Ecosystem Risk

Definition ∞ Ecosystem Risk pertains to the potential for adverse events to negatively impact the interconnected components within a digital or financial system. This encompasses risks arising from the failure of individual protocols, smart contracts, or external dependencies that collectively support a digital asset or platform. Assessing ecosystem risk requires a comprehensive view of interdependencies and potential contagion effects. Mitigating these risks is crucial for maintaining the stability and reliability of digital networks.
Context ∞ Discussions surrounding Ecosystem Risk are particularly pertinent in the context of rapidly evolving decentralized finance (DeFi) protocols and interconnected blockchain networks. Recent events have highlighted the potential for cascading failures across seemingly independent entities. Analysts are actively developing frameworks to quantify and manage these systemic vulnerabilities, focusing on inter-protocol dependencies and smart contract security.