Autor Cointelegraph By Shiraz Jagati

While 2021 did provide some sort of respite for investors operating across the global crypto landscape, it was still largely been driven by fears that first reared their ugly heads back in 2020. From rising inflation rates to another wave of coronavirus-related outbreaks, the ground beneath everyone’s feet continued to move even without them knowing. For example, while everyone assumed that Bitcoin (BTC) would hit a price target of $100,000 quite easily — including many traditional financial institutions — by the turn of the new year, the flagship crypto continued to showcase a high degree of volatility despite having touched an all-time high of $69,000 earlier in November, and essentially just moved in a broad sideways channel for the past ten months. That said, there have been a lot of developments — mostly positive but some negative as well — surrounding Bitcoin this year. In this piece, we will look to explore many of these themes and much more. So, without any further ado, let’s get straight into the heart of the matter.Adoption gains momentum as El Salvador leads the roostKnown as the “Land of Volcanoes,” the Central American nation of El Salvador shocked everyone in 2021 by becoming the first country to adopt Bitcoin as legal tender, potentially paving the way for other countries to follow suit, especially those being faced with issues related to rampant inflation — looking at you, Turkey, Venezuela and Zimbabwe.I’ve just sent the #BitcoinLaw to Congress pic.twitter.com/DljnxsXlyt— Nayib Bukele (@nayibbukele) June 9, 2021And, even though the move hadn’t quite converted El Salvadorans into overnight BTC proponents, President Nayib Bukele has been quite strategic in his approach when it comes to overhauling his country’s economic woes. Citizens were given access to a Chivo crypto wallet while he has also vowed to address the internet connectivity issues that currently plague the country.Lastly, El Salvador’s highly touted “Bitcoin Bond” — which makes use of a federated BTC sidechain to issue a legally viable monetary bond — is being viewed by many as an attractive money-making avenue since it offers users with a novel means of investing in the currency as well as providing them with a chance to obtain the county’s citizenship.Bitcoin transactions garner momentumThe Lightning Network (LN) showcased a tremendous amount of growth over the course of 2021 with a growing amount of funds being poured into various LN channels — especially with more nodes popping up online, seemingly with each passing day. Statistically speaking, there is more than 3,300 BTC locked across various public Lightning channels, at the time of writing, with more funds likely contained within other private/unannounced channel networks that are currently being operated between various exchanges. In terms of improvements, the infrastructure of the Lightning Network underwent a number of major overhauls this past year (such as Amboss), improving the systems’ native node administrative capacity as well as retail customer UX for Lightning wallets. Looking ahead, LN’s BOLT-12 module promises to make recurring payments easier as well as enable other useful features such as donations via static QR codes.Taproot makes its long-awaited debutOne of the biggest breakthroughs for the Bitcoin network since the SegWit overhaul of 2017 — a process by which the block size limit on asset’s blockchain was increased by removing signature data from transactions included in each block — was the activation of the Taproot upgrade. Taproot is basically designed to help the flagship cryptocurrency’s community of backers and core developers gain access to better a “policy privacy” framework, allowing them to not reveal all of the possible ways through which they could potentially spend their BTC. Bitcoin Node Taproot Support: 63.49%Node count:Taproot: 31329Non-enforcing: 17122Light: 33Unknown: 863 pic.twitter.com/svgeSmRKxM— Taproot Signal (@taproot_signal) January 1, 2022

To be a bit more technical, the update enhances the efficacy of certain multisignature setups all while making individual transactions on the Lightning Network more secure and privacy-oriented.That being said, in order for these advantages to truly see the light of day, a little more work may be needed, particularly on the MuSig2 — a simple and highly practical two-round multisignature scheme that makes transaction facilitation hassle-free for Bitcoiners — front as well as in relation to certain technical niches associated with Lightning Network-based client implementations and improved hardware wallet support functionality (meant solely for Taproot).Mining disruption caused by China A piece of news that had Bitcoiners, as well as crypto enthusiasts in general, a little shook this past calendar year was when China imposed an unequivocal blanket ban on its local crypto economy. Even though the eastern powerhouse has issued many such prohibitions in the past, this time the threat was a lot more serious, as a large number of crypto mining firms had to relocate from the country’s borders in order to keep their operations alive — with many even having to close shop permanently.Following the mass exodus that took place after the ban came into effect, Bitcoin’s hash rate dropped quite to record lows — sliding from around 180 exa-hashes per second (EH/s) to about 90 exa-hashes per second (EH/s) — only to make a swift recovery shortly thereafter. Much of the BTCs hash rate recovery was attributed to miners migrating to more hospitable parts of the world including the United States of America, Kazakhstan, Canada, Belarus, etc. After the ban, the crypto market also witnessed a growth in the number of publicly-listed miners, showcasing the ability of these firms to tap into debt capital markets as well as scale dramatically thanks, in large part, to their ability to borrow massive sums of money against their natively mined crypto. Infrastructure development surges Bitcoin’s ever-growing community of backers continued to pour money into the digital asset’s technical development. In this regard, organizations such as Spiral, Blockstream and MIT’s Digital Currency Initiative doled out sizable funding as well as sponsorship grants to help Bitcoin Core devs based all across the globe.Other organizations that also made sizable donations to help spur the growth of the Bitcoin ecosystem included Chaincode Labs, the Humans Rights Foundation and a cryptocurrency exchange BitMEX, whose grants were meant to help awardees carry forward their work in relation to improving the reliability of the Lightning Network’s payment system as well as improving the implementation of the Stratum v2 Bitcoin mining pool protocol.Major mainstream companies add Bitcoin to their coffersNo story regarding Bitcoin’s recently concluded calendar year could be complete without mention of how some of the biggest investors in the world continued to load up on the flagship crypto. In this regard, 2021 started off with the Dogefather aka Tesla CEO Elon Musk investing a cool $1.5 billion in Bitcoin, making it one of the largest investments into the flagship crypto by a mainstream corporation.For a brief window of time, Tesla even noted in an SEC filing that it was going to allow its clients to use BTC as a medium of payment for its various offerings — a decision that was eventually rescinded. As was to be expected, soon after Musk’s apparent backing of the digital asset became public knowledge, its price shot up to a then all-time high of $43,000 within a matter of minutes.You can now buy a Tesla with Bitcoin— Elon Musk (@elonmusk) March 24, 2021

That said, the only man to outdo Musk with his Bitcoin purchases this year was Microstrategy CEO Michel Saylor whose maximalist attitude was reflected by his constant accrual of the premier cryptocurrency, both when it was hovering at its all-time highs as well as lowest levels. Numbers-wise, Microstrategy now lays claim to a whopping 124,391 BTC that were purchased for nearly $6 billion. Conservative estimates suggest that the firm has already accrued $2.1 worth of profits from its BTC investments.Financial institutions join in the actionSoon after Musk made his foray into the world of Bitcoin, a number of other financial services giants such as Mastercard and U.S.-based lender Bank of New York Mellon proceeded to start offering their clients a wide range of crypto-related services spanning from custody to payments.Similarly, U.S. Bank, America’s fifth-largest commercial financial entity, also revealed that it was offering its clients a fully functional crypto custody service, assisting them in storing their private keys for Bitcoin, Bitcoin Cash (BCH) and Litecoin (LTC) with help from NYDIG. State Street and Northern Trust were among the other major U.S.-based financial institutions to disclose similar plans.At the start of the year, Nasdaq-listed Marathon Patent Group went ahead with a $150 million purchase of Bitcoin as part of its reserves, a decision that was followed by social media juggernaut Twitter enabling a ‘crypto tipping’ option for its patrons. Not only that, but Jack Dorsey helmed payments provider Square also announced that it was going to be allocating 5% — estimated to be worth $170 million — of its assets to Bitcoin.Lastly, a number of other firms including WeWork, AXA and Substack also announced their decision to start accepting payments in Bitcoin — a move that was aped by companies of a relatively smaller market cap across the globe.Conversations surrounding Bitcoin’s environmental impact grewAnother major topic of contention surrounding Bitcoin last year was the currency’s environmental impact, with an increasing amount of studies revealing the digital currency’s massive annual power consumption. To put things into perspective, a University of Cambridge analysis noted that Bitcoin utilized 707 kWh per transaction which works out to a whopping approximately 121.36 terawatt-hours a year. This energy has been touted to be more than the power needs of many major countries like Argentina, the Netherlands, and the United Arab Emirates (UAE) among others. The collision of bitcoin miners and energy executives is only beginning.Financial incentives will completely change the oil and gas industry, while making a positive impact on the environment. https://t.co/UcXUbaciib— Pomp (@APompliano) September 4, 2021

In recent months, however, an increasing number of mining firms are transitioning toward the use of renewables. For example, MintGreen, a Canada-based cleantech cryptocurrency mining outfit recently signed a deal with Lonsdale Energy Corporation to supply heat generated from BTC mining to the residents of North Vancouver in British Columbia by the start of 2022.Similarly, many other firms including CleanSpark and Bit Digital have transitioned toward a more environmentally conscious means of harvesting Bitcoin. In fact, a study recently released points to the fact that hydroelectric power is the most common source of energy for miners presently, with a little over 60% of all mining farms across the globe utilizing this renewable power medium to facilitate their day-to-day operations.Global regulatory scrutiny increases greatlyChina wasn’t the only country to formulate and initiate a comprehensive ban on Bitcoin this year with many other nations including Egypt, Algeria and Iraq also imposing blanket bans on crypto businesses operating within their borders. This could partially have been because, over the course of Q3, Q4 2021, more than a dozen public and private mining companies were able to accrue hundreds of millions of dollars, forcing regulators to start taking notice of this space like never before.Monetarily speaking, the increased regulatory pressure was compounded by the fact that Bitcoin miners were able to generate over $15.3 billion in revenue, a number that represented a year-on-year increase of 206% when compared with 2020. This may have caused governments to start looking at ways in which to control this sector’s exponential growth.Finance Minister remarks on the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.Sourcehttps://t.co/LcKeY2RYn5 pic.twitter.com/JKMPZpOLq1— Kashif Raza (@simplykashif) July 5, 2021

In some countries like India, where cryptocurrencies seemed to have gained a strong foothold over the last few months, the government decided to start looking at ways of introducing new laws — namely the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 — seeking to prohibit “private cryptocurrencies,” a term whose definition that has yet to be made clear. That said, India is still keen on promoting the use of blockchain tech as well as certain other digital assets that can wholly fall under its regulatory purview.Bitcoin ETF makes its debut on the NYSEOctober 19, 2021 was hailed as a landmark date by crypto enthusiasts all over the globe, as it was the day when the world saw the debut of the world’s first Bitcoin exchange-traded fund (ETF) on the New York Stock Exchange (NYSE). ProShares’ Bitcoin Strategy ETF became the world’s first U.S. exchange-traded fund based on Bitcoin futures to be approved by the United States Securities and Exchange Commission (SEC), allowing investors across the board with a novel means of investing in the premier cryptocurrency. As soon as the offering made its debut, it attracted a record amount of institutional capital. In fact, the demand was so monumental that soon after its launch, the CME Group — ProShares’ Bitcoin Strategy ETF’s parent issuer — had to file an application with the SEC asking the regulatory body to lift any restrictions pertaining to the maximum amount of contracts that one could buy in relation to the ETF.Coinbase IPOAnother event that may not be associated primarily with Bitcoin but was representative of the currency’s growing market clout (as well as mainstream acceptance) was that of Coinbase’s initial public offering (IPO) that saw the cryptocurrency gain approval of the traditional finance market. Coinbase’s IPO debut saw the stock open at a price point of $381, a number that was significantly higher than its pre-listing reference price of $250 — something that directly alluded to heightened institutional demand for the crypto-focused stock. Looking ahead toward 2022Moving into the new year, Bitcoiners all over the world are anxious to see how the future plays out for the market, especially with fears of inflation and economic instability looming large across the globe. That said, it appears as though the ecosystem surrounding the digital asset has continued to mature, with an increasing number of conferences and meetups all set to take place in 2022.Related: NFTs find true utility with the advent of the Metaverse in 2021Also, as an increasingly decentralized future looms closer, more people are beginning to realize the importance of securing their BTC — especially in the way they spend/receive their coins as well as facilitate their transactions in a private manner.

As regulatory uncertainty continues to plague the global digital asset ecosystem, there are many anti-crypto proponents who continue to harp on the fact that the industry as a whole has a long way to go when it comes to securing itself in a manner that is anywhere comparable to the traditional finance system. Now, with the recent Bitmart hack coming to light, these individuals have been given even more firepower.To recap, on Dec 5, cryptocurrency exchange Bitmart was on the receiving end of a major hack that saw the platform lose nearly $200 million via a hot wallet compromise hosted over the Ethereum and Binance Smart Chain blockchains. The breach was first exposed by blockchain security firm Peckshield whose cybersecurity team revealed that nefarious third parties were able to initially transfer roughly $100 million via the Ethereum blockchain, followed by another concurrent hack of $96 million using the crypto exchange’s BSC reserves.The hackers were able to accrue over 20 tokens including a number of altcoins such as Binance Coin (BNB), SafeMoon (SAFEMOON), BSC-USD and BNBBPay (BPay). They were also able to steal decent quantities of meme tokens including Baby Doge Coin (BabyDoge), Floki Inu (FLOKI) and Moonshot (MOONSHOT). As per PeckShield’s security team, the entire scheme can be attributed to a simple “transfer-out, swap and wash” maneuver.Bitmart respondsTo gain a better understanding of how the entire incident came to be, Cointelegraph reached out to Bitmart. A spokesperson for the trading platform pointed out that as soon as the breach was discovered, the firm took action by shutting down multiple systems to “limit any sort of immediate harm” — the actions included halting token withdrawals as well stopping users from trading certain pairs. The representative added:“We plan to continue to gradually restore services but only following our security team’s thorough testing process. Security remains our No. 1 priority. In fact, as of Tuesday, Dec. 7, 2021, EST we have resumed ETH and ERC20 token deposits and withdrawals.”Additionally, a written response from the exchange also highlighted that in order to bolster its native security infrastructure, Bitmart had replaced all of its token deposit addresses in relation to currencies like Bitcoin (BTC), Ether (ETH) and Solana (SOL), as well as all the other tokens involved in the incident. “We have also notified our users of the pertinent changes”, the statement closed out by saying.Lastly, on Dec 6. Sheldon Xia, founder and CEO of BitMart, announced via Twitter that the xchange was going to be using its own funding to compensate for any losses emanating as a result of the incident: “We are also talking to multiple project teams to confirm the most reasonable solutions such as token swaps. No user assets will be harmed.”The crypto community shows solidarityFollowing the near $200-million hack, members of the global Shiba Inu (SHIB) community and crypto exchange Huobi Global jumped in to offer Bitmart with any sort of assistance needed by the exchange to not only strengthen its existing security setup but also to keep an accurate tab on the inflows of its misplaced assets.Speaking with Cointelegraph, Huobi’s director of global strategy Jeff Mei noted that in cases like the one witnessed in relation to Bitmart, it is a must that transparency and immediate action be given top priority, adding:“Exchanges should alert their users, other exchanges and law enforcement authorities as soon as possible and be transparent about what they are doing to handle the hack and the loss of user funds.”Additionally, Mei emphasized that users should avoid pooling all of their assets on a single platform or a single wallet, and in cases where they feel something fishy might be going on, users should not hesitate to reach out to the relevant exchange and tell them about the potential security incident.Much like Huobi, the Shiba Inu community also confirmed its intentions to help Bitmart, adding that it had already ramped up its efforts to review any potential security threats for ShibaSwap, a community-built decentralized exchange (DEX).More education is neededRaimundo Castilla, CEO of digital asset custody platform Prosegur Crypto, told Cointelegraph that what happened to Bitmart with its recent security breach was something that was easily preventable only if the platform’s users had been educated enough to keep their digital assets externally and not on the exchange itself:“Hot wallets should be reserved just for the funds you want to trade with. This amount of money should have been guarded on cold storage with an air-gapped system and 100% offline transactions.”Nevertheless, Castilla went on to add that in order for platforms like Bitmart to prevent future incidents, they need to employ a combination of innovative technologies coupled with rigid governance protocols. For starters, their private keys shouldn’t have been guarded online since anything stored online is susceptible to being attacked regardless of how well it may be protected. “They should have worked with whitelisting so even though someone gets access to any private key, he could only send funds to a pre-confirmed wallet direction”, he elucidated.Moreover, Bitmart could have potentially employed an advanced multiparty computation (MPC) co-signing system that made use of a multisignature approval module. This would have required the hackers to need several people to approve the transactions in question. Castilla added that: “Hacking just one private key can do nothing at all.” Furthermore, someone performing the role of a key account manager could have stepped in and “stopped the transaction to get to the client to see if it was legitimate.”Better security measures are the need of the hourWith the crypto ecosystem seemingly under an ongoing onslaught of nefarious hacking incidents, it is worth noting that recently digital asset lending platform Celsius also confirmed that it had been faced with a loss of $50 million via an exploit related to decentralized finance (DeFi) protocol BadgerDAO.Reports of the attack first surfaced on Dec 9. with the protocol’s core developer team announcing that they received “multiple exports of unauthorized withdrawals” related to their clients. After, they paused all of their existing smart contracts so as to mitigate any more potential losses.That said, it hasn’t all been bad news recently, as cross-chain protocol Synapse Bridge revealed that on Nov. 9, its security team was able to avert a multimillion-dollar exploit on the Avalanche Neutral Dollar (nUSD) metapool, preventing miscreants from making their way with nearly $8 million worth of digital currencies.