Centralized Intermediation in a Decentralized Web3 Economy: Value Accrual and Extraction

This paper examines the paradoxical emergence of centralized intermediaries within the supposedly decentralized Web3 ecosystem. We analyze how these intermediaries accumulate and extract value, despite the underlying blockchain technology being designed to eliminate such middlemen. Through empirical analysis of major cryptocurrency exchanges, NFT marketplaces, and DeFi platforms, we demonstrate that network effects and economies of scale naturally lead to the concentration of power in a few dominant players.

Our findings suggest that while blockchain technology provides the technical infrastructure for decentralization, economic incentives often push the ecosystem toward centralization. We identify key mechanisms through which this centralization occurs and propose potential regulatory and technological solutions to better align the reality of Web3 with its decentralization ideals.

Keywords: blockchain, cryptocurrency, decentralized finance, network effects, market structure