Decentralization vs. Blockchain Neutrality: The Unequal Burden of Ethereum’s Market Mechanism on dAppsy

Abstract: Blockchain platforms have been hailed to usher our digital economy in Web3.0, a more transparent, inclusive, and equal era of the Internet. To do so, blockchain platforms \textcolor{blue}{aim to} disintermediates digital platforms by substituting a centralized authority with a network of peers who collectively verify and enforce\todo{What is “enforcement”? I think it’s all about recording} transactions based on rules predefined in a public protocol. As this decentralization necessitates limiting the transaction supply, most blockchain platforms rely on a market mechanism to allocate the transaction verification\todo{recording?} service. We study how this market mechanism influences what type of applications can be sustainably offered on such platforms. Based on a sample of 1,560 applications running on Ethereum, the most popular blockchain platform, we show that allocating transactions by a market mechanism favors some types of applications over others and reduces the heterogeneity of platform complements. This finding highlights a trade-off of between decentralization and {\em blockchain neutrality}—a new notion we introduce as the principle that all actors on a blockchain platforms are treated equally. This trade-off is especially problematic as blockchain platform providers have no strategic tools to mitigate this discrimination and allow all types of applications to be offered on the platform.

Keywords: Blockchain, decentralization, blockchain neutrality, platform orchestration, decentralized applications