LD Capital: An Overview of New POW Tokens: A Victory for Miners, Communities, and Mining Machine Makers?

Ethereum moved from POW to POS in September 2022, and the miner community sought new POW tokens, spawning some new POW projects. After more than a year of development, in November 2023, the price of Kaspa, a new PoW project, rose sharply, and its market value exceeded 3 billion US dollars, entering the top 30. Driven by Kaspa, the new POW tokens achieved a good overall increase.

This report provides a brief analysis of the reasons for the rise of POW projects, and takes stock of new POW projects with a market capitalization of over 40 million, as well as current problems.

1. POW is the reason for the rise of new projects

First, Ethereum moved from POW to POS in September 2022, resulting in a large amount of idle computing power. These computing forces are looking for new POW projects. It was during this period that Kaspa was launched and received support from this computing power relatively quickly. Some miners of old POW tokens have observed new trends and are also investing computing power into new POW projects one after another.

Second, there are some investors who prefer the POW model, believing that this model is blockchain orthodoxy, and have become early participants in the POW project community. The main members and the European and American community are the main members. Many Twitter bloggers participated in the early POW projects.

Third, the new POW project has a lower market value and is more friendly to newcomers who have just entered this market. Newcomers are willing to buy a project with a low market value and wait for the overall market to arrive. However, the old POW projects, such as BCH and LTC, had a high market capitalization and were heavily locked. As for the Ethereum series of projects, due to the large number of VCs that have been piled up before, the valuation is very high. The market value of the newly listed tokens is hundreds of millions of dollars, and it has been accompanied by a long period of release and sell-off pressure. For these projects, the willingness of newcomers to enter is low.

Fourthly, these projects are narratively incorporating new trends. In addition to high-performance smart contract operation platforms, most of them are combined with concepts such as artificial intelligence and the Internet of Things to propose the concept of “useful proof of work” to attract financial attention.

Fifth, Kaspa was initially driven by miners and communities. By February 2023, it had already attracted much attention in POW projects. In March 2023, mining machine manufacturers launched professional mining rigs to improve mining computing power. At this point, mining machine manufacturers have entered the market and participated in the new POW project. The sharp increase in computing power led to a drop in the price of KAS, but then it continued to rise until it reached the top 30 in market capitalization.

With the success of KAS, it has opened up room for imagination in the market value of the new POW token. Projects with fair fundamentals all experienced good gains in November.

II. Brief introduction of new POW projects

When POW projects are first launched, their market capitalization is usually only a few hundred thousand US dollars. After early community development, tokens were launched on small places such as Xeggex (the community calls it an “egg house”). Egg has a large number of POW tokens with a market capitalization between a few hundred thousand and a few million. Early players are digging for gold here.

A POW project may enter a second-tier exchange, such as Matcha or Gate.io, after reaching a market capitalization of 5 million to 10 million US dollars. After the launch of a second-tier exchange, the market capitalization can grow to between 10 million and 50 million US dollars. As for larger market capitalization, more coordination between capital and fundamentals is needed.

In terms of market capitalization, KAS and TAO are in the first tier, with a market capitalization exceeding 1 billion US dollars and a market capitalization ranking within 50. In the second tier, with a market capitalization of more than 100 million US dollars, there is only one project called QUBIC. Moreover, the project has not yet been listed on any second-tier exchanges. The actual trading volume is very low, and the price may be inflated. The third tier is between $10 million and $100 million. At the bottom is a large number of tokens under $10 million.

The table below is a brief summary of POW tokens with a market capitalization of over $40 million.

Source: LD Capital

III. POW is a new project development problem

First, most of the projects are equivalent to L1 projects. Currently, they are in the early stages of development. They have only built a mining and coin issuing structure. As for business and ecology, most of them are still in the expansion stage. For example, KAS’s smart contract platform is currently under development. ZEPH is a stablecoin, but there are currently no usage scenarios for its stablecoin. ATOR is a private routing network, but due to the breakdown of cooperation with the Onion Network, there is a need to rebuild the user base.

Second, the POW token, which had certain fundamentals in the early days, had a market capitalization between 40 million and 100 million US dollars, and basically experienced an increase of 5-10 times. Short-term development expectations have been digested, and the community’s financial strength has also been consumed. Currently, it has entered a period of turbulence and consolidation. However, tokens with a market capitalization of less than 10 million US dollars have basically not reached second-tier exchanges. Their trading volume is very low, they are easily manipulated, and prices have skyrocketed and plummeted in the short term.

Third, POW tokens are also facing the release of tokens. Most tokens may release 30 %-40% tokens in the first two years. These tokens are mainly in the hands of big miners. If the big miners sell, the project tokens will face a significant decline.

Third, projects combined with specific AI businesses are more likely to receive financial attention. Both TAO and CLORE are superimposing the concepts of POW and AI. TAO belongs to the AI algorithm model market. Developers from around the world provide AI algorithm models to form an AI algorithm model market; users choose the algorithm models they need. The more highly rated and used models are, the more incentives their developers will receive. CLORE is an AI computing power leasing platform. It is equipped with nearly 6,000 high-end Nvidia GPU chips, which can be leased for mining, rendering, AI training, etc. Lenters that provide high-performance chips to the network will be incentivized by CLORE tokens.

IV. CONCLUSIONS

As can be seen, the revival of POW projects is the result of the joint efforts of many parties. Essentially, miners search for new POW projects, communities look for projects with low market capitalization and good narratives, and mining machine manufacturers look for projects that can receive community support. At the same time, the rise of AI has raised computing power to the level of infrastructure in the data age, and the POW project’s own computing power can easily be combined with AI, causing the story to be superimposed twice.

However, a large number of POW projects are mixed. It is necessary to investigate and understand the project narrative, business, team, and community, and consider the probability of their sustainable development, and the probability of receiving large financial support.

Statement:

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