Abstract
Web3 and DeFi are widely advocated as innovations for greater
financial inclusion and democratization. We conduct an initial
investigation using data from the Ethereum network. We provide detailed
analyses of the ecosystem and its main participants in terms of transaction
volume, network structure, and mining and ownership distributions. While
mining concentration is moderate, Ether ownership is concentrated in
exchanges and a small set of individuals. Concerning usage and
transactions, we observe a shift from peer-to-peer interactions to user
interactions with DApps, and much more transactions by large players in the
system. Moreover, we document high transaction-fee ratios for small
players, significant fluctuation of gas prices due to congestion, high
transaction failure rates using DeFi, and high return volatility for tokens
on the Ethereum platform. While users can reserve extra Ether under the gas
limit policy to reduce transaction failures and gas-related parameters can
be adjusted, these issues present particular challenges for small and new
agents in the network under both the original protocol and EIP-1559.
Through burning base fees, EIP-1559 partially mitigates these issues
through redistribution. Time permitting, I will also discuss adding dynamic
incentives to blockchain design.
Short Biography
Lin William Cong is the Rudd Family Professor of Management and Associate
Professor of Finance at the Johnson Graduate School of Management at
Cornell University, where he is the founding faculty director for the
FinTech Initiative. He is also a Kauffman Foundation Junior Faculty Fellow,
Poets & Quants World Best Business School Professor, and editorial board
member for top business and finance journals such as the Management
Science. Prior to joining Cornell, he was an assistant professor of Finance
at the University of Chicago Booth School of Business where he created
courses on “Quantimental Investment,” faculty member at the Center for East
Asian Studies, doctoral fellow at the Stanford Institute for Innovation in
Developing Economies, and George Shultz Scholar at the Stanford Institute
for Economic Policy Research. He advised companies such as String
Lab/Dfinity, DataYes, and is currently advising ChainLink, Blackrock, among
other industry leaders in FinTech and asset management.
Professor Cong’s research spans financial economics, information economics,
FinTech and AI, and Entrepreneurship (theory and intersection with
digitization and development). Widely recognized as a founding scholar for
FinTech research, Professor Cong has received numerous accolades such as
the AAM-CAMRI-CFA Institute Prize in Asset Management, the CME Best paper
Award, Finance Theory Group Best Paper Award, and has also been invited to
speak or teach at hundreds of world-renowned universities, venture funds,
investment and trading shops, and government agencies such as IMF, Asset
Management Association of China, Alibaba, SEC, and federal reserve banks.
He received his Ph.D. in Finance and MS in Statistics from Stanford
University, and A.M. in Physics jointly with A.B. in Math and Physics from
Harvard University.