The crypto ecosystem is an overview within the decentralized financial market that helps investors visualize where funds are flowing. Let’s learn about the crypto ecosystem through the article below!
What is the crypto ecosystem?
An ecosystem is a complex system with a complete organizational structure formed by the interaction between different elements.
In nature, ecosystems include biotic and abiotic components that interact with and depend on each other. For example, plants need sunlight and water for photosynthesis and growth. Animals can eat plants to survive and provide natural fertilizer for the soil. Bacterial species break down organic matter and regenerate nutrients in the soil.
In the technology world, an ecosystem is an evolving, interconnected network of devices that can rely on each other or operate independently. Powered by different platforms and manufacturers, technology ecosystems are becoming increasingly familiar and common. For example, technology ecosystems such as Apple and Samsung have become an important part of our daily lives.
According to the above definition, the crypto ecosystem is a system of projects that can connect and interact to support the development of blockchain. It can be seen that the blockchain platform plays a role in the crypto ecosystem similar to that of a forest or lake in a natural ecosystem, or the original software in a technological ecosystem.
Projects built on the blockchain are considered components such as plants and microorganisms. These projects will operate simultaneously, connect to each other, and support each other to promote the development of the blockchain ecosystem.
Furthermore, by applying blockchain technology, the crypto ecosystem provides users with access to a wide range of services without relying on a central organization and changes the way the financial world works.
2. Components of the Crypto Ecosystem
For the crypto ecosystem to develop, its components must function smoothly and support each other to promote growth.
The crypto ecosystem helps companies develop innovative products and services, serve people around the world, and provide a variety of decentralized financial services such as payment, remittance, trading, investment, banking, wealth management, and gaming. More specifically, the crypto ecosystem is divided into two main components: off-chain and on-chain:
2.1. Encrypted off-chain ecosystem
Developers
Developers are responsible for creating and maintaining the underlying blockchain technology that runs cryptocurrencies. They also develop blockchain wallets, exchanges, and other applications that make it easier for users to use cryptocurrencies.
2.1.2. Miner/validator
Miners or validators are responsible for confirming transactions on the blockchain and adding them to the ledger. They are rewarded in cryptocurrency for their work.
2.1.3. Exchanges
Exchanges allow users to buy, sell, and trade cryptocurrencies. Exchanges provide a place where buyers and sellers can find each other to exchange tokens.
2.1.4. Enterprise
More and more businesses are beginning to accept and test cryptocurrencies as a payment method. This is increasing the use of cryptocurrencies and making them more useful in everyday transactions.
2.1.5. Investors
Investors buy cryptocurrencies in the hope that their value will grow. They also invest in companies that are developing technologies and applications that use cryptocurrencies.
2.1.6. Users
Users are people who use cryptocurrencies. They can use cryptocurrencies to purchase goods and services, or simply hold them as an investment.
The crypto off-chain ecosystem is still in its infancy, but it has the potential to change the way we think about money and attract more stakeholders to contribute to the ecosystem.
2.2. Encrypted on-chain ecosystem
a/ Infrastructure
2.2.1. Oracle
Oracles are software or hardware that connect real-world data to blockchains and smart contracts. The important function of an oracle is to receive and verify data from external sources (such as market information, APIs) and put it into the blockchain for smart contracts to use, and vice versa. In simple terms, an oracle acts as an intermediary between off-chain data and on-chain data.
2.2.2. Indexer
An indexer is a program that creates a location where information can be retrieved and blockchain data can be searched. This functionality makes it possible to quickly and easily find information on the blockchain, including transaction data, smart contract logs, and other events.
Blockchain indexers play an important role in many applications, including decentralized applications (dApps), blockchain browsers, and analytics platforms. For dApps, indexers provide on-chain data access, enabling users to quickly retrieve transaction operations without waiting for a third party.
For blockchain explorers, indexers provide data for web pages that enable users to view and interact with blockchains. For analytics platforms, indexers provide data to track and analyze trends in the cryptocurrency market.
2.2.3. KNIFE
DAO (Decentralized Autonomous Organization) is a decentralized autonomous organization. Simply put, DAO is a community with shared values. The characteristics of DAO include:
Voting Rights: Members of a DAO have the right to vote in governance decisions.
Flat and flexible system: DAO breaks down the hierarchy and creates a flexible working environment.
Resource Allocation: The DAO allocates resources to achieve its core goals.
For more information, see DAO 101 – All About Decentralized Autonomous Organizations (DAOs).
2.2.4. Wallet
A blockchain wallet is a cryptocurrency wallet that is connected to the internet, allowing users to access it from anywhere and quickly make transactions. Blockchain wallet software can be installed on computers and mobile phones, and users are responsible for managing private keys. There are many popular blockchain wallets, such as Metamask, Exodus, Trust Wallet, Coin98 Wallet, Zerion, and Phantom.
2.2.5. EVM
EVM is a virtual machine in the Ethereum network, used to interact with the Ethereum blockchain through smart contracts and in accordance with the rules of Ethereum. It runs on each node in the network and determines the state of the system and calculates the new state on the Ethereum chain.
b/ DeFi
2.2.6. DEX
DEX (decentralized exchange) is a decentralized exchange where all transactions are conducted directly between users (peer-to-peer network) through an automated process without the intervention of a third party or intermediary. This allows users to have full control over their assets and transactions without having to worry about security, hacking or fraud.
2.2.7. Staking
Staking is the process of storing a certain amount of digital currency in a blockchain project's wallet for a period of time to receive rewards. The amount of the reward depends on how much and when you invest. This is similar to depositing savings in a bank and earning interest after a certain period of time.
However, when participating in staking, you are a supporter of a blockchain project that uses a proof-of-stake mechanism to improve the security, transaction speed, and scalability of the project. At the same time, participating in Staking will not have a significant impact on the environment and energy consumption like the proof-of-work mechanism.
2.2.8. Lending , Borrowing
In the cryptocurrency space, lending is the process of borrowing and lending tokens, which can be done through centralized or decentralized platforms.
Centralized platforms act like traditional banks, acting as intermediaries between borrowers and lenders. Lenders deposit cryptocurrencies into the platform, and borrowers can borrow that cryptocurrencies. The platform collects interest fees on loans and deposits, and uses that interest to generate revenue.
2.2.9. Synthetic
Synthetic assets are financial instruments whose price is pegged to an underlying asset but do not represent ownership of that asset. They are created through self-executing contracts (smart contracts) stored on a blockchain.
2.2.10. Stablecoins
Stablecoins are also known as stablecoins. This is a cryptocurrency developed on the blockchain that has a stable value. The price of stablecoins is pegged to other stable assets such as gold or fiat currencies (such as the US dollar, euro, Vietnamese dong).
2.2.11. Bridge
A bridge is a bridge between multiple independent blockchains. You can think of a cross-chain bridge as a "middleman" connecting two different blockchains, allowing users to transfer tokens, use smart contracts, exchange data, and use other functions.
2.2.12. Launchpad
Issuance platforms, also known as cryptocurrency incubators, are platforms that allow projects to raise funds from investors. Early access to projects means that investors can buy at a lower price before the project is publicly sold on the market.
2.2.13. SocialFi
SocialFi is a combination of social networking and decentralized finance (DeFi) features. The SocialFi platform provides a Web 3.0 solution for creating, managing, and owning social media accounts and content.
What makes SocialFi special is that content creators, influencers and members have greater control over their data, enjoy freedom of expression, and are able to monetize their interactions on the social network.
3.1. Ethereum
The Ethereum ecosystem is the one that attracts the most external capital inflows in the crypto market. This is not only because of the security of the entire ecosystem, but also because there are a relatively large number of high-quality projects on Ethereum.
3.2. BNB Chain
BNB Chain is an ecosystem supported and developed by Binance, which is currently the largest centralized exchange. With this feature, developers of decentralized applications will be more interested in the BNB ecosystem.
3.3. Polygon
Polygon (formerly known as Matic Network) is a second-layer blockchain platform with great potential in 2023. The platform provides scalability to Ethereum, reduces transaction costs and increases transaction confirmation speed. Polygon was developed to solve the problem of slow and high transaction processing speed on Ethereum. Because of this, many projects on Ethereum migrated to Polygon and developed on it.
3.4. Solana
The Solana ecosystem is a fast-growing ecosystem of decentralized applications, protocols, and tools built on the Solana blockchain. Due to the Proof of History mechanism, projects on Solana have fast transaction speeds, attracting many projects that need to focus on TPS.
3.5. Come on
Sui is a new generation blockchain project that has the advantages of scalability and low latency. It achieves this by processing transactions in parallel, making more efficient use of resources and expanding processing power.
However, since Sui is a recently developed ecosystem, it uses the Move programming language instead of Solidity, resulting in the products in this ecosystem being less diverse and rich than those in the already developed ecosystems.
3.6. Apartments
Aptos is a specially developed Layer 1 blockchain platform designed to solve key issues faced by existing Layer 1 platforms such as reliability, scalability and ease of use. Through a unique technology called Block-STM, Aptos is able to process more than 130,000 transactions per second while keeping transaction fees low.
Similar to Sui, Aptos is a new blockchain ecosystem, so the scale of capital flow in this ecosystem has not yet reached the scale of previously developed ecosystems, and it has not yet attracted the participation of many investors and developers.
Summarize
Through the above articles, I have provided you with information about the crypto ecosystem and the necessary components it needs to grow. Hopefully, this information will help you maintain an objective and strategic investment perspective in this volatile market. Good luck!
