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| Main Authors: | , , , , |
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| Format: | Preprint |
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2022
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2212.05632 |
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| _version_ | 1866912526056292352 |
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| author | Zhang, Yufan Chen, Zichao Sun, Yutong Liu, Yulin Zhang, Luyao |
| author_facet | Zhang, Yufan Chen, Zichao Sun, Yutong Liu, Yulin Zhang, Luyao |
| contents | Decentralized finance (DeFi) is known for its unique mechanism design, which applies smart contracts to facilitate peer-to-peer transactions. The decentralized bank is a typical DeFi application. Ideally, a decentralized bank should be decentralized in the transaction. However, many recent studies have found that decentralized banks have not achieved a significant degree of decentralization. This research conducts a comparative study among mainstream decentralized banks. We apply core-periphery network features analysis using the transaction data from four decentralized banks, Liquity, Aave, MakerDao, and Compound. We extract six features and compare the banks' levels of decentralization cross-sectionally. According to the analysis results, we find that: 1) MakerDao and Compound are more decentralized in the transactions than Aave and Liquity. 2) Although decentralized banking transactions are supposed to be decentralized, the data show that four banks have primary external transaction core addresses such as Huobi, Coinbase, and Binance, etc. We also discuss four design features that might affect network decentralization. Our research contributes to the literature at the interface of decentralized finance, financial technology (Fintech), and social network analysis and inspires future protocol designs to live up to the promise of decentralized finance for a truly peer-to-peer transaction network. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2212_05632 |
| institution | arXiv |
| publishDate | 2022 |
| record_format | arxiv |
| spellingShingle | Blockchain Network Analysis: A Comparative Study of Decentralized Banks Zhang, Yufan Chen, Zichao Sun, Yutong Liu, Yulin Zhang, Luyao General Economics Economics Cryptography and Security Social and Information Networks Trading and Market Microstructure Computation 91D30, 91-11, J.4; C.2; K.4 Decentralized finance (DeFi) is known for its unique mechanism design, which applies smart contracts to facilitate peer-to-peer transactions. The decentralized bank is a typical DeFi application. Ideally, a decentralized bank should be decentralized in the transaction. However, many recent studies have found that decentralized banks have not achieved a significant degree of decentralization. This research conducts a comparative study among mainstream decentralized banks. We apply core-periphery network features analysis using the transaction data from four decentralized banks, Liquity, Aave, MakerDao, and Compound. We extract six features and compare the banks' levels of decentralization cross-sectionally. According to the analysis results, we find that: 1) MakerDao and Compound are more decentralized in the transactions than Aave and Liquity. 2) Although decentralized banking transactions are supposed to be decentralized, the data show that four banks have primary external transaction core addresses such as Huobi, Coinbase, and Binance, etc. We also discuss four design features that might affect network decentralization. Our research contributes to the literature at the interface of decentralized finance, financial technology (Fintech), and social network analysis and inspires future protocol designs to live up to the promise of decentralized finance for a truly peer-to-peer transaction network. |
| title | Blockchain Network Analysis: A Comparative Study of Decentralized Banks |
| topic | General Economics Economics Cryptography and Security Social and Information Networks Trading and Market Microstructure Computation 91D30, 91-11, J.4; C.2; K.4 |
| url | https://arxiv.org/abs/2212.05632 |