4th Quarter Market Outlook: The CoinDesk Computing Index (CPU)

The CoinDesk Computing Index (CPU) is designed to measure the market capitalization weighted performance of computing protocols that are included in Digital Asset Classification Standard (DACS). Inclusion of a digital asset in CPU is subject to minimum trading and exchange eligibility requirements. CPU reflects the DACS as of the prior month, so the Computing sector consists of projects that aim to decentralize the sharing, storing and transmission of data by removing intermediaries and ensuring privacy for all users. All projects that aim to gather, transmit, store and share data and web services in a decentralized manner play a key factor in building the infrastructure of Web3. This includes on-chain and off-chain data transmission, social data platforms, peer-to-peer secure data transactions, open networks, free market private computation, and decentralized file storage and file sharing.

As of Dec 15, 2022, CPU lost 20.9% for the quarter to date (QTD), and included 23 digital assets assigned to five single industry or industry groups according to the CoinDesk Digital Asset Classification Standard (DACS). Twenty constituents remained in CPU the entire fourth quarter, with 15, or 75%, losing and five, or 25%, gaining.

Best performer: Mask Network, a protocol that allows users to send encrypted messages over Twitter, gained 151.2%, and is part of the DACS Shared Storage Industry and Industry Group. The social media integration protocol was seemingly catalyzed by Elon Musk’s statements in late October regarding his goals for Twitter and advertising and speculation that Twitter's pivot to Web3 might directly benefit the Mask Network.

Worst performer: JasmyCoin, the token of a platform that develops internet of things (IoT), lost 44.1% and is part of the DACS IoT Industry and Industry Group. However, these best and worst assets are relatively small, with a combined total weight less than 2.8% of CPU at the end of the period.

Biggest asset: Chainlink, comprising 42.7% of the sector. While LINK lost 13.7% QTD, it ranked as the seventh-best performing asset in the sector. It hosted a crypto conference in October, SmartCon, and launched Staking v0.1 on the Ethereum mainnet in December.

Also notable: BAND, the native token of cross-chain data oracle platform Band Protocol, jumped 58%.

Read more: CoinDesk Market Outlook: 4Q Crypto Gloom Spills Into 2023

Commentary and outlook

The Computing sector suffered some of the same doubts applied to centralized entities in the wake of FTX collapse, raising the question of how to decentralize both front- and back-end systems, or both web-hosting services and cloud services, according to Ganesh Swami, co-founder and CEO of blockchain data organization Covalent.

“The industry is still so nascent that the reliance on the centralized, incumbent systems for the infrastructure is still very much an issue for a number of blockchain ecosystems,” Swami told CoinDesk.

Such reliance presents problems in terms of “exposing their networks to single points of failure,” he added.

Heading into 2023, Swami said the decentralized infrastructure projects in the sector will play "a more prominent role" that will make the broader ecosystem "much more durable and censorship resistant."

More from this report

(Fourth quarter performance as of Dec 15, 2022.)

The CoinDesk Currency Index, Excluding Stablecoins (CCX)

The CoinDesk Smart Contract Platform Index (SMT)

The CoinDesk DeFi Index (DCF)

The CoinDesk Culture & Entertainment Index (CNE)

The CoinDesk Digitization Index (DTZ)