Forbes
Forbes Digital Assets Home Web3 Community beta News Crypto Prices NFTs Research Learn More Edit Story Premium Daily Cover The Rise Of Crypto’s Billion Dollar Zombies Illustration by Nicolas Ortega for Forbes Steven Ehrlich Forbes Staff Director of FDA; Editor, Forbes CryptoAsset & Blockchain Advisor.Maria Gracia Santillana Linares Forbes Staff I cover the intersection of business, culture and technology.Mar 27, 2024, 06:30am EDT With bitcoin soaring once again, blockchains are suddenly much more valuable.More than 50 of them are now worth over $1 billion—despite many having few users.By Steven Ehrlich , Maria Gracia Santillana Linares and Nina Bambysheva , Forbes Staff
In 2012 when Blockchain pioneers Jed McCaleb, Arthur Britto and David Schwartz created Ripple Labs and its new cryptocurrency, known as XRP, they envisioned a new global financial standard that would enable banks to transfer money rapidly with minimal fees.During its first decade, dozens of financial institutions, including Bank of America and Banco Santander, signed up, eager to test Ripple’s new network.To fund their ambitious project, executives at the company created 100 billion XRP tokens and sold $1.4 billion worth to the public.
In early 2018, at the height of the first wave of crypto euphoria, XRP was trading with a market value of $132 billion, giving cofounder and executive chairman Chris Larsen a net worth of $8 billion.
In terms of global money flows, not much is going on at Ripple Labs today, and few expect it ever to disrupt the Belgian banking cooperative known as SWIFT, which facilitates $5 trillion in interbank transfers every day.
Despite failing at its primary mission, Ripple’s blockchain, a ledger of XRP transactions, continues to hum along.It’s largely useless, but the XRP token still sports a market value of $36 billion, making it the sixth-most valuable cryptocurrency.Larsen remains a billionaire, worth an estimated $3.2 billion.Last year, Ripple’s XRP ledger earned a mere $583,000 in fees processing transactions across its network, according to Messari.
In Wall Street parlance, that would give XRP a “price-to-sales” ratio of 61,689.Nvidia, the market’s hottest stock, with a market capitalization above $2 trillion and revenue of $61 billion, has a price-to-sales ratio of 37.
Ripple Labs is a crypto zombie.Its XRP tokens continue to trade actively, some $2 billion worth per day, but to no purpose other than speculation.Not only is SWIFT still going strong, but there are now better ways to send payments internationally via blockchains, especially stablecoins like tether, which is pegged to the U.S.
dollar and has $100 billion in circulation.
Ripple is not alone.A Forbes investigation reveals that even though only a handful of blockchains other than Bitcoin and Ethereum have gained significant traction, there are no fewer than 50 blockchains today trading at values of more than $1 billion, of which at least 20 are functional zombies.
In the wake of the SEC’s approval of spot bitcoin ETFs, crypto markets are soaring.The 20 blockchains Forbes analyzed , whose quixotic ambitions range from a universal world computer to an untraceable payments network, have a combined market value of $116 billion.Most have few users.
But don’t expect XRP or any of these crypto creations to shutter operations anytime soon.With billions sitting in their coffers, Ripple and others can continue to exist for years.Ripple currently has $24 billion worth of XRP tokens in escrow that it can sell over the next four years.Currently, the San Francisco company has 900 employees and continues to issue press releases for things like its recent acquisition of digital asset custody operation Standard Custody & Trust.
After more than a decade in existence, it is still running pilot crypto programs with central banks in places like the nation of Georgia and the South Pacific Republic of Palau.
“It’s like early-stage venture capital funds or companies that raise too much money and don’t know how to adequately deploy it,” says Matt Hougan, CIO of Bitwise Asset Management.“There’s no way to return the treasury to the investors.”
Moreover, in the bizarro world of digital assets, rich zombie blockchains need not worry about the kinds of things that keep traditional companies on their toes.There are no shareholders or regulators asking for financial statements, and short selling tokens is relatively difficult.So long as there is an ample supply of speculators willing to trade the tokens, flush zombie blockchains will continue to roam the digital landscape.
Says one venture capitalist who requested anonymity, “There’s no wind-down process for a dead crypto protocol.”
GOOD-FOR-NOTHING BLOCKCHAINS The 20 blockchains below command a total market value of more than $100 billion despite the fact that they are unproven and have little utility other than for speculative crypto trading.
Most have treasuries brimming with millions, but they answer to neither shareholders nor regulators.(SCROLL RIGHT TO SEE THE FULL TABLE) Z OMBIE BLOCKCHAINS mostly fall into two categories: They are either spin-offs of earlier blockchains like Bitcoin and Ethereum or direct competitors to them.
Spin-off (a.k.a.“hard fork”) zombies include Bitcoin Cash, Litecoin, Monero, Bitcoin SV and Ethereum Classic.These five blockchains collectively trade at a valuation of $23 billion today.They are largely the result of disagreements between programmers over how Bitcoin or Ethereum should be run.Because the code underlying these blockchains is open source, anyone can repurpose it for any reason.
When the coders can’t get along, a group of them will split off and create a new network, a schism known as a hard fork.
Each time a new chain is created this way, it shares the same history as the original chain.And like stock spin-offs, this means that all token holders at the time of the fork receive the same number of tokens on the new chain that they own on the original.
Litecoin was an early Bitcoin fork.It launched in 2011 as a faster, cheaper version for sending payments.It produces blocks four times faster than Bitcoin, an average of one every 2.5 minutes against every 10 minutes for Bitcoin.Like Bitcoin, it processes transactions via proof of work, meaning lots of computers are spinning their wheels (and burning electricity) solving pointless mathematical equations.Also like Bitcoin, it has a hard limit on its token supply, 84 million versus Bitcoin’s 21 million.
Today Litecoin has a market capitalization of $6.5 billion, but last year it booked just $389,000 in fees, compared to $800 million for Bitcoin.Blockchain users pay fees to miners as an incentive for them to process their transactions in the next block they create.The fees generated by zombie blockchains like Litecoin are minimal, indicating a lack of demand for the platform.These blockchains also have trouble attracting developers.As of the end of 2023 there were only 74 monthly active open-source developers supporting Litecoin, according to Electric Capital’s Developer Report, compared to more than 1,000 for Bitcoin and 7,000-plus for Ethereum.
Bitcoin Cash is worth even more than Litecoin, with a market cap of $7.9 billion, yet it has only 30 monthly active developers supporting it and $49,000 in 2023 fee revenue.Bitcoin Cash was born after an acrimonious split with Bitcoin in 2017 over whether to increase Bitcoin’s block size.
The fight was arcane.
Essentially, Bitcoin Cash supporters thought the crypto should be primarily useful as a medium of exchange (in other words, you should be able to buy things with it), while the rest of the community wanted to prioritize the store of value function, or the ability to save it for future use.
Bitcoin SV—for “Satoshi Vision”—is even more controversial, given that it’s fronted by Craig Wright, an Australian computer scientist who dubiously claims to be Satoshi Nakamoto, the pseudonymous Bitcoin inventor.“I created Bitcoin,” he told Forbes in an interview in 2023.The U.K.’s High Court disagreed in March, ruling that the evidence is “overwhelming” that Wright did not write the initial Bitcoin whitepaper, is not Satoshi Nakamoto and did not create the “Bitcoin system.” Bitcoin SV was delisted by Coinbase in January but still maintains a market value of $1.6 billion.
Among blockchain zombies, Ethereum Classic (ETC) holds the unique distinction that it actually is the original Ethereum chain.What is widely known as Ethereum today is in reality a fork of ETC, created in 2016 to recover $60 million in stolen ether (worth $11.5 billion based on today’s prices).A significant minority of Ethereum backers worried about the moral hazard implications of altering the history of the ledger to recover funds, and they decided to continue maintaining ETC as the original and unaltered code base.One of the blockchain’s biggest backers is Connecticut firm Grayscale Investments, the world’s largest crypto asset mana-ger, whose ex-billionaire founder, Barry Silbert, is an outspoken ETC bull.Ethereum Classic has a market value of $4.6 billion but generated fees of less than $41,000 in 2023.
Of the five spin-off blockchains Forbes analyzed, none of the crypto industry insiders or data analysis firms we consulted could cite any serious uses for these platforms except for simply trading their tokens.
“What’s keeping these zombies alive is liquidity,” says one VC.
“Litecoin was one of the first tokens that Coinbase supported back in the day.A lot of people owned litecoin.”
Adds Bob Summerwill, executive director at the Ethereum Classic Cooperative, “ETC is listed nearly everywhere because of its history, which turns into quite a lot of trading volume.Much of the activity is speculative.”
Riding ethereum’s coattails, ethereum classic tokens are trading 31% higher than they did a year ago, compared to a 77% gain for ether.Bitcoin Cash has outpaced bitcoin, which hit a record high in mid-March after a 121% surge in the last 12 months.
Bitcoin Cash is up 164% over the same period..
