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The Role of Smart Contracts in the Transaction Networks of Four Key DeFi-Collateral Ethereum-Based Tokens

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Complex Networks & Their Applications X (COMPLEX NETWORKS 2021)

Part of the book series: Studies in Computational Intelligence ((SCI,volume 1072))

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Abstract

We analyse the transaction networks of four representative ERC-20 tokens that run on top of the public blockchain Ethereum and can be used as collateral in DeFi: Ampleforth (AMP), Basic Attention Token (BAT), Dai (DAI) and Uniswap (UNI). We use complex network analysis to characterize structural properties of their transaction networks. We compute their preferential attachment and we investigate how critical code-controlled nodes (smart contracts, SC) executed on the blockchain are in comparison to human-owned nodes (externally owned accounts, EOA), which are be controlled by end users with public and private keys or by off-blockchain code. Our findings contribute to characterise these new financial networks. We use three network dismantling strategies on the transaction networks to analyze the criticality of smart contract and known exchanges nodes as opposed to EOA nodes. We conclude that smart contract and known exchanges nodes play a structural role in holding up these networks, theoretically designed to be distributed but in reality tending towards centralisation around hubs. This sheds new light on the structural role that smart contracts and exchanges play in Ethereum and, more specifically, in Decentralized Finance (DeFi) networks and casts a shadow on how much decentralised these networks really are. From the information security viewpoint, our findings highlight the need to protect the availability and integrity of these hubs.

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Author information

Authors and Affiliations

  1. Blockchain and Distributed Ledger Technologies Group, University of Zurich, Zurich, Switzerland

    Francesco Maria De Collibus & Matija Piškorec

  2. International Doctoral School, Rey Juan Carlos University, Madrid, Spain

    Alberto Partida

  3. Rudjer Boskovic Institute, Zagreb, Croatia

    Matija Piškorec

Authors
  1. Francesco Maria De Collibus
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  2. Alberto Partida
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  3. Matija Piškorec
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Corresponding author

Correspondence to Francesco Maria De Collibus .

Editor information

Editors and Affiliations

  1. Escuela Técnica Superior de Ingeniería Agronómica, Alimentaria y de Biosistemas, Universidad Politécnica de Madrid, Madrid, Madrid, Spain

    Rosa Maria Benito

  2. IUT Lumière, University of Lyon, Bron Cedex, France

    Chantal Cherifi

  3. LIB, UFR Sciences et Techniques, University of Burgundy, Dijon, France

    Hocine Cherifi

  4. Grupo Interdisciplinar de Sistemas Complejos, Universidad Carlos III de Madrid, Leganés, Madrid, Spain

    Esteban Moro

  5. Thomas J. Watson College of Engineering and Applied Science, Binghamton University, Binghamton, USA

    Luis M. Rocha

  6. Department of Chemical Engineering, Universitat Rovira i Virgili, Tarragona, Tarragona, Spain

    Marta Sales-Pardo

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De Collibus, F.M., Partida, A., Piškorec, M. (2022). The Role of Smart Contracts in the Transaction Networks of Four Key DeFi-Collateral Ethereum-Based Tokens. In: Benito, R.M., Cherifi, C., Cherifi, H., Moro, E., Rocha, L.M., Sales-Pardo, M. (eds) Complex Networks & Their Applications X. COMPLEX NETWORKS 2021. Studies in Computational Intelligence, vol 1072. Springer, Cham. https://doi.org/10.1007/978-3-030-93409-5_65

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  • DOI: https://doi.org/10.1007/978-3-030-93409-5_65

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-93408-8

  • Online ISBN: 978-3-030-93409-5

  • eBook Packages: EngineeringEngineering (R0)

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