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Over 68% of All Ethereum Transaction Value Is “Mixed” by One Entity

The Ethereum ecosystem processes thousands of transactions every single hour. One would not necessarily think most of these transactions are “handled” by one centralized entity. New research by cyber•Fund reveals a very different reality, though. According to their findings, 65% of all ETH transactions are seemingly generated by temporary addresses, all of which seemingly belong to the same entity.

Centralized Control of the Ethereum Ecosystem?

It sounds pretty strange that so many Ethereum transactions would be generated by temporary addresses. While this might be considered a good thing, its repercussions could also be disastrous for all we know. The findings by cyber•Fund paint a very interesting picture, although they also raise a lot of questions. The company analyzed all ETH transactions from the creation of the genesis block through September 15th.

During this period, nearly seven in ten Ethereum transactions passed through a temporary address. Although the company refers to those as “mixing” services, it remains to be seen if that’s actually what was going on. One peculiar aspect of these temporary addresses is how money typically comes in and goes out within 1 hour or less. After that time, these addresses are never used again. Disposable addresses are nothing new in the cryptocurrency world, although they aren’t necessarily associated with Ethereum in any big way.

About 95% of the temporary addresses discovered so far can all be traced back to one “service,” which is peculiar. This “service” interacts with a group of temporary addresses as well as permanent addresses. Incoming transactions to any of these Ethereum addresses are then outputted to the same entities, by the looks of things. Although it is hard to associate an individual or company with a specific destination address, it turns out quite a few “mixed” transactions give a strong indication as to where they are heading to.

While that piece of information is not necessarily worrisome, there are other findings as well. This “mixing service” processed four times as much money as the amount moving in and out of the shell addresses and “core service” together. This seems to explain why cyber•Fund refers to the service in question as a mixer. If the same amounts were mixed several times, it would explain the discrepancy in numbers. It’s an interesting observation, but then things get even more interesting.

Roughly 68.5% of all ETH transaction value during the observation period was broadcast over 10.7% of all network transactions. That means that 10.7 % of all transactions are potentially controlled by one centralized, unknown entity. However, this also means 68.5% of all transaction value is controlled by the same entity. It also appears this service successfully contributed to Ethereum transaction growth, which is pretty interesting. People most often attribute this growth to cryptocurrency ICOs, but that may not necessarily be the case.

Last but not least, cyber•Fund claims it found “sets” of addresses that get deactivated after use while a new batch is prepared. These findings are pretty interesting and show how there is far less unique value broadcast on the Ethereum network than most people would assume. It remains unclear why this is happening or who is providing the “service” in the first place. Nor does it appear to have had any negative effects on the Ethereum network itself, other than perhaps creating some blockchain bloat.