Forbes - Blockchain 50 2023 | 25 Fintech Zombies

BLOCKCHAIN 50 WORK THROUGH CRYPTO WINTER

Crypto is in the toilet. Even after a January rally that saw prices jump by a third or more, the cryptocurrency market is still down more than 50% over the last 12 months. Faddish bits of the market, like NFT digital collectibles, have done even worse. Prominent prophets like Sam Bankman-Fried have been exposed as incompetent at best, criminal at worst. Despite it all, dozens of enterprises around the world are still quietly investing in blockchain, the distributed-database technology that underpins the entire sector. These mostly big, mostly smart firms aren’t throwing good money after bad. They’re doing it because blockchain helps their businesses operate better, faster or cheaper. Check out the Blockchain 50 2023 list here.

ETHEREUM TO UNLOCK $29 BILLION OF CRYPTO IN UPGRADE

Ethereum developers and users are gearing up for the first major upgrade following the Merge, which marked the blockchain’s transition to near-carbon neutrality. Expected next month, the revision, dubbed Shanghai, has major implications for ether (ETH), the blockchain’s native token and the second-largest cryptocurrency by market value. The Merge changed Ethereum’s transaction-processing mechanics, enabling a move away from computers that took a lot of energy to run and replacing it with a proof-of-stake model. The new approach compensates validators who stake (deposit) ether in exchange for a chance to win the right to add new transactions to the Ethereum blockchain ledger. Though the Merge occurred last year, Ethereum users began staking ether as far back as December 2020, about 14% of all ether tokens are currently staked, according to data provider Staking Rewards, accounting for roughly $29 billion in market value. The Shanghai upgrade will enable validators to withdraw these assets, should they choose to do so.

KRAKEN ENDS U.S. CRYPTO STAKING TO SATISFY SEC

The Kraken crypto exchange will cease offering staking services to U.S. customers to settle charges by the U.S. that its investment program should have been registered under securities laws. The announcement by the SEC came on Thursday after Brian Armstrong, head of the rival Coinbase exchange, cited rumors that the agency wants to ban retail staking, which allows individual investors to lend cryptocurrencies in exchange for interest payments. Kraken advertised yields of up to 21% a year, according to the SEC. Along with withdrawing its staking service, Kraken will pay $30 million in disgorgement, prejudgment interest and civil penalties.

The SEC also posted a video featuring its chairman, Gary Gensler, warning investors of the danger of “staking-as-a-service,” a term used to define third-party programs offered by centralized entities such as Kraken. He said that when such services allow an exchange to take control of an investor’s crypto tokens in a staking program “that relationship should come with the protections of the federal securities laws.”

Source: Forbes Digital Assets, powered by Nomics. Prices as of 4:00 p.m. on February 10, 2023.

AI HYPE BLEEDS INTO CRYPTO

Artificial intelligence (AI) crypto tokens have been soaring in price, but the gains seem to be mostly a crypto proxy to the AI bubble. AI cryptos have reached a $4.6 billion market cap, up more than 50% from last week. The hype has largely been led by the explosive growth of ChatGPT, an AI-powered chatbot, and Dall-E, a tool that generates images out of word-based descriptions, both created by a company called OpenAI. Wall Street traders have not been immune to the AI seduction—artificial intelligence surpassed blockchain as the technology expected to be the most influential in the next three years, according to a J.P. Morgan report. The study found that 53% of surveyed traders, up from 25% last year, say that AI and machine learning will be the most influential technology for them. Blockchain, which tied with AI for the most influential technology in 2022, only garnered 12% of the votes this year.

ZOMBIE FINTECHS

These are dark days for some recent arrivals on the fintech scene. Forbes combed through more than 200 startups and found 25 venture-backed fintechs that are facing a troubled future. Some are cash-strapped; others have broken business models. With venture investors and bankers turning off the cash spigot, not just for new investments but for additional funding to existing portfolio companies, getting acquired at a deep discount is the only hope for most. See the list here.

The True Value Of Cryptocurrencies

The geopolitical strife taking place in Ukraine has once again underlined the true value proposition of digital currencies that are censorship resistant and easily transportable. To get in-depth research, interviews, trading signals and other valuable information unavailable anywhere else subscribe to Forbes CryptoAsset & Blockchain Advisor.

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ELSEWHERE

Stablecoin Issuer Paxos Is Being Investigated By New York Regulator [CoinDesk]

Ex-Coinbase Employee Pleads Guilty To Insider Trading [The New York Times]

This Year’s Super Bowl Commercials Will Be Cryptocurrency-Free [Vox]