How to sort zombie blockchains from the living

Driving the news: Forbes has a feature that put the label on some well known blockchains.

• It characterized zombies as projects with market caps over a billion dollars, but with too little use to justify their continued existence.
• In particular, it discussed the ratio of a given coin's market capitalization to a year's worth of fees generated on the network.
• Comparing this metric to the price-to-sales (P/S) ratio commonly used to value traditional stocks, Forbes noted that several blockchain valuations were way, way out of sane bounds.

For comparison, Ethereum (not a zombie), which generates the most daily average fees among all blockchains, scores at 122.4. Coinbase has a P/S ratio around 14. Tesla is around a 6.

• A lower number means a lower multiple of earnings to the total valuation, but of course cryptocurrencies are more of a bet on a dream of decentralization.

The big picture: Blockchains are not businesses in the traditional sense, so we don't have language yet to think clearly about the value of decentralized organizations.

• This makes being truly analytical about them difficult.
• Joshua Frank, CEO of the data firm, The Tie, tells Axios, "I think this is a very subjective question and I don't necessarily entirely agree with the Forbes article."
• But that doesn't mean people aren't trying.

Between the lines: Coin Metrics' Parker Merritt put together some other ways to compare the liveness of a few chains named in the article to that of Bitcoin and Ethereum.

• Meltem Demirors, a long-time entrepreneur in the space, tells Axios that investment activity on a chain could be a good way to define credible blockchains. If investment has stopped, that's a bad sign.
• Demirors had a caveat though. Watchers should only count deals from VC funds independent of blockchains, with real LPs, she said, because lots of dead chains still have plenty of money in development funds (funded with millions of dollars worth of such chains' own tokens.)

Paul Veraddikkit of Pantera, a crypto hedge fund, pointed to developer activity as a gauge of health, and The Tie's Frank did as well.

• By that measure, according to the Electric Capital's Developer Report, The Graph, Tezos and IOTA are well known projects that have seen pretty severe drop-offs.

Then again, crypto investor William Mougayar said that on-chain activity is the key. That is, how much are people really using the chain and whatever apps have been built on it.

• DappRadar shows very little activity on some of the chains Forbes named, such as EOS, Theta and Algorand.

Sam Trautwein, of Tristero, suggested making on-chain metrics more sophisticated by looking for indicators of human activity, such as looking for users active on multiple chains.

• Wallets on more than one chain are likely to belong to a human, he said.
• "There's a tension between things being easy to calculate and how indicative of they are of a chain being a zombie," he said.

Our thought bubble: It would be nice if someone could hoover up all the public data out there, write a clear definition of "zombie blockchain" and make a data dashboard telling us definitively which ones can be written off.

Reality check: As soon as anyone did that, however, the worst blockchains' last bagholders would game the system. "There are firms you pay to game metrics for you," Demirors says.

• "All the metrics are gamed hard."

The bottom line: Among the folks we reached out to, many had quibbles about whether or not this or that blockchain truly belonged on Forbes' list, but no one disputed the core contention.

• There are blockchains still running out there that the world clearly has no use for.