Forbes' "Zombie Blockchains": Hype or Reality?

Forbes has identified 20 "zombie blockchains" with valuations in billions despite minimal utility, including well-known names like ADA, XRP, and LTC. These blockchains exhibit low developer activity and fee collection, suggesting a disconnect between their valuations and actual network usage. However, analysis of key metrics such as Network Value to Transactions (NVT) reveals that some zombie blockchains may not be as dormant as they seem, potentially indicating undervaluation or potential for future growth.

Forbes' "Zombie Blockchains": Misnomer or Accurate Assessment?

In a recent report, Forbes has classified 20 blockchain networks as "zombies," citing their billions of dollars in valuations despite their perceived low utility. While the term "zombie blockchain" is intriguing, a closer examination reveals a more nuanced picture, challenging the validity of Forbes' categorization.

Defining Zombie Blockchains

Forbes describes zombie blockchains as those characterized by "low utility, high trading." Essentially, these networks have valuations in the billions of dollars but limited real-world applications or usage. According to Forbes, the following blockchains fall under this category:

• XRP (XRP)
• Cardano (ADA)
• Bitcoin Cash (BCH)
• Litecoin (LTC)
• Internet Computer (ICP)
• Ethereum Classic (ETC)
• Stellar (XLM)
• Stacks (STX)
• Kaspa (KAS)
• Fantom (FTM)
• Monero (XMR)
• Arweave (AR)
• Algorand (ALGO)
• Flow (FLOW)
• MultiversX (EGLD)
• Bitcoin SV (BSV)
• Mina (MINA)
• Tezos (XTZ)
• Theta (THETA)
• EOS (EOS)

Metrics in Question

Forbes primarily relies on metrics such as the number of developers, fee collection, and active addresses to determine the "low utility" of these networks. However, a deeper analysis reveals a more complex story.

Cardano: A Case in Point

Cardano, one of the blockchains labeled as a zombie, has been criticized for its declining active addresses and low fee collection. However, a closer examination reveals that Cardano has a robust community of developers, with over 150 weekly active core developers, which is higher than many other Layer 1 blockchains.

Furthermore, Cardano's Adjusted Network Value to Transactions (NVT) ratio, a measure of network value relative to transaction volume, is significantly lower than that of Ethereum Classic (ETC), another blockchain on the zombie list. This suggests that Cardano's valuation is relatively undervalued compared to its transaction activity.

Pump and Dump Allegations

Forbes also points to the presence of large holders and pump-and-dump schemes as contributing factors to the "zombie" status of these cryptocurrencies. While it is true that some large holders may engage in such activities, it is important to note that these allegations have not been substantiated with concrete evidence.

Assessing the Zombie List

A critical examination of the Forbes list reveals that several of the included blockchains have been operating for extended periods, with established communities and significant usage. For instance, Litecoin and Bitcoin Cash have been around for years and continue to have active user bases. XRP, despite regulatory challenges, remains a widely used asset for cross-border payments and remittances.

Moreover, the NVT ratio, which Forbes does not consider, provides a more balanced view of network valuations. By comparing the network value to transaction volume, the NVT ratio helps identify potential overvaluations. According to Messari data, the Adjusted NVTs of several blockchains on the zombie list, including ADA, KASPA, and ICP, are relatively low, suggesting that they are not significantly overvalued.

Conclusion

While the concept of "zombie blockchains" may be attention-grabbing, a thorough analysis of the Forbes list and the underlying metrics reveals a more nuanced picture. Several of the included networks have demonstrated notable development activity, established communities, and growing transaction volumes.

The NVT ratio, which Forbes overlooks, provides a more comprehensive assessment of network valuations, suggesting that some of the so-called "zombies" may be undervalued rather than overvalued.

It is crucial to approach such classifications with a critical eye and consider a broader range of factors beyond the limited metrics used by Forbes. The blockchain industry is constantly evolving, and dismissing networks as "zombies" based on a snapshot in time may hinder our understanding of their potential and long-term value.