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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title The Structural Role of Smart Contracts and Exchanges in the Centralisation of Ethereum-Based Cryptoassets
Organization Unit
Authors
  • Francesco Maria De Collibus
  • Matija Piškorec
  • Alberto Partida
  • Claudio Tessone
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Entropy
Publisher MDPI Publishing
Geographical Reach international
ISSN 1099-4300
Volume 24
Number 8
Page Range 1048
Date 2022
Abstract Text In this paper, we use the methods of networks science to analyse the transaction networks of tokens running on the Ethereum blockchain. We start with a deep dive on four of them: Ampleforth (AMP), Basic Attention Token (BAT), Dai (DAI) and Uniswap (UNI). We study two types of blockchain addresses, smart contracts (SC), which run code, and externally owned accounts (EOA), run by human users, or off-chain code, with the corresponding private keys. We use preferential attachment and network dismantling strategies to evaluate their importance for the network structure. Subsequently, we expand our view to all ERC-20 tokens issued on the Ethereum network. We first study multilayered networks composed of Ether (ETH) and individual tokens using a dismantling approach to assess how the deconstruction starting from one network affects the other. Finally, we analyse the Ether network and Ethereum-based token networks to find similarities between sets of high-degree nodes. For this purpose, we use both the traditional Jaccard Index and a new metric that we introduce, the Ordered Jaccard Index (OJI), which considers the order of the elements in the two sets that are compared. Our findings suggest that smart contracts and exchange-related addresses play a structural role in transaction networks both in DeFi and Ethereum. The presence in the network of nodes associated to addresses of smart contracts and exchanges is positively correlated with the success of the token network measured in terms of network size and market capitalisation. These nodes play a fundamental role in the centralisation of the supposedly decentralised finance (DeFi) ecosystem: without them, their networks would quickly collapse.
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Digital Object Identifier 10.3390/e24081048
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Keywords General Physics and Astronomy