Crypto Market’s Near-Apocalypse in 2022 Turns Zombie Tokens Into Dead Coins

When the decentralized market warehouse Debuting its own newly minted cryptocurrency in July 2019, the STO token soon garnered the attention of traders: The STO price jumped from a few cents to an all-time high of around $35 for a few days in March 2020 before Get back up and running quickly at less than $1.

But since then, Storeum has remained mostly silent. Their website is down and social media accounts are down. The token technically still exists, in zombie form, as a contract on the Ethereum blockchain. This year, the STO has taken another step towards oblivion: it has disappeared from the pricing site CoinGeckowhich lists almost 13,000 cryptocurrencies that are still considered viable in some form.

CoinGecko officials did not confirm when exactly Storeum was disabled from its website. But a cursory search using the Wayback Machine, which archives websites from earlier dates, shows that a Storeum token page was still active as of early 2022. Now, typing Storeum into CoinGecko’s search bar returns no results.

Call it dead currency.

During the cryptocurrency bull market of the past few years, the number of cryptocurrencies seemed to be on a steady rise, roughly quadrupling from 2019 to early 2022, according to data from the website. statist. Since peaking at 10,397 in February 2022, the number has dropped by about 1,000, the biggest drop in the crypto industry’s volatile 13-year history.

“It’s relatively simple for someone to create a token,” said Riyad Carey, a research analyst at crypto data firm Kaiko. “But these tokens can obviously lose interest extremely quickly.”

Just as STO arrived during a previous crypto bull market hype cycle, a bunch of tokens appeared last year as bitcoin (BTC), the oldest and largest cryptocurrency by market value, often seen as an industry benchmark, soared to a record high of $69,000.

According to CoinGecko, which uses a different methodology than Statista, more than 8,000 cryptocurrencies were newly listed in 2021but about 3,300 of them, or about 41%, ended up being deactivated and delisted.

“During this period, many anonymous cryptocurrency, token, and coin projects were released by various anonymous developers with little or no value or with no immediate or discernible purpose,” Julia Ng, growth marketing at CoinGecko, wrote in a recent article. analysis. “Few were really committed to their projects, which resulted in a high failure rate and therefore their eventual demise.”

Tokens may be removed from the site due to no discernible trading activity in the last two months, based on CoinGecko’s methodology. A coin may also be removed from CoinGecko if it is deemed to be a “rug pull” or other scam, or if the project team requests a deactivation.

“This can occur when the team disbands, rebrands, shuts down the project, or undergoes major token revisions where old tokens become sufficiently illiquid or dead, per CoinGecko standards,” Ng wrote.

The graph shows the number of cryptocurrencies deactivated on CoinGecko, by indicated year. (CoinGecko)

The overall crypto market capitalization has shrunk from an all-time high of $3 trillion in November 2021 to around $850 billion today. Bitcoin price has fallen 66% over the past year and ether (ETH) is down 71%.

Kaiko’s Carey estimated that the number of failed tokens could be “significantly higher in the last two years” due to the 2017 explosion in the amount of ERC-20 tokens – a type that is easy to mint and runs on the Ethereum blockchain.

“It is relatively simple for someone to create a token and an associated decentralized exchange [DEX] liquidity pool,” Carey told CoinDesk. “If no one provides liquidity, there will be little to no trading volume.”

carpet pull

In addition to losing buyers’ interest, some token failures could be associated with scams, according to Chainalysis research director Kim Grauer.

One of the most common schemes, referred to in darkly humorous cryptocurrency trader jargon as “pulling the rug,” involves “creating a token, funding the liquidity pool, and then removing all liquidity afterwards.” before an initial rush of people buys the token,” as Carey describes it.

As is the case with Storeum, the contract behind the token remains on the blockchain; the data is still there, for posterity, even when the token has long since gone dormant and forgotten. Etherscan, a data explorer for the Ethereum blockchain, shows no transactions have occurred for 231 days.

A warning notice on the Etherscan page reads: “Warning! There are reports that this token used a fake team profile on your website. Be careful when interacting with this token.”

At one point, in 2019, there were discussions on the forum. that the Storeum project could be a “scam hitting all cylinders”, including speculation that the team members were created using artificial intelligence.

Chainalysis’s Grauer told CoinDesk that “it’s hard for a token to totally ‘die’ because the code keeps the project running even without buyers.”

The existence of dead coins points to a key paradox of the crypto industry, according to Kaiko’s Carey: decentralization, often portrayed as a pillar of virtue, can turn out to be little more than wishful thinking. Like the rapid growth.

It is “decentralization, in the sense that the bar for creating tokens has been lowered dramatically in recent years,” Carey said. It is “centralization, in the sense that many of these tokens or projects relied on one or a few people to provide liquidity and keep the project alive. Centralized exchanges are well within their rights to remove tokens with little or no trading volume, as they will not contribute to revenue and likely incur some maintenance cost.”

Some tiles might be better off dead.