LD Capital: Overview of the new POW series tokens: A victory for miners, communities, and mining machine manufacturers?

Original Author: LD Capital, Duoduo

Ethereum transitioned from POW to POS in September 2022, leading the miner community to seek new POW tokens, which gave rise to several new POW projects. After more than a year of development, in November 2023, the price of the new POW project Kaspa surged, with a market capitalization exceeding $3 billion, entering the top thirty. Driven by Kaspa, the new POW tokens overall experienced significant gains.

This report briefly analyzes the reasons for the rise of POW projects, lists new POW projects with a market capitalization exceeding $40 million, and discusses the current issues.

I. Reasons for the Rise of New POW Projects

First, Ethereum's transition from POW to POS in September 2022 resulted in a large amount of idle computing power. This computing power was searching for new POW projects. Kaspa was launched during this period and quickly gained support from this computing power. Some miners of older POW tokens observed the new trend and gradually redirected their computing power to new POW projects.

Second, there is a segment of investors who prefer the POW model, believing it to be the orthodox approach to blockchain, becoming early participants in the POW project community. The main participants are from the European and American communities, with many Twitter influencers involved in early POW projects.

Third, new POW projects typically have lower market capitalizations, making them more friendly to newcomers entering this market. Newcomers are willing to buy a low-market-cap project, waiting for the overall market to improve. In contrast, older POW projects, such as BCH and LTC, have higher market capitalizations and many trapped positions. As for Ethereum-related projects, due to a previous influx of VCs, their valuations are very high, with newly listed tokens having market capitalizations in the hundreds of millions, accompanied by long periods of release and selling pressure. Newcomers are less willing to enter these projects.

Fourth, these projects combine narratives with new trends. In addition to high performance and smart contract operation platforms, most are integrated with concepts like artificial intelligence and the Internet of Things, proposing the concept of "useful proof of work" to attract funding attention.

Fifth, Kaspa was initially driven by miners and the community, and by February 2023, it had already gained significant attention among POW projects. In March 2023, mining machine manufacturers launched specialized mining machines to increase mining power. At this point, mining machine manufacturers entered the scene, participating in new POW projects. The explosive growth of computing power led to a drop in KAS prices, but it later entered a sustained upward trend, eventually rising into the top thirty by market capitalization.

With the success of KAS, the market capitalization imagination space for new POW tokens was opened, and projects with decent fundamentals all experienced good gains in November.

II. Brief Introduction to New POW Projects

At the initial launch of POW projects, their market capitalizations typically only reach hundreds of thousands of dollars. After early community development, tokens are listed on smaller exchanges like Xeggex (referred to as "Egg Exchange" by the community). The Egg Exchange has a large number of POW tokens with market capitalizations ranging from hundreds of thousands to millions. Early players mine for gold here.

Once a POW project reaches a market capitalization of $5 million to $10 million, it may enter second-tier exchanges, such as MEXC or Gate.io. After being listed on second-tier exchanges, the market capitalization can grow to between $10 million and $50 million. For larger market capitalizations, more funding and fundamental support are needed.

In terms of market capitalization, KAS and TAO are in the first tier, with market capitalizations exceeding $1 billion, ranking within the top 50. The second tier, with market capitalizations above $100 million, includes only the QUBIC project. Moreover, this project has not yet been listed on any second-tier exchanges, and its actual trading volume is very low, which may lead to inflated prices. The third tier consists of projects with market capitalizations between $10 million and $100 million. The lowest tier includes a large number of tokens below $10 million.

The table below provides a brief summary of POW tokens with market capitalizations exceeding $40 million.

Source: LD Capital

III. Development Issues of New POW Projects

First, most projects are equivalent to L1 projects and are currently in the early stages of development, having only constructed the framework for mining and token issuance, while their business and ecosystem are mostly still in the expansion phase. For example, KAS's smart contract platform is currently in development. ZEPH is a stablecoin, but it currently lacks use cases. ATOR belongs to a privacy routing network, but due to a breakdown in cooperation with the Tor network, it needs to rebuild its user base.

Second, some early-stage POW tokens with certain fundamentals, with market capitalizations between $40 million and $100 million, have generally experienced price increases of 5 to 10 times. The short-term development expectations have already been digested, and the community's financial strength has been depleted, leading to a period of consolidation. Tokens with market capitalizations below $10 million have generally not yet reached second-tier exchanges, their trading volumes are very low, making them easy to manipulate, resulting in short-term price volatility.

Third, POW tokens also face the release of tokens, with most tokens potentially releasing 30% to 40% in the first two years. These tokens are primarily held by large miners, and if large miners sell, the project tokens will face significant declines.

Fourth, projects that specifically integrate with AI business are more likely to attract funding attention. TAO and CLORE both combine the concepts of POW and AI. TAO belongs to the AI algorithm model market, where developers from around the world provide AI algorithm models, forming an AI algorithm model market; users select the algorithm models they need. The higher the evaluation and usage of a model, the more incentives its developer will receive. CLORE is an AI computing power leasing platform, equipped with nearly 6,000 mid-to-high-end NVIDIA GPU chips, which can be rented for mining, rendering, AI training, etc. Providers of high-performance chips to the network will receive CLORE token incentives.

IV. Conclusion

It is evident that the revival of POW projects is the result of a collective effort. Essentially, miners are seeking new POW projects, communities are looking for low-market-cap projects with good narratives, and mining machine manufacturers are searching for projects that can gain community support. Meanwhile, the rise of AI has elevated computing power to the level of infrastructure in the data era, and POW projects inherently possess computing power, making it easier for them to integrate with AI, resulting in a secondary narrative overlay.

However, the large number of POW projects is mixed, requiring investigation into the project narratives, business, teams, and communities to assess their probability of sustainable development and the likelihood of obtaining substantial financial support.