This post will focus entirely on Chainalysis’ 2021 Global Cryptocurrency Adoption Index, which is intended to provide an objective measure of countries by volume of transactions, including those made by individuals. A large part of this presentation will be allocated to the presentation of the methodology and the results of the investigations on this question of adoption. Another part will be devoted to the 3 predictions issued by the blockchain analysis company for 2022.
One index and three measurements
In its endeavor to identify the rate of adoption of cryptocurrencies in 2021, Chainalysis has established a global character index authorizing a classification of 154 countries according to three measures. Which were preceded by the establishment of the following principles:
– establishment of a geometric mean of the ranking of each country according to the measures considered;
– normalization of the final number on a scale of 0 to 1 in order to obtain the score determining the general classification. Thus, the closer the final score is to 1, the higher the country’s ranking.
Measure 1: Value of cryptocurrencies received on the channel, weighted by purchasing power parity (PPP) per capita
Here, the goal was to rank each country based on the completeness of cryptocurrency movements and weight the rankings to favor countries based on the average wealth of the people and the overall wealth of the country.
The calculation of the metric was based on the total estimate of cryptocurrencies obtained by a country, plus an on-chain value weight fluctuating according to the PPP per capita (a measure of the country’s wealth per resident).
The higher the ratio between the on-chain value obtained and the PPP per capita, the more the country has the chance to rise to the top of the ranking. In case of dead heat, the Chaynalisis team assigns first place to the country with the lowest PPP per capita.
Metric #2: Retail value transferred on-chain, weighted by PPP per capita
This is a measure aimed at evaluating the activities of individual users of cryptocurrencies, or more precisely non-professionals, according to the quantity of assets exchanged on the basis of this notion of average wealth per person. Thus, the movements made by individuals were considered by measuring the amount of currencies transferred within the framework of the transaction in detail. These should not exceed the $10,000 mark in crypto.
A new ranking will emerge from this measure which will be weighted according to PPP per capita. The favored countries are those with a very low PPP level.
Measure 3: Trading volume peer to peer (P2P), weighted by PPP per capita and number of internet users
The volume of P2P exchanges takes up a large share of the overall crypto business. Analysis of emerging markets confirms this.
This index is based on a classification of countries according to their Peer-to-Peer exchange volume, which will then be weighted to ensure that the country with a low PPP per capita and a lower number of Internet users will be favored.
The goal is to highlight countries with several inhabitants who carry out P2P cryptocurrency transactions according to their overall wealth.
2020 methodology vs 2021 methodology
This index established in 2021 no longer includes the 4and measure considered a year earlier. Which incorporated the number of filings per country, weighted by the number of internet users.
This measure aims to determine residents by country carrying out the most transactions in cryptocurrency. After obtaining such data, the Chaynalisis team will have the facility to enter the number of individuals using cryptocurrencies and also to simulate the countries with inhabitants carrying out the maximum transaction per user.
However, this measure has its limits, among other things the lack of visibility, for Chainalysis, relating to transactions within centralized services such as stock exchanges since they are not entered on the chain and only appear in their transaction books. ‘order.
The agency supports this removal of measure (or update) because of an anecdote about transactions made by users of the DeFi protocol. Indeed, these all appear on the channel, knowing that no withdrawal of assets will ever be made by any centralized service. Result: The ranking was skewed as it favored countries with more DeFi users.
What results for 2021?
This table ranking 20 countries according to their level of adoption of cryptocurrencies in 2021, and including other rankings according to the three parameters mentioned above, is the result of this investigation.
In addition, 3 major trends should be identified for the year 2021, namely: the increase in the overall adoption rate of cryptos, the increase of the same rate in emerging markets supported by P2P platforms and the downgrading of the China and the United States in the Chainalysis ranking.
Increase in overall cryptocurrency adoption rate
According to the data collected, more and more residents in various countries are flocking to cryptocurrencies. If at the end of the second quarter of 2020, the agency posted a score of national indices added to 2.5, this figure was multiplied by 10 a year later, i.e. 24 at the end of Q2 2021.
In other words, the global adoption rate has increased by 2300% since the third quarter of 2019, and by 881% in 2021.
Why such excitement? The reasons are:
– desire to preserve the economy in the face of the devaluation of a local currency by choosing cryptocurrency;
– making institutional investments in North America, East Asia and Western Europe;
– increase in the prices of crypto currencies,
Increased adoption rate of cryptocurrencies in emerging markets boosted by P2P platforms
These emerging markets are represented by countries such as Kenya, Venezuela, Nigeria and Vietnam. Which have been awarded a good place in the Chainalysis index due to the huge trading volumes recorded on the platforms Peer to peer. It should be noted that a weighting according to the PPP per inhabitant and the number of Internet users was carried out on occasion.
A small comparison between countries with larger economies such as Eastern Asia and Western Europe, certain countries in Latin America, Central and Southern Asia or even Africa show a significant number of traffics on platforms peer to peer. International transactions, individual fund transfers, commercial uses (purchase and sale of goods)… so many motives justify this situation.
It should be noted that these results were preceded by interviews with experts from these countries, which reveal findings such as the problem of access to centralized exchanges causing increased use of P2P cryptocurrency exchanges.
China and USA demoted in Chainalysis ranking
Blockchain analytics firm’s global adoption index puts China 4thand rank in the ranking, the United States at 16and rank. In 2021, the Middle Kingdom offers itself the 13and position, the land of the free lies in 18and position.
This decline is justified by the fall in the volume of P2P exchanges weighted by the population using the Internet in the two countries. Consideration of this measure has shown that China has gone from 53and at 155and rank, and a tilting American empire from the 16and at 109and rank.
An in-depth analysis led to the following connections: the decrease in the volume of P2P transactions in the United States would be driven by the professionalization and the increasing institutionalization of the cryptocurrency trade, and a government crackdown on the same type of trade for China.
What predictions for 2022?
For this new year, Chainalysis collaborators have made three predictions.
Constant evolution of the NFT market
The rise of the NFT market in 2021 is at the heart of many debates. Chainalysis researchers have advanced the cryptocurrency equivalent of $26.9 billion sent to Ethereum smart contracts related to NFT marketplaces and collections.
Here are the words of Ethan McMahon, economist at Chainalysis:
” In 2022, we expect investment techniques, such as the use of bots by investors looking to buy during coin-minting events, to continue to grow and could potentially crowd out less sophisticated users. “.
” We also believe that more artists, creators, celebrities and even video game manufacturers will launch collections aimed at their fans; and many more use cases we don’t know about yet “.
Launch of the first special cryptocurrency app store
The year 2021 was marked by a plurality of solutions facilitating the purchase of cryptocurrencies. Fintechs and exchange platforms competed in imagination to provide users with so many alternatives.
For 2022, we expect the development of the cryptos app store, following, of course, a competition in which several players will participate.
Philip Gradwell, Chief Economist at Chainalisys, argues that “ Web 2.0 has proven that platforms are very popular with consumers, and I’m sure that will continue in Web 3.0 “.
It is up to him to add that ” currently, there is no crypto platform that owns customer relationship and aggregates vendors. I think that in 2022, many companies will try to build this platform, with Coinbase leading the way because it already integrates DeFi and NFTs. »
Fighting crime supported by cryptocurrencies
Many believe that cryptocurrencies are anonymous and untraceable. Reason for which they accuse them of being at the origin of the proliferation of criminality and illicit activities. Which seems completely false since blockchains, which have a public and immutable character, grant much more transparency to these digital currencies. On the contrary, cryptocurrencies will be a very effective tool in the eradication of crime for companies and competent authorities.
Gurvais Grigg, Global Public Sector Chief Technology Officer at Chainalysis, believes that “ the traceability of cryptocurrencies will therefore become fundamentally crucial to counter criminals in 2022 “.
His prediction for the year 2022 can be found in this statement:
” So, if global adoption of cryptocurrencies continues to evolve, law enforcement training improves, and business investment in cybersecurity increases, cryptocurrencies will soon be recognized as an invaluable tool, not as an obstacle, to help us bring down the criminals “.
Having reached the end of this long presentation, we hope to have provided ample explanations on the Chaynalisis methodology, guaranteeing the veracity of the results on the increase in the rate of adoption of cryptocurrencies in 2021. Otherwise, the predictions for 2022 contained in this article let us imagine that these assets still have a long way to go this year.
The blockchain and crypto revolution is underway! And the day when the impacts will be felt on the most vulnerable economy of this World, against all hope, I will say that I had something to do with it