Quantifying Inequality in Blockchain Networks

Abstract

Inequality measures such as the Gini coefficient are widely used to motivate public policy [6], and are being increasingly applied in blockchain settings to design fairer mechanisms. [1, 9, 16]. Several challenges impair the reliability of inequality measures. First, the pseudonymous nature and the fact that actors may create multiple sybil accounts, distort asset distribution. Second, there are complex token-holding patterns, where an entity's assets may be stored across various smart contracts. In this work we propose methods to improve the accuracy of inequality measurements in blockchain networks. We empirically test these methods on Ethereum and assess policy impacts. Our results suggest that while inequality in Ethereum appeared to decline over time, and several previous protocol changes such as the transition from PoW to PoS indeed reduced inequality, this trend has recently reversed.

Keywords: Blockchain, Tokenomics, Inequality, Ethereum