Is there equality in Ethereum distribution? Analysis of on-chain Ether supply distribution and…

Emerging technologies such as blockchain, decentralized finance (DeFi), cryptocurrencies, tokens, and smart contracts are revolutionizing resource allocation and economic interactions. Ethereum, a prominent network supporting DeFi and tokenized assets, plays a crucial role in offering an alternative financial system for a wide range of users, including the unbanked population. The recent shift of Ethereum from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism through the Shanghai upgrade has raised questions about the distribution of Ether (ETH) supply.

To investigate the distribution of wealth within Ethereum, a comprehensive analysis was conducted using a detailed dataset spanning from July 2015 to December 2024. This analysis delved into the balances across different address groups and examined the influence of economic activities like exchanges, DeFi platforms, and staking on the distribution of ETH. The study employed a combination of descriptive, longitudinal, and causal inference analyses, focusing on more than 98 million unique wallet addresses to gain insights into the distribution of ETH.

The findings of the study revealed a significant concentration of ETH within a small number of addresses, with approximately 0.3% of wallets holding almost 95% of the total supply. Despite this concentration, the majority of wallets held less than 0.1% of ETH. Interestingly, the distribution of ETH was found to mirror wealth distributions in traditional economies, exhibiting a log-normal body and Pareto-like tails. The study refuted previous claims of excessive centralization of ETH and highlighted a dynamic trend towards less concentration over time, driven by market fluctuations, increasing staking participation, and reinvestment in DeFi.

These results challenge the idea of widespread centralization within the Ethereum ecosystem and contribute to a deeper understanding of the evolution of ETH distribution over time. By providing objective, data-driven insights into the wealth distribution in blockchain-based ecosystems, particularly in DeFi, the study aims to facilitate informed discussions on wealth (in)equality in these emerging technologies.

In conclusion, the profound impact of blockchain technology, DeFi, and cryptocurrencies on reshaping economic structures and wealth distribution underscores the need for continued research and analysis to ensure a fair and equitable financial landscape for all stakeholders involved.