Decentralized Finance, Centralized Ownership? An Iterative Mapping Process to Measure Protocol Token Distribution

TL;DR

This paper introduces an iterative mapping process to accurately analyze token distribution and ownership in DeFi protocols, accounting for complex nesting and reallocation over time.

Contribution

It presents a novel method for detailed token distribution analysis, including nested holdings and intertemporal changes, enhancing understanding of DeFi ecosystem ownership.

Findings

Improved accuracy in token ownership mapping.

Insights into reallocation and protocol usage patterns.

Enhanced understanding of DeFi ecosystem integration.

Abstract

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.