Is decentralized finance actually decentralized? A social network analysis of the Aave protocol on the Ethereum blockchain

Is decentralized finance actually decentralized? A social network analysis of the Aave protocol on the Ethereum blockchain | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article Is decentralized finance actually decentralized? A social network analysis of the Aave protocol on the Ethereum blockchain Ziqiao Ao, Lin Cong, Gergely Horvath, Luyao Zhang This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7610938/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Decentralized finance (DeFi) has the potential to disrupt centralized finance by validating peer-to-peer transactions through tamper-proof smart contracts, thus significantly lowering the transaction cost charged by financial intermediaries. However, the actual realization of peer-to-peer transactions and the levels and effects of decentralization are largely unknown. Our research pioneers a blockchain network study that applies social network analysis to measure the level, dynamics, and impacts of decentralization in DeFi token transactions on the Ethereum blockchain. First, we find a significant core-periphery structure in the AAVE token transaction network where the cores include the two largest centralized crypto exchanges. Second, we provide evidence that multiple network features consistently characterize decentralization dynamics. Finally, we document that a more decentralized network significantly predicts a higher return and lower volatility of the decentralized market of AAVE tokens on the Ethereum blockchain. We point out that our approach is influential for inspiring future extensions related to the facets of application scenarios, research questions, and methodologies on the mechanics of blockchain decentralization. Humanities/Complex networks Social science/Complex networks Physical sciences/Mathematics and computing Physical sciences/Physics Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7610938","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Article","associatedPublications":[],"authors":[{"id":519182403,"identity":"13a2f503-9ac9-42cc-a1a8-b699ed3d836d","order_by":0,"name":"Ziqiao Ao","email":"","orcid":"","institution":"Microsoft","correspondingAuthor":false,"prefix":"","firstName":"Ziqiao","middleName":"","lastName":"Ao","suffix":""},{"id":519182404,"identity":"b5af742b-153c-4bce-89b1-62b050548768","order_by":1,"name":"Lin Cong","email":"","orcid":"","institution":"Cornell University","correspondingAuthor":false,"prefix":"","firstName":"Lin","middleName":"","lastName":"Cong","suffix":""},{"id":519182405,"identity":"5091512d-a230-46fe-b142-34a6b9b8199f","order_by":2,"name":"Gergely Horvath","email":"","orcid":"","institution":"Duke Kunshan University","correspondingAuthor":false,"prefix":"","firstName":"Gergely","middleName":"","lastName":"Horvath","suffix":""},{"id":519182406,"identity":"e6f3b530-3ceb-44f8-92d1-3497bb6297bb","order_by":3,"name":"Luyao Zhang","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAsUlEQVRIiWNgGAWjYBACPgbGxocfKpgZJEA8HmK0sDEwNxtLnCFNC3ubBG8bSVr4DzYbSM6zTpzZ3sD44G0bUbYcbHxQuC09cTbPAWbDuURpYWwE2rLtcOI8iQQ2aV6itDAzAv0yB6hF/gH7b+K0sIG0NBxOnC0B1E6cFh5GYCAfSzee2ZPYLDnnHBFa+PmPP3z4ocZadsbxwwc/vCkjQgsSYGwgTf0oGAWjYBSMAtwAAEoMMg1/KIrCAAAAAElFTkSuQmCC","orcid":"","institution":"Duke Kunshan University","correspondingAuthor":true,"prefix":"","firstName":"Luyao","middleName":"","lastName":"Zhang","suffix":""}],"badges":[],"createdAt":"2025-09-14 07:08:20","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-7610938/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-7610938/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":92294521,"identity":"87c421be-e001-4187-a3d4-06c072e16aa8","added_by":"auto","created_at":"2025-09-27 00:55:22","extension":"pdf","order_by":0,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":2774922,"visible":true,"origin":"","legend":"","description":"","filename":"BNSNatureScientificReportsubmissions.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7610938/v1/88092e8f150e09d5ab5be9ea.pdf"},{"id":92294480,"identity":"1cc9bf27-b0b3-4074-a8c1-490820e8590f","added_by":"auto","created_at":"2025-09-27 00:55:18","extension":"json","order_by":1,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":5866,"visible":true,"origin":"","legend":"","description":"","filename":"e6d05f957d8c4330aabc3d334e4c50cf.json","url":"https://assets-eu.researchsquare.com/files/rs-7610938/v1/759028a5dc74bc60834a32d5.json"},{"id":100548194,"identity":"b52cffed-0bbe-4496-a275-3b712e806925","added_by":"auto","created_at":"2026-01-19 08:17:47","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":1488774,"visible":true,"origin":"","legend":"","description":"","filename":"BNSNatureScientificReportsubmissions.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7610938/v1_covered_9cf56613-647f-42ac-b512-c3d33476dc95.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Is decentralized finance actually decentralized? 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