Near 2022 Crypto Markets Apocalypse Turns Zombie Tokens Into Dead Coins

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When decentralized marketplace Storeum launched its own freshly minted cryptocurrency in July 2019, the STO token quickly caught the attention of traders: the price of STO rose from pennies to an all-time high of around $35 during a few days in March 2020 before stabilizing quickly. less than $1.

But Storeum has since gone rather quiet. Its website is down and social media accounts are inactive. The token technically still exists, in zombie form, as a contract on the Ethereum blockchain. This year, the STO took another step toward oblivion: it disappeared from pricing site CoinGecko, which lists almost 13,000 cryptocurrencies still considered viable in one form or another.

CoinGecko officials have not confirmed when exactly Storeum was deactivated from its website. But a quick search using the Wayback Machine, which archives websites from earlier dates, shows that a Storeum token page was still active in early 2022. Now typing Storeum into the CoinGeckos search bar yields no results.

Call it a dead room.

During the crypto bull market of recent years, the number of cryptocurrencies seemed to be steadily increasing, roughly quadrupling from 2019 to early 2022, based on data from the Statista website. Since peaking at 10,397 in February 2022, the number has fallen by around 1,000, the biggest drop ever in the crypto industry’s volatile 13-year history.

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

Just as the STO arrived in a previous round of crypto bull market hype, a slew of tokens emerged last year as bitcoin (BTC), the oldest and largest crypto -currency in market value, often seen as an industry indicator hitting a record high of $69,000.

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

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During this period, many cryptocurrency projects, tokens and coins with little or no value or with an immediate or discernible goal have been started by various anonymous developers, wrote Julia Ng, Growth Marketing at CoinGecko , in a recent analysis. Few were actually committed to their projects, leading to a high failure rate, and thus their ultimate demise.

Tokens may be removed from the site due to a noticeable lack of trading activity in the past two months, based on CoinGecko’s methodology. A coin may also be removed from CoinGecko if it is deemed a “rug pull” or other scams, or if the project team requests a deactivation.

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

The chart shows the number of cryptocurrencies deactivated on CoinGecko, by year listed. (CoinGecko)

The overall capitalization of crypto markets has grown from an all-time high of $3 trillion in November 2021 to around $850 billion now. The price of Bitcoin has fallen 66% over the past year and Ether (ETH) has fallen 71%.

Kaikos Carey estimated that the number of failing tokens could be significantly higher over the past two years due to the explosion in 2017 in the number of ERC-20 tokens, an easy-to-manufacture type that operates on top of the Ethereum blockchain. .

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

carpet zipper

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

One of the most common schemes, referred to in crypto trader gallows lingo as a coin toss, involves creating a token, funding the liquidity pool, and then removing all liquidity after a stampede. initial number of people buy 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 become inactive and long forgotten. Etherscan, a data miner for the Ethereum blockchain, shows that no transactions have taken place for 231 days.

A warning on the Etherscan page reads: “Warning! There are reports that this token has used a fake team profile on their website. Please exercise caution when interacting with this token.”

At one point in 2019, there were discussions on the bitcointalk.org forum that Project Storeum might be an “all-cylinder scam”, including speculation that team members were crafted 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 highlights a key paradox of the crypto industry, according to Kaiko’s Carey: decentralization, often described as a pillar of virtue, may turn out to be little more than an illusion. Just like rapid growth.

It’s decentralization, in that the bar for tokenization has been lowered significantly in recent years, Carey said. This 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 will likely incur maintenance costs.

Some tokens might be better off dead.

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