their actual profit was only at $80 million.
June 2022: Harmony Bridge – $100M & Elrond – $113M
The North Korea-linked Lazarus team had access to two of the five security keys of the Binance and Ethereum bridges, approving transactions that sucked assets off the bridge. Harmony currently requires four out of five authentication keys to reach consensus on transactions and has yet to announce a plan to compensate users.
In June, hackers exploited a vulnerability on the Maiar decentralized exchange to steal around 1.65 million $EGLD, the native token of the Elrond blockchain. Researchers say the attacker deployed a smart contract and used three wallets to steal an estimated $113 million worth of $EGLD from the exchange.
The hackers immediately sold 800,000 tokens for $54 million on the same DEX and the rest was sold on centralized exchanges or exchanged for ETH.
August 2022: Nomad Bridge – $190M
August 2022 saw $190 million in various cryptocurrencies withdrawn from the Nomad Token Bridge cross-chain protocol in just a few hours. Due to a bug that was introduced into the protocol during periodic updates, hackers could transfer any amount by editing the code of the previous transaction.
When the hacker first carried out the attack, hundreds quickly followed suit. The incident was described as “the first centralized mob looting of a nine-figure bridge in history” and “one of the most chaotic hacks web3 has ever seen”.
Nomad has positioned itself as a “secure cross-chain messaging protocol first” and is a response to the billions of dollars that have been stolen from similar bridges in recent times.
November 2022: Binance – $570M
In one of the most famous hacks in crypto history, the Binance exchange was hacked for $570 million in October 2022. A cross-chain bridge, BSC Token Hub, was exploited by hackers, leading to the creation of more Binance Coin ($BNB ) and the withdrawal of 2 million $BNB. $BNB is the native token of the cryptocurrency exchange. A bug in the smart contract triggered the hack, highlighting the need for tighter blockchain security.
The Merge – Spectacular change in energy consumption
The Merge – the event that marks the change of the Ethereum network from Proof of Work (PoS) to Proof of Stake (PoS).
According to Ethereum.org, The Merge is a combination of Ethereum Mainet working under Proof-of-Work with Baecon Chain operating under Proof-of-Stake.
This eliminates the energy consumption used to mine ETH and maintains the security of the network with staked ETH. Simply put, instead of users on Ethereum needing to compete with each other to build high configuration rigs to solve algorithms to confirm transactions on the network, thereby receiving ETH as a reward. Now, users only need to stake 1 amount of ETH into a contract to solve the payment, and also receive ETH rewards. A really exciting step in realizing the Ethereum vision – more scalability, security and sustainability.
On December 1, 2020, Beacon Chain was born but exists separately from the Mainnet.
And on September 15, 2022, the Merge event took place successfully, thereby cutting energy consumption by up to 99.95%. The number achieved is impressive given the concerns about Ethereum miners consuming too much power, which goes against the world’s sustainable development standards.
After the Merge, the creator of Ethereum – Vitalik Buterin said: “This is the first step in Ethereum’s great journey towards becoming a complete system.”
Only the graphics card market was strongly affected after the Merge, many models even fell by nearly 50%. The card market in Vietnam fell into a situation of happy people and sad people, when the miners accepted to liquidate the cards, and those who needed to build PCs, they got a good deal.
Ukraine: Could Crypto Fight Inflation?
February 24, 2022 marks Russia’s special military operation in Ukraine. After nearly six months, the conflict between the two sides shows no sign of ending any time soon. Fighting continues in the east and south as Ukraine tries to retake areas controlled by Russia.
Ukraine is assessed on the weaker side compared to Russia, so all reinforcements are directed to Ukraine. The Ukrainian authorities posted a tweet calling for donations via the first wallet addresses on the Bitcoin and Ethereum (ERC-20) networks. According to statistics from Eliptic, the Bitcoin, Ethereum, TRON, Polkadot, Dogecoin, and Solana network wallet addresses listed in the tweets have received donations worth up to $54.4 million.
In addition, the aid money also comes from the call of Come Back Alive, a Ukrainian Non-profit organization whose goal is to support the Ukrainian military. This fund had previously called for aid through the Patreon portal, but was suspended by Patreon due to policy violations. As a result, Come Back Alive tweeted out the addresses of wallets that received aid in crypto.
According to data from Dune Analytics, up to now, this fund has raised more than 8 million USD.
In addition to the above two sources, aid money is also called from UkraineDAO. Aid assets for Ukraine are mainly Bitcoin and Ethereum, the rest are stablecoins and NFTs. The total amount of aid is about 63.58 million USD.
However, how this money is withdrawn and used is a big question mark. If the Ukrainian government withdraws this amount of crypto and converts it to UAH, it is natural that the UAH will be increasingly depreciated. The fact is that the Ukrainian people have been facing a huge inflation rate, calculated to be up to 26.5% as of November 2022, according to data from Trading Economics. Fuel prices increased by 90% and food prices by 35%. The Ukrainian government had to actively devalue the UAH to avoid falling into a crisis.
Thus, we see that even with aid from crypto, Ukraine cannot avoid inflation. Therefore, aid from crypto is only considered as a means to receive aid from many other countries. However, the use of crypto allows Ukraine to receive more aid from individuals and organizations instead of previously only governments giving aid to each other. Therefore, crypto has indeed brought a breath of fresh air to ease the war situation in Ukraine.
Which path for GameFi and NFT?
2021 is the uptrend and the main trends are GameFi and NFT. Do you remember within just a few months, a series of GameFi projects were born with all kinds of games and attractive features for players. And within just a few months, a series of investment funds emerged by investing tens or hundreds of thousands of dollars in those projects.
An eternal problem that Game projects always face is inflation. Once players come to the game because of the profit the game can bring, they will also leave because the game is no longer profitable. The number of active projects on the networks is decreasing markedly.
According to data from Footprint Analytics, the transaction volume and the number of GameFi-related transactions have fallen sharply, especially from April to now. The number of people playing the game still stands at more than 800,000 people. However, up to the present time, the majority of players have the right purpose of the game – entertainment.
Besides games, another equally exciting market, NFT, was also heavily affected. Total trading volume is down more than 70% from the peak volume in August 2021.
GameFi and NFT create two main pillars in the uptrend season in 2021. However, both cannot keep their vitality when they both reveal many weaknesses that need to be overcome.
For GameFi, those are projects built in too short a time, not completing the core element that makes a game, which is gameplay. Moreover, the ‘earn’ element in the game is too easy to manipulate. Although the in-game token is assigned many features by the development team, it is guaranteed not to be inflation, but in the end is still subject to inflation. The ponzi pattern in the game is still inevitable, the latter paying the first player and at some point, there are no later players.
For NFTs, although the assets are unique, the price of the NFTs is highly dependent on the popularity of the project. That means for someone who doesn’t follow the project, NFTs are worthless, just expensive jpegs.
In the near future, if GameFi and NFT do not have improvements, as a matter of course, both will be eliminated. GameFi’s improvement journey is probably more focused on the ‘play’ element, instead of focusing on advertising for the ‘earn’ element. Gameplay is what helps players stay with the game, because the essence of the game is to attract players to pour in for entertainment, not for rewards. In-game rewards should only be encouraging. Similarly, NFT needs to return to the purpose it was born for, which is to mark true works of art. NFT creators will gradually have their own market, no counterfeiting, no need to secure patents.
Experiencing a turbulent 2022 when affected by the global economic crisis, crypto is still showing full two sides: vulnerabilities and potential for development.
Regarding vulnerabilities, the crisis has exposed many weaknesses in the security and transparency of projects. In particular, the security of the blockchain system is receiving much attention when consecutive hacks occur, the amount of damage is up to billions of dollars. Vulnerabilities in new infrastructure projects were immediately exposed. This raises a big question about whether the developers really test the features on the product before putting it into operation or not? Besides security holes, 2022 also outlines the lack of transparency in the operation of large organizations such as Terralabs, Three Arrow Capital or FTX. Binance is also being watched by US government entities.
In terms of development potential, we see a series of new improvements, the biggest of which is Ethereum when successfully conducting the Merge – the energy revolution. In addition, a series of Ethereum’s layer 2 names have introduced the advantage of extremely low fees, promising huge growth potential. NFT and GameFi playgrounds are also opening up a lot of potential if projects care and invest in the game experience more than just focusing on profits.