Original article by Steven Ehrlich, Maria Gracia Santillana Linares and Nina Bambysheva, Forbes journalists
Original compilation: Luffy, Foresight News
In 2012, blockchain pioneers Jed McCaleb, Arthur Britto and David Schwartz founded Ripple Labs and the cryptocurrency XRP, envisioning a new global financial standard that would enable banks to transfer money quickly with minimal fees. In the first decade of Ripples existence, dozens of financial institutions, including Bank of America and Santander, signed up with it to test Ripples new network. To support this ambitious project, Ripple executives created 100 billion XRP tokens and sold $1.4 billion worth of XRP to the public. In early 2018, at the height of cryptocurrency mania, XRPs market capitalization reached $132 billion, and co-founder and executive chairman Chris Larsens net worth reached $8 billion.
Ripple Labs isnt making much progress right now when it comes to global money flows, and few think it will shake up SWIFT, the Belgian banking cooperative that facilitates $5 trillion in interbank transfers every day. Despite failing in its primary mission, the Ripple blockchain (the XRP transaction ledger) continues to function. Its basically useless, but the XRP token still has a market capitalization of $36 billion, making it the sixth most valuable cryptocurrency. Larsen remains a billionaire, worth approximately $3.2 billion. Last year, the Ripple blockchain network collected just $583,000 in transaction fees, according to Messari data. According to Wall Street, this would give XRP a “price-to-sales ratio” of 61,689. The hottest stock on the market, Nvidia, has a market capitalization of over $2 trillion, revenue of $61 billion, and a price-to-sales ratio of 37.
Ripple Labs is a cryptocurrency zombie. Its XRP token is still active in the trading market, with about $2 billion in daily transactions, but has no use other than speculation. Not only is SWIFT still going strong, but there are now better ways to make international payments via blockchain, such as stablecoins like Tether, which is pegged to the U.S. dollar and has a circulating value of $100 billion.
Ripple is not alone. A survey by Forbes shows that although only a few blockchains have achieved significant development except Bitcoin and Ethereum, there are currently no fewer than 50 blockchains worth more than $1 billion on the market, at least 20 of which are functional Sex botnet. Cryptocurrency markets are surging after the U.S. Securities and Exchange Commission approved a spot Bitcoin ETF. Of the 20 blockchains analyzed by Forbes, most of which have grand ambitions ranging from a universal world computer to untraceable payment networks and have a combined market value of $116 billion, most of them are rarely used.
But don’t expect cryptocurrencies like XRP to cease operations anytime soon, these companies have billions of dollars in funding to keep them around for many years. Ripple currently holds $24 billion worth of XRP tokens in custody, which can be sold over the next four years. The San Francisco company currently has 900 employees and continues to issue press releases describing its recent acquisition of digital asset custody business Standard Custody Trust, among other events. More than a decade after its founding, it is still running pilot cryptocurrency programs in partnership with central banks in places like Georgia and the South Pacific Republic of Palau.
Matt Hougan, chief information officer of Bitwise Asset Management, said: Its like an early-stage venture capital fund or company raising too much money and not knowing how to make the best use of the money and no way to return the money to investors.
Furthermore, in the exotic world of crypto assets, wealthy zombie blockchains don’t have to worry about the same issues that traditional companies face. There are no shareholders or regulators required to disclose financial statements, and it is relatively difficult to short a token. As long as there are enough speculators willing to trade coins, rich zombie blockchains will continue to roam the crypto space.
There is no clear liquidation process for dead crypto protocols, said one venture investor who asked not to be named.
The following 20 blockchains have a combined market capitalization of over $100 billion, but they are of little use outside of speculative cryptocurrency trading. Most blockchain projects are well funded, but they report neither to shareholders nor to regulators.
Zombie blockchains mainly fall into two categories: they are either derivatives of earlier blockchains such as Bitcoin and Ethereum, or they are direct competitors. Derivative (aka “hard fork”) zombies include Bitcoin Cash, Litecoin, Monero, BSV, and Ethereum Classic. The current total valuation of these five blockchains is $23 billion. They are largely the result of programmers’ disagreements over how Bitcoin or Ethereum should run. Since the underlying code of these blockchains is open source, anyone can repurpose it for any reason. When programmers disagree, some of them split and create a new network, a split known as a hard fork. Every time a new chain is created this way, it shares the same history as the original chain. As with equity derivatives, this means that all token holders at the time of the fork receive the same number of tokens on the new chain as they had on the original chain.
Litecoin is an early fork of Bitcoin. Launched in 2011, it is a faster and cheaper version of payments. It generates blocks four times faster than Bitcoin, averaging one block every 2.5 minutes, while Bitcoin generates one block every 10 minutes. Like Bitcoin, Litecoin processes transactions through proof-of-work, which means many computers are idling (and consuming power) solving meaningless mathematical equations. Litecoin’s token supply is also strictly limited at 84 million, compared to Bitcoin’s 21 million. Today, Litecoin has a market capitalization of $6.5 billion, but last year it only collected $389,000 in transaction fees, compared with $800 million for Bitcoin. Blockchain users pay miners a fee to incentivize them to process transactions in the next block. Zombie blockchains like Litecoin generate negligible fees, indicating a lack of demand for the platform. These blockchains also struggle to attract developers. According to Electric Capital’s developer report, Litecoin had only 74 monthly active open source developers at the end of 2023, compared with more than 1,000 developers for Bitcoin and more than 7,000 developers for Ethereum.
Bitcoin Cash has a market capitalization even greater than Litecoin, at $7.9 billion, but it has only 30 monthly active developers supporting it and generated fee revenue of $49,000 in 2023. Bitcoin Cash was born out of a heated debate in 2017 over whether Bitcoin should increase its block size. This fight is very subtle. Essentially, Bitcoin Cash proponents believe that the cryptocurrency should be used primarily as a medium of exchange (in other words, you should be able to buy things with it), while other members of the community want to prioritize store-of-value functionality.
Bitcoin SV (BSV) is even more controversial because its spokesperson is Australian computer scientist Craig Wright, who has always claimed to be Bitcoins inventor Satoshi Nakamoto. I created Bitcoin, he said in a 2023 interview with Forbes. The British High Court disagreed with this statement in March, ruling that there was overwhelming evidence that Wright did not write the original Bitcoin white paper, was not Satoshi Nakamoto, and did not create the Bitcoin system. BSV was delisted by Coinbase in January but still maintains a market capitalization of $1.6 billion.
Among blockchain botnets, Ethereum Classic (ETC) is unique in that it is actually the original Ethereum chain. The Ethereum chain now widely known as Ethereum is actually a fork of ETC, created in 2016 to recover $60 million in stolen ETFs (worth $11.5 billion at todays prices). A significant portion of Ethereum supporters are concerned about the moral hazard of altering the ledger history to recover funds, so they have decided to continue to keep ETC as the original and unaltered codebase. One of the blockchain’s biggest backers is Connecticut-based Grayscale Investments, the world’s largest crypto asset manager, whose billionaire founder Barry Silbert is an outspoken ETC bull. ETC has a market capitalization of $4.6 billion, but will generate less than $41,000 in transaction fees in 2023.
Of the five spin-off blockchains analyzed by Forbes, none of the crypto industry insiders or data analytics firms we consulted could point to any serious use for these platforms beyond simply trading their tokens.
“What keeps these zombie companies alive is liquidity,” said one venture capitalist. Litecoin was one of the first tokens supported by Coinbase, and many people hold Litecoin.
Bob Summerwill, executive director of Ethereum Classic Cooperative, added: “ETC is listed on almost every exchange due to its history, which generates considerable trading volume and much of the activity is speculative.”
ETC is trading 31% higher than a year ago, while ETH is up 77%. Bitcoin Cash has outperformed Bitcoin, which has gained 121% in the past 12 months and hit an all-time high in mid-March, while Bitcoin Cash has gained 164% during the same period.
The largest group of botnets are potential challengers to Ethereum. Most of them claim to have made technical improvements based on Ethereum, founded by Vitalik Buterin in 2014, because Ethereum can only handle a dozen transactions per second and is prone to high fees during peak usage periods. Founded in late 2014, Tezos was one of the first blockchains to adopt proof-of-stake (rather than proof-of-work) to create new tokens. The details are confusing, but proof-of-stake is favored by many crypto enthusiasts because it doesnt require the power-hungry computing power of Bitcoin mining.
Tezos raised $230 million in an initial coin offering (ICO) in 2017, and its XTZ token has a current market cap of $1.2 billion. However, it handles approximately 130,000 transactions per day, compared to Ethereum’s 1.2 million transactions, and the total value locked (TVL) on its network is only $66 million. TVL is widely used as a measure of health for blockchains like Ethereum, which are designed to host applications ranging from cryptocurrency exchanges to video games and NFTs. Ethereum has over 4,500 applications and a TVL of $48 billion.
In terms of baking (as the Tezos community calls it) fees, revenue in February 2024 was $5,640 and revenue for the full year of 2023 was $177,653. Arthur Breitman, who co-founded Tezos with his wife Kathleen, insisted that the figure was far lower than the actual total. According to Breitman, 75% of the total fees paid to the network are paid in XTZ tokens, which are typically withdrawn from circulation (or “burned”) and therefore are not included in published fee figures. Breitman estimated the Tezos treasury at $700 million and insisted that only 20% of the funds are held in the form of XTZ tokens. “There’s a lot of Bitcoin, and the rest is a diversified portfolio of stocks and bonds,” he said.
His statement cannot be verified. The development of Tezos is funded by the Tezos Foundation, a Swiss-based non-profit organization. Its mission is to “promote the Tezos protocol through grants and other capital deployment tools.” In the first half of 2023, the Tezos Foundation awarded up to $18 million to 31 recipients.
Theres also Algorand, which has a market capitalization of $2 billion and is well funded. Algorand was once considered the Ethereum killer for its ability to process 7,500 transactions per second, but in 2023, its blockchain transaction fees were only $63,000. “Their technology may be on par with other blockchains, but there isn’t much activity on the chain because they don’t have a community and talent to speak of except the founders,” said a prominent crypto strategist.
Eric Wragge, who is responsible for business development at the Algorand Foundation in Singapore, countered: We are in Uber mode - every person who gets on the bus makes us lose money. Their executive team is losing money rapidly. Over the past two years, the Algorand Foundation has hired a new CEO and overhauled its entire executive team.
Some blockchain zombies seem to survive solely on the popularity of their creators. Cardano, another Ethereum competitor, launched in 2017 when its co-founder Charles Hoskinson fell out with Ethereum co-founder Buterin. Cardano has a market capitalization of US$23 billion, with a total locked value of US$396 million. Although the Cardano Foundation itself says it has not completed the development phase, it generated $3 million in transaction fees last year.
Hoskinson himself is also very interesting. He owns an 11,000-acre ranch in Wyoming, funds a self-proclaimed alien hunter group, and he recently opened an anti-aging and regenerative medicine center in the town of Gillette. He is not always a reliable narrator. He claimed he dropped out of the University of Colorado Boulders doctoral program in mathematics, but the school said Hoskinson was an undergraduate who did not complete his degree. For years, he has hinted that he works for DARPA, the Pentagons famed research arm. But what he did was tout Cardano to his 980,000 followers on X.
Matt Hougan of Bitwise said: “Is Cardano a blockchain that is not yet profitable and still building its architecture, or is it just a pilot for the future that will never come to fruition?”
Our list of 20 zombie blockchains are just the most obvious examples of digital asset transactions that have no regard for the utility or viability of their underlying projects. There are more zombie blockchains roaming around. According to CoinGecko, there are more than 13,000 cryptocurrencies listed on various exchanges, and most have the characteristics of speculative penny stocks, except that they do not represent ownership of anything at all. Thanks to Bitcoins surge, the total value of all cryptocurrencies today is approximately $2.5 trillion.
This may seem like a perfect shorting opportunity, but according to cryptocurrency exchanges, it is difficult to bet on zombie blockchain tokens because it is not easy to borrow large amounts of the underlying token to short. Additionally, shorting is extremely risky given cryptocurrencies’ history of irrational and volatile trading. Any coin has the potential to transform into a meme coin based solely on a late-night tweet from Elon Musk.
Take Ethereum Classic as an example. In August 2020, when ETC was trading at around $6 per coin, it suffered three so-called 51% attacks in one month. This occurs when a single token holder controls more than half of the network’s computing power, which is used to create blocks and “manage” the platform. If these hostile takeovers are permanent (which they are not), then these hostile takeovers could allow the blockchains supposedly immutable ledger to be altered. In other words, anyone with 51% of the computing power can reverse a previously settled transaction or mint an unlimited amount of tokens for themselves. Although Ethereum Classic was exposed to security issues three times in a month, it escaped a fatal blow in the summer of 2020 and is currently trading at $31.
The Department of Justice and the Securities and Exchange Commission combat cryptocurrency fraud and theft by going after large cryptocurrency exchanges. FTX has been shut down and its founder, Sam Bankman-Fried, is in jail. Binance founder Changpeng Zhao has been kicked out of the company, and last year his exchange was forced to pay a $4.3 billion fine after he admitted violating anti-money laundering and sanctions regulations.
Two other large exchanges, Coinbase and Kraken, have also been sued by the SEC for acting as unregistered securities brokers and exchanges. Several zombie blockchain tokens, including Cardano and Algorand, are considered securities.
Can token holders gain access to the billions of dollars stored in the “vaults” of blockchain zombie companies? Unfortunately, this may be out of reach. “It requires a cause of action and actual harm such as fraud,” said Yesha Yadav, associate dean at Vanderbilt University School of Law. He noted that past cases have been divided over whether decentralized organizations or foundations should be held liable. .
In September 2022, the federal government indicted participants in a decentralized autonomous organization called Ooki DAO, accusing it of selling unregistered commodity futures. In June, a California court ordered the organization to pay a $644,000 fine. The money was supposed to be withdrawn from its decentralized coffers, but the government is still waiting for payment. Two months later, a federal judge in New York dismissed a lawsuit filed against decentralized cryptocurrency exchange Uniswap, ruling that there was no centralized entity as an identifiable defendant.
Don’t expect any well-funded, do-nothing blockchain to collapse anytime soon. They are busy spending money on projects that have no future. In March of this year, the Stellar Development Foundation announced that it would invest $100 million in companies planning to use its new smart contract platform. The foundation is a non-profit organization that manages the zombie Stellar’s $2.5 billion fund. Achieve business diversification in addition to the existing payment business.
