In this paper, we analyze various Decentralized Finance (DeFi) protocols in terms of their token distributions. We propose an iterative mapping process that allows us to split aggregate token holdings from custodial and escrow contracts and assign them to their economic beneficiaries. This method accounts for liquidity-, lending-, and staking-pools, as well as token wrappers, and can be used to break down token holdings, even for high nesting levels. We compute individual address balances for several snapshots and analyze intertemporal distribution changes. In addition, we study reallocation and protocol usage data, and propose wrapping complexity as a proxy for measuring token dependencies and ecosystem integration. The paper offers new insights on DeFi interoperability as well as token ownership distribution and may serve as a foundation for further research.
In this paper, we analyze various Decentralized Finance (DeFi) protocols in terms of their token distributions. We propose an iterative mapping process that allows us to split aggregate token holdings from custodial and escrow contracts and assign them to their economic beneficiaries. This method accounts for liquidity-, lending-, and staking-pools, as well as token wrappers, and can be used to break down token holdings, even for high nesting levels. We compute individual address balances for several snapshots and analyze intertemporal distribution changes. In addition, we study reallocation and protocol usage data, and propose a proxy for measuring token dependencies and ecosystem integration. The paper offers new insights on DeFi interoperability as well as token ownership distribution and may serve as a foundation for further research.
It is difficult to retain privacy on a public blockchain. In contrast to popular belief, permissionless blockchains are completely transparent. All confirmed transactions are publicly observable and stored as part of the blockchain's history. The users' identities are only protected through the use of addresses that act as pseudonyms. This setup allows public blockchains to operate without any intermediaries and creates a system where everyone can mathematically verify the legitimacy and integrity of transactions as well as the current state of the ledger; but the setup raises severe privacy concerns.If someone obtains information that allows them to link a blockchain address to an entity, they may effectively observe that entity's entire transaction history and associated activity. Even if the entity uses multiple addresses, any link between these addresses may expose the fact that they belong to the same person. Moreover, the immutable and public nature of the data creates a setting where the data accrues over time and will always be available for analysis. The algorithms and tools to analyze the data will become more sophisticated, off-chain data more abundant, and computational constraints less relevant.
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