Have you heard of disguised unemployment? It refers to a situation where part of the workforce seems to be employed, but does not contribute to the production of the economy. Consider the massive loss of capital costs from ghost towns that represent unoccupied infrastructure.
Something similar can be said for the best smart contract blockcainers hosting hundreds of decentralized protocols. Of these, only a minority generate income, while the rest do not produce any yield, which loosely represents Ghost Digital Cities and some form of hidden unemployment.
According to Defillama, Ethereum is the world’s largest smart contract Blockchain, hosting 1,271 protocols. Over the past 30 days, a staggering 88%or 1,121 projects in total generated no revenue.
Ethereum’s rival, Solana, has a much smaller ecosystem that hosts 264 protocols, of which 75% have not generated revenue in the last few days.
In other words, a large number of protocols on the two chains have not caught any value recently, just as the workforce that draws a salary but does not contribute to output, or ghost towns that are not used to create a meaningful economic return.
Key AI insight
Inactive projects are not necessarily a direct burden on the network’s treatment force in the same way as an overloaded network is, but they constitute an indirect burden in the following ways:
Storage burden
Each smart contract, active or not, is stored on blockchain forever. These unchanging data adds the size of blockchain, and all nodes in the network need to save and maintain this story. As the total number of contracts grows, it also makes storage and bandwidth requirements to run a knot. While the effect of a single inactive contract is minimal, a “ghost town” of thousands of them is added over time, increasing the network’s long -term operating costs.
Security and vulnerability risks
The existence of a large number of inactive or abandoned contracts creates a larger attack surface. A smart contract, although no longer used, may contain a vulnerability which, if exploited, could have unforeseen consequences for other parts of the ecosystem or funds locked inside it. This introduces a layer of systemic risk of the network that must be continuously monitored by security researchers and auditors.
Economic inefficiency
This is where the analogy of “disguised unemployment” is most appropriate. Although these projects do not cause overload, they represent a collective failure of capital and develop time to create a productive asset on the network. The means, time and forces used to implement these projects are effectively locked in a non-productive state, which is a feature of the overall efficiency of the ecosystem.
Just as a physical ghost city represents a massive investment of capital and labor that does not provide any financial return, represents the diversity of non-income-generating protocols on Blockchains wasted developer efforts and capital that does not contribute to the network’s productivity.
Obstacle to user experience
A large number of inactive projects can make it difficult for new users to find and rely on legitimate, active protocols. Aim through a sea of abandoned or unsuccessful projects can be confusing and can detract from the overall user experience.
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