Overview of POW-based new tokens A victory for miners, communities, and mining equipment manufacturers?

Unveiling POW-Based Tokens A Win for Miners, Communities, and Mining Equipment Manufacturers

Author: Duoduo; Source: LD Capital

Ethereum transitioned from POW to POS in September 2022, sparking the emergence of new POW projects as miners sought new POW tokens. After over a year of development, in November 2023, the price of the new POW project KasLianGuai skyrocketed, surpassing a market cap of $3 billion and entering the top thirty. Thanks to KasLianGuai’s influence, the overall POW token market experienced significant growth.

This report provides a brief analysis of the reasons behind the rise of POW projects, lists POW new projects with market caps exceeding $40 million, and discusses current challenges.

1. Reasons for the rise of POW projects

First, Ethereum’s transition from POW to POS in September 2022 created a surplus of idle computing power. This computing power started looking for new POW projects, and KasLianGuai was launched during this period, quickly gaining support from these computing power resources. Some miners of old POW tokens observed this new trend and gradually invested their computing power in these new POW projects.

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Second, there are investors who prefer the POW model, believing it to be the true essence of blockchain. They became early participants in the POW project community. The main participants are primarily from European and American communities, with many Twitter influencers joining early POW projects.

Third, new POW projects have relatively lower market caps, making them more appealing to newcomers to the market. Newcomers are willing to invest in projects with lower market caps, waiting for the overall market conditions to improve. In contrast, older POW projects like BCH and LTC have higher market caps and more trapped investors. As for Ethereum-based projects, they had high valuations due to a large number of venture capitalists, with newly listed tokens having market caps in the hundreds of millions of dollars and facing prolonged release and selling pressure. Newcomers have less incentive to enter these projects.

Fourth, these projects incorporate new trends into their narratives. In addition to high performance and smart contract platforms, many projects combine concepts such as artificial intelligence and the Internet of Things, proposing the concept of “useful proof of work” to attract attention and funding.

Fifth, in its early stage, KasLianGuai was driven by miners and the community. By February 2023, it had already gained attention within the POW project community. In March 2023, mining equipment manufacturers launched specialized mining machines, increasing mining power. With the entry of mining equipment manufacturers, mining power surged, causing the price of KAS to initially drop but then enter a continuous upward trend, leading to its rise to the top thirty in terms of market cap.

With the success of KAS, the market cap potential for new POW tokens has been opened up, resulting in decent price surges for fundamentally promising projects in November.

2. Brief introduction to new POW projects

When POW projects first launched, their market caps were usually only a few hundred thousand dollars. After early community development, tokens were listed on small exchanges like Xeggex (referred to as “Egg Exchange” by the community). Egg Exchange listed numerous POW tokens with market caps ranging from a few hundred thousand to several million dollars. Early adopters struck gold here.

A POW project, once its market value reaches 5-10 million US dollars, may enter secondary exchanges such as Matcha or Gate.io. After listing on a secondary exchange, the market value can increase to between 10-50 million US dollars. As for larger market values, more funding and fundamentals are needed.

In terms of market value, KAS and TAO are in the first tier, with market values exceeding 1 billion US dollars and ranking within the top 50. In the second tier, projects with market values above 100 million US dollars only have QUBIC. Moreover, this project has not yet listed on any secondary exchange, with low actual trading volume, and prices may be artificially inflated. The third tier consists of projects with market values between 10-100 million US dollars. At the bottom are a large number of tokens below 10 million US dollars.

The table below provides a brief summary of POW tokens with market values exceeding 40 million US dollars.

3. Challenges in the Development of POW Projects

First, most projects are equivalent to L1 projects and are currently in the early stages of development. They have only built the architecture for mining and issuing coins, while business and ecosystems are still expanding. For example, KAS’s smart contract platform is still under development. ZEPH is a stablecoin, but it currently lacks a use case. ATOR is a privacy routing network, but due to a broken partnership with the Onion Network, it needs to rebuild its user base.

Second, early-stage POW tokens with decent fundamentals have experienced 5-10x increases in market value. Short-term development expectations have been priced in, and community funds have been consumed, resulting in a period of consolidation. Tokens with market values below 10 million US dollars have yet to list on a secondary exchange, with low trading volume and the potential for price manipulation, leading to extreme volatility.

Third, POW tokens are also subject to token release. Most tokens may release 30-40% of their supply within the first two years. These tokens are mainly held by large miners, so if they sell off, the project’s tokens will experience a significant decrease.

Furthermore, projects that integrate AI-specific businesses are more likely to receive funding attention. TAO and CLORE are examples of POW and AI combined. TAO is an AI algorithm model marketplace where developers from around the world provide AI algorithm models, forming a marketplace for AI algorithm models. Users can select the models they need. Models with higher ratings and more usage will incentivize their developers more. CLORE is an AI computing power leasing platform with nearly 6000 high-end GPU chips from NVIDIA, available for mining, rendering, AI training, and more. Providers who offer high-performance chips for network leasing will receive incentives in the form of CLORE tokens.

Conclusion

It is evident that the revival of POW projects is the result of multiple forces at work. Essentially, miner computing power seeks out new POW projects, communities seek out projects with low market values and compelling narratives, and mining equipment manufacturers seek projects with community support. Meanwhile, the rise of AI has elevated computing power to the level of infrastructure in the data era, and POW projects come with computing power, making it easy to integrate with AI and create a secondary narrative layer.

However, there is a confusing mix of POW projects, which require investigation and understanding of project narratives, business plans, teams, and communities. It is important to consider the probability of their sustainable development and the likelihood of obtaining large financial support.

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