Although the crypto market as a whole has taken a beating over the last few weeks, crypto.com’s CRO has been hit particularly hard. This is because of crypto.com’s sudden announcement that it would be making significant changes to its popular crypto products, and many are wondering what this all means for CRO’s future potential. Today I’m going to give you a bit of background about crypto.com and CRO, bring you up to speed on some important updates, and explain why CRO might still have long-term potential. Let’s see why CRO could see a recovery.
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What is CRO?
If you’re unfamiliar with the complex relationship between crypto.com and CRO, here’s what you need to know. Crypto.com is a crypto company that was founded back in 2016 and it’s sort of a one-stop shop for cryptocurrency. Crypto.com offers everything from crypto trading, crypto borrowing and lending, crypto staking, crypto payments and even NFT trading.
Crypto.com’s most popular products are its crypto debit cards, and this is primarily because they offer a series of benefits like cashback rewards on purchases, free subscription services for Spotify and Netflix, travel discounts and increased cryptocurrency staking rewards.
Crypto.com’s crypto debit cards are also made of solid steel, which not only makes them durable but let’s you flex hard on the no coiners when you’re running errands or eating out. Almost all of crypto.com’s products and services leverage CRO in some way, and in the case of its metal crypto debit cards, purchasing them requires buying and locking up CRO for no fewer than 180 days.
CRO was introduced in late 2018 as an ERC 20 token on the ethereum blockchain and has since become the native cryptocurrency coin of two blockchains, the crypto.org chain and the Cronos chain. The crypto.org chain launched last March and has since been integrated into many of crypto.com’s products and services. Like almost every other exchange chain, the crypto.org chain was built using the Cosmos SDK. This means it uses a proof-of-stake blockchain that can process up to 10,000 transactions per second. The trade-off is, of course, centralization, with the crypto.org chain only having 100 validators, but for what it’s worth, all these validators are run by independent third parties.
On the crypto.org chain, CRO is used for staking to pay for transaction fees and for governance. Note that a portion of the supply was allocated to staking rewards for validators on the crypto.org chain. Like many other cosmos-based blockchains, the crypto.org chain has limited smart contract functionality. This is where the Cronos chain comes in. The Cronos chain launched last November and has also been integrated into many of crypto.com’s products and services since that time. Like the crypto.org chain, the Cronos chain was built using the Cosmos SDK. The main difference is that the Cronos chain leverages the Ethereum virtual machine for smart contract functionality, and the EVM’s built-in constraints mean the Cronos chain can process between 200 and 300 transactions per second.
Another difference is that the Cronos chain is only secured by 25 validators. It uses proof of authority rather than proof-of-stake. You must know that validators on proof of authority chains must prove their identity to some centralized authority, in this case, the company behind the Cronos chain.
While CRO is used to pay for transaction fees on the Cronos chain, it seems no additional CRO was allocated to validators, as they do not need to stake. They also don’t seem to earn very much by way of transaction fees, and CRO holders do not have governance over the Cronos chain. This barely scratches the surface of the complex relationship between crypto.com, the crypto.org chain, and the Cronos sidechain.
Updates Part 1
It’s been about six months since I last covered CRO. It’s safe to say that a lot has happened since then, and not just in the last couple of weeks. Crypto.com announced that it had purchased the naming rights to the famous Staples Center stadium in Los Angeles for 20 years at a cost of $700 million. Crypto.com also announced that it had partnered with Silvergate to facilitate USD deposits and withdrawals for users in the United States.
In early December, the crypto.org chain announced the Draco 2 upgrade, which increased its blockchain smart contract functionality and native coin issuance via the Cosmos IBC. The Cronos chain also announced its first round of ecosystem grants courtesy of particle B, a startup accelerator for Cronos that received nearly 1 billion CRO in February last year.
Meanwhile, Crypto.com announced that it had purchased two exchanges in the United States to expand its exchange offerings in the country. In mid-December, the Cronos chain announced its integration with the Cosmos IBC, making it possible for it to seamlessly interoperate with other cryptocurrency blockchains that have integrated IBC since mid-January. Select crypto.com ads were banned here in the UK by our infamous advertising standards authority on the grounds that they were misleading. This was pretty ridiculous given that there are literal coins being advertised all over the country to this day, not naming any names here.
Crypto.com also announced that its venture capital arm would be increasing the size of its next fund from 200 million to 500 million dollars, money that reportedly came from crypto.com’s balance sheet. That same day, it was reported that crypto.com had suspended withdrawals for all its users after ‘suspicious activity’ on its platform.
A few days later, crypto.com revealed that almost 500 of its users had been hacked and that their accounts had been drained of over 34 million dollars in crypto. Luckily, all affected users were quickly refunded by crypto.com. The company also revamped and migrated to a completely new 2FA infrastructure and introduced an account protection program that covers up to $250,000 in losses per user.
At the end of January, the Cronos chain integrated with terror via the Cosmos IBC, bringing Terra’s UST stablecoin to the Cronos chain ecosystem now.
Updates Part 2
Anyways, in early February, the crypto.org chain announced that it had issued its first coin using the Cosmos IBC, which was the Polka.dot. Not to split hairs, but it’s worth pointing out that this IBC enabled dot is technically a wrapped token living on the crypto.org chain backed by actual dot coins being held by crypto.com, not a coin native to the crypto.org chain.
In mid-February, crypto.com made the news because of its epic crypto ad, which aired during the 2022 Super Bowl. The ad was called “The Moment of Truth” and it has since received almost 24 million views on YouTube. That’s in addition, of course, to the 208 million who saw it on live TV.
The Cronos chain also announced that the CRO cryptocurrency would henceforth be simply referred to as Cronos. According to the blog post, ‘the new name properly reflects the decentralized nature of CRO and recognizes the explosive growth of the Kronos ecosystem’.
In early March, crypto.com suddenly announced that it had blocked access to its lending services to users located in over 40 different countries and asked that any users in those countries with existing loans repay them in about a week’s time.
Crypto.com also announced that it began rolling out its crypto exchange platform in the United States, though it still seems to be limited to institutional investors for the time being. At the end of March, Crypto.com announced that it had become the official sponsor for the upcoming FIFA World Cup in Qatar for an undisclosed amount. My guess is that it will be hundreds of millions. Shortly afterwards, Following in the footsteps of other well-known cryptocurrency companies such as Binance and FTX, Crypto.com announced the establishment of a regional headquarters in Dubai.
Updates Part 3
Anyhow, in April, the Cronos chain announced that it had bridged to a cache network thanks to the Cosmos IBC, foreshadowing a potential integration with Cosmos’s most popular decentralized storage solution. The Cronos chain also announced a partnership with blockchain analytics firm Chainalysis to track crypto transactions on its blockchain. The Cronos chain’s aforementioned startup accelerator, particle P, also announced that it would be rebranding to Cronos Labs. The announcement specifies that ronos laLbs is ‘the team Web3 startup accelerator and ecosystem development fund focused on growing the Cronos ecosystem’. This is a bit confusing because both, the crypto.org chain and the Cronos chain, were built by a software company called CRO Protocol Labs that’s based in the Cayman Islands.
At the beginning of May, Crypto.com made the crypto headlines when it announced that it would be significantly reducing and for some tiers, eliminating the rewards on its crypto debit cards, namely cashback rewards and staking rewards. The outcry from the community was so intense that crypto.com CEO Chris Marzelek took to Twitter the next day to announce that it wouldn’t be slashing the staking rewards as aggressively as had originally been announced:
Although the reviewed staking rates were still significantly below what they were. Many crypto.com users were extremely unhappy with the changes, which resulted in Chris having to take to twitter again and announce that cashback rewards would likewise be increased from near zero but still significantly lower than the previous cashback rewards.
Now it’s important to note that the changes to the rewards for crypto.com crypto debit cards will begin on the 1st of June and anyone who purchased and locked up CRO prior to that date will continue to earn the previous reward rates for the duration of the 180-day lock-up period.
The very next day, crypto.com announced that it had surpassed the 50 million user mark. For reference, crypto.com reached the 10 million user milestone in February of last year. Just a few days ago, the Cronos chain completed its first major mainnet upgrade, dubbed Huygens, which introduced EIP1559 fee burns to the Cronos chain blockchain.
Price Analysis
Anyhow, as amazing as some of these development announcements may be, partnerships and upgrades have been canceled and the price has plummeted to levels not seen since last autumn, which, to be fair, wasn’t all that long ago.
Like the rest of the crypto market, CRO has been in a downtrend since its all-time high last November. This has mostly to do with macro factors like the Federal Reserve raising interest rates. As you can see, CRO effectively fell off a cliff after Crypto.com announced it would be scaling back rewards for its metal crypto debit cards. This is simply because getting a metal crypto debit card requires purchasing and locking up lots of cash for a very long time, which has the same economic effect as buying and holding cash.
As far as I can tell, crypto.coms and cryptocards seem to have been the primary demand drivers for CRO, and I suspect that the number of new card holders coming in slowed down significantly late last year as interest in the crypto industry started to wane.
What’s annoying is that the cross rebrand to Cronos meant I wasn’t able to track exactly how much its circulating supply has increased since I last covered the project. The only thing I was able to find, however, was an image from my previous CRO update which shows how much CRO crypto.com’s ethereum wallets were holding at the time.
The difference between now and November reveals that crypto.com seems to have withdrawn about 2 billion CRO from one of its multi-sig wallets, but only to move it to another of its multi-sig wallets. This is pretty surprising because crypto.com has spared no expense on its marketing activities and the like, yet it apparently hasn’t sold any CRO. This suggests that Crypto.com is making some serious profits from its crypto products.
There’s even more surprising stuff happening on the demand side of the equation. For starters, the number of wallets holding CRO on ethereum has doubled since November. Unfortunately, I wasn’t able to find any wallet statistics for the crypto.org chain, but if the Cronos chain is anything to go by, its adoption has been explosive. That’s because the Cronos chain has seen a staggering 10x increase in wallet addresses, specifically from 77k to nearly 800k.
According to DeFi Llama, the total value locked on Cronos’s protocols has likely increased by 10x, specifically from $200 million to $2 billion. The only thing that doesn’t really add up is the number of daily transactions on the Cronos chain, which only increased slightly while all other on-chain metrics went to the moon. I take this as a sign that most of the liquidity on the Cronos chain is coming from a handful of whales, which is consistent with something the IMF mentioned about DeFi in its recent crypto report.
When it comes to how high CRO could go in the short term, it’s not looking too good. That’s just because the primary demand driver for CRO has been decimated, and its massive market cap means it is going to have a hard time finding the money to fill that gap.
Roadmap
When it comes to how high CRO could go in the long term, this ultimately depends on all the upcoming milestones for crypto.com, the crypto.org chain, and the Cronos chain. As a company, Crypto.com doesn’t exactly have a roadmap, but a few milestones were mentioned by CEO Kris Marszalek in recent interviews.
In November, Kris mentioned that Crypto.com’s endgame is to become the largest crypto platform on the planet, and it plans on achieving this adoption by focusing on marketing as well as blockchain gaming and NFTs. Crypto.com also wants to establish a headquarters in every region.
In April, Chris mentioned that Crypto.com wants to stay as small as possible while expanding so that it can move faster as a company. This is the same thing that Crypto.com’s venture capital arm said earlier this year. Chris also seemed to hint that Crypto.com was working on building a decentralized social media platform to drive mass adoption, though there currently isn’t any official news from the company about this supposed milestone.
As for the crypto.org chain, its roadmap was released last March. It consists of five network upgrades, two of which have been completed. The remaining three will be to introduce an AMM DeX to the crypto.org chain, enable fully fledged smart contract functionality, and integrate with Oracle’s for pricing data.
As for the Cronos chain, its roadmap was released in January and most of the milestones it mentions involve integrating upcoming technologies that will be introduced to all Cosmos-based blockchains.
The Cronos chain roadmap also specifies that an on-chain governance structure will be introduced later this year, that it will be increasing the number of validator nodes securing its blockchain and that it will explore the creation of Layer 2 scaling solutions as required.
What’s strange is that the Cronos chain roadmap makes no mention of moving away from proof of authority, and this brings me to the concerns I have about Cronos.
Concerns
My first concern with CRO is centralization. It’s clear that CRO’s price action is still heavily dependent on the actions of crypto.com and this will probably be the case for the foreseeable future. You’d think that the crypto.org and Cronos chains would both add to CRO’s decentralization, but this doesn’t seem to be the case. That’s because crypto.org still seems to be thoroughly under crypto.com’s influence. Case in point, most of its social channels redirect to crypto.com’s social channels.
The centralization is even more apparent with the Cronos chain because the founder of Cronos Labs is also the co-founder and former CTO of crypto.com. Recall that the Cronos chain also only has 25 validators that must be approved by the Cronos chain team, which may or may not be Cronos Labs. The fact that the blog posts of all three entities have consistently emphasized the decentralization of CRO as a cryptocurrency suggests that decentralization is something crypto.com is also concerned about now.
My second concern about CRO is its supply. Most of CRO’s supply is already in circulation and this means there isn’t much left to go around. Normally this would be a good thing, but there are lots of entities that need access to CRO at any given time. This actually seems to be why crypto.com nuked CRO staking rewards for its crypto debit cards. If CRO’s taking rewards had remained high, it’s possible that there wouldn’t be enough CRO left for stuff like validator staking rewards on the crypto.org chain. It’s possible that this is also why the Cronos chain doesn’t seem to have any plans to move away from proof of authority; moving to proof of stake would just result in less runway for CRO.
To make things worse, it’s not entirely clear how much runway CRO-dependent products have. The fact that crypto.com seems to hold what’s left of CRO’s supply suggests it’s their decision at the end of the day and it’s safe to say that they’ve been using this power wisely, albeit not very mindfully.
Now this relates to my third concern about CRO and that’s competition: Crypto.com isn’t the only crypto company out there offering cool crypto cards. Many of its competitors will be offering much more attractive rewards on their cards come the 1st of June and without all the sudden major changes. The crypto.org chain is just one of many cosmos-based blockchains, and though it’s taken the right steps as far as integrations go, it barely cracks the top 10 by IBC traffic according to the map of zones.
It’s a similar story with the Cronos chain. For context, the Kronos chain was built using EVM technology developed by another Cosmos project called Ethermint. As it so happens, Ethermint rebranded to Evmos last autumn and recently launched its own mainnet, even though Evmos hasn’t seen the same adoption yet. It’s a direct competitor to the Cronos chain, which you’ll recall seems to have some inconsistent on-chain statistics. For what it’s worth, crypto.com clearly has no shortage of capital, and it’s proven that it won’t hesitate to splurge to grow its ecosystem, which, of course, includes the crypto.org and Cronos chains. That’s all for today’s CRO update. The Crypto.org and Cronos chains are still very much in development as well, and in time they might just manage to create the demand dynamics required to push CRO to new all-time highs. Then again, the same can be said for other exchange tokens, which are also competitors of CRO.
[This article is a transcription of a video made by Coin Bureau]
Original video: https://youtu.be/upe-BoLet_M ]
