Cryptocurrency's Billion-Dollar Zombie Invasion

Forbes has compiled a list of 20 billion-dollar tokens with substantial trading volume but minimal practical utility, dubbing them "zombie tokens." With a combined market capitalization exceeding $100 billion, these tokens appear to exist primarily for speculative trading purposes, despite the lack of significant applications. Many of these projects hold millions of dollars in their treasuries, but operate without shareholder accountability or regulatory oversight. The prevalence of these tokens highlights the importance of investor due diligence and the need for industry regulation to protect investors in the rapidly evolving cryptocurrency market.

The Rise of Crypto's Billion-Dollar Zombies

The cryptocurrency market, valued at nearly $2.5 trillion, encompasses over 14,000 active tokens. Do we truly require such a plethora of blockchain projects?

Emphatically, the answer is no.

The market does not necessitate a proliferation of projects replicating similar functions. This fragmentation of liquidity yields nothing but "worthless" tokens, whose sole purpose is trading.

It is widely acknowledged that "99% of tokens in circulation will eventually vanish," leaving only projects with genuine utility and economic models.

Identifying these "functionless" tokens can pose a challenge. Investors are frequently swayed by buzzwords and grandiose marketing promises that paint unrealistic visions for projects. As such, distinguishing between valuable tokens and those with dubious value can be arduous.

After extensive research and analysis, Forbes has compiled a list of 20 billion-dollar tokens that offer minimal utility. These tokens are deemed "zombie" tokens, "living" solely for the purpose of speculative trading.

Disclaimer: The following information is based on Forbes' assessment.

XRP

XRP tops the list with a market capitalization of $36 billion. It is also considered the longest-lived "zombie," having been established in 2012.

When Jed McCaleb, Arthur Britto, and David Schwartz founded Ripple Labs with the XRP token, their goal was to create a new global financial standard that would allow banks to transfer funds quickly and with minimal fees.

In the first decade, dozens of financial institutions, including Bank of America and Banco Santander, participated in testing Ripple's new network. To fund their ambitious project, the founders created 100 billion XRP tokens and sold them on the market, raising $1.4 billion.

At the height of the bull run in early 2018, XRP peaked at a market value of $132 billion, making co-founder and CEO Chris Larsen a billionaire with a net worth of $8 billion.

Despite this success, Ripple Labs has failed to compete with SWIFT, let alone surpass its rival. The international payment system SWIFT remains firmly in control, processing $5 trillion in interbank transfers daily.

Not only has Ripple failed to match SWIFT, but its payment network has also faced competition from stablecoins such as Tether, which has a circulating supply of $100 billion.

Meanwhile, according to data from Messari, Ripple's XRP ledger generated only $583,000 in transaction processing fees last year—a meager amount compared to the company's grandiose ambitions.

Furthermore, the XRP token serves no purpose beyond being traded by speculators in the secondary market. Yet XRP's market cap remains at $36 billion, making it the sixth-largest coin in the industry.

According to Forbes' billionaire rankings, Larsen is the seventh-wealthiest person in the cryptocurrency industry, with an estimated net worth of $3.2 billion.

Ripple currently holds $24 billion worth of XRP tokens in reserve, sufficient to sell for the next four years. The San Francisco-based company has 900 employees and continues to make headlines for its partnerships with various companies and countries.

However, despite a decade of efforts, Ripple's progress has been incremental at best.

Matt Hougan, CIO of Bitwise Asset Management, commented:

"Ripple is like these early-stage venture funds or companies that raised too much money and don't know what to do with it."

The "Ethereum Killer" Cohort

The largest group of zombie tokens is the "Ethereum Killers," a term popularized during the previous cycle for projects that aimed to dethrone Ethereum.

These projects primarily touted their alleged superiority over Vitalik Buterin's brainchild, arguing that Ethereum could only process a few dozen transactions per second and suffered from prohibitively high gas fees during periods of high demand.

However, these arguments have become stale. Ethereum in 2024 is a far cry from its nascent days in 2014. While it remains expensive and faces scalability issues, Ethereum's importance to the DeFi ecosystem and the industry at large is indisputable.

So, what becomes of projects that aspired to surpass ETH but failed to keep pace with its advancements?

Cardano (ADA)

Cardano, once hailed as an "Ethereum Killer," was launched in 2017 when Charles Hoskinson split from ETH due to disagreements with Vitalik Buterin.

The Cardano blockchain has a staggering value of $23 billion with a TVL of $396 million. The blockchain earned $3 million in fees last year, although the Cardano Foundation itself admits that it is still in its "start-up phase."

The entire Cardano blockchain ecosystem seems to revolve around its eccentric founder, Hoskinson. He owns an 11,000-acre ranch in Wyoming, funds self-proclaimed "alien hunters," and recently opened an anti-aging, regenerative medicine center in the town of Gillette.

However, Hoskinson's credibility has been questioned on several occasions. He claims to have dropped out of a math PhD program at the University of Colorado, Boulder, but the university states that Hoskinson was a graduate student who never completed his degree.

Hoskinson has also made vague references over the years to working for Darpa, the Pentagon's prestigious research arm.

Matt Hougan of Bitwise commented:

"Is this a blockchain that pretends to be an architecture or is it just an experiment that will never go anywhere?"

Tezos (XTZ)

Tezos, founded in 2014, was one of the first blockchains to incorporate Proof-of-Stake (PoS) consensus. The project raised $230 million in an ICO in 2017 and currently has a market capitalization of $1.2 billion.

The Tezos blockchain processes around 130,000 transactions per day, compared to Ethereum's 1.2 million, and has a TVL of just $66 million. Ethereum, with over 4,500 dApps, has a TVL of $48 billion.

While the goal of "surpassing Ethereum" in transaction throughput has proven elusive, what about gas fees?

Tezos collected just $5,640 in transaction fees in February 2024 and $177,653 for the entire year of 2023.

However, Tezos founder Arthur Breitman insists that this number is significantly lower than the actual amount. According to Breitman, 75% of network fees paid in XTZ are burned—and thus not counted in reported revenue figures.

The founder estimates that Tezos has $700 million in its treasury and claims that only 20% of that is in XTZ tokens.

"The Tezos treasury is very much in Bitcoin and then a diversified portfolio of stocks and bonds."

However, this information cannot be verified.

Development of the blockchain is overseen by the Swiss-based Tezos Foundation, a non-profit organization whose mission is to "foster the Tezos protocol through grants and other means of capital deployment."

In the first half of 2023, the Tezos Foundation awarded $18 million to 31 new projects, including a Philadelphia video game company building puzzles on the Tezos blockchain and a Singapore-based talent development company focused on digital art.

Algorand (ALGO)

Algorand has a market capitalization of $2 billion and $500 million in its treasury. It was once touted as an "Ethereum Killer" due to its ability to process 7,500 transactions per second. However, the network generated only $63,000 in transaction fee revenue in 2023.

One analyst commented:

"Algorand's technology might be on par with other blockchains, but it doesn't have much activity because it lacks a strong community and talented developers outside of its founders."

Algorand was founded by renowned Italian computer scientist and current MIT professor Silvio Micali.

Unsurprisingly, Algorand disputes these claims. Eric Wragge, head of business development at the Singapore-based Algorand Foundation, stated:

"We're in the market development phase like Uber—have to pay for people to get in cars."

The implication is that once this "burn phase" is over, Algorand will emerge as a formidable competitor.

The project has been undergoing a rapid turnover of its top executives, and the Algorand Foundation has a new CEO. It remains unclear when this "Uber phase" will end.

The Hard Fork Faction

Forbes analysts also include hard forks of Bitcoin and Ethereum on their list of billion-dollar zombies: Bitcoin Cash, Litecoin, Monero, Bitcoin SV, and Ethereum Classic.

These tokens are largely the result of disagreements among developers over how the Bitcoin or Ethereum networks should operate. Since they are open-source, anyone can use them. When developers fail to see eye to eye, they split off and create a new network using the same codebase as the original chain—a process known as a hard fork.

The new chain shares the transaction history of the original chain. And similar to a stock split, holders of tokens at the time of the fork receive an equal number of tokens on the new chain.

Litecoin (LTC)

Litecoin hard forked from Bitcoin in 2011 as a faster, cheaper version for everyday transactions.

LTC's block time is four times faster than BTC's, producing a new block every 2.5 minutes compared to BTC's 10-minute block time. Litecoin also uses Proof-of-Work (PoW)