The ‘Winner Takes All’ Problem: Graphite CTO Marko Ratkovic on Fixing Inequities in Blockchain

While blockchain technology has brought transformative innovations, it often replicates some of the precise same structural issues seen in traditional finance, where smaller players like developers and node operators carry the entire weight of ensuring network functionality but remain underprivileged. Graphite CTO Marko Ratkovic is among those analyzing these challenges and vouching for solutions based on fairness, efficiency, and trust within the blockchain ecosystem.

Blockchain Power Concentration

When Marko and his team studied low-level protocols and high-load systems, they noticed that most blockchains’ profit-sharing mechanisms consistently favored the top few, creating oligopolies and neglecting the broader ecosystem.

One example is Ethereum, which Marko points out has historically fostered concentration of power.

“During Ethereum’s mining era, a small number of mining pools, particularly F2Pool and Ethermine, consistently dominated block production, often controlling more than 60% of the network’s hash rate. This raised concerns about centralization in the network, especially when in some periods their influence reached even higher levels. In the current Proposer/Builder Separation (PBS) era, block creation is dominated by a small number of builders, with two major entities often controlling more than 90% of block construction,” he explains.

This “winner takes all” dynamic, Marko notes, leaves little room for smaller players to participate meaningfully. “If a block is sealed, the entire profit goes to its creator. There are no out-of-the-box profit-sharing mechanisms. Sometimes, this leads to off-chain collusion (agreements) between MEV searchers and builders, which are often not visible or regulated within the Ethereum network itself,” Marko adds.

As a result, Marko noted that technically inclined ecosystem participants are limited to earning through mechanisms more closely related to financial systems built on blockchains, such as arbitrage, trading, and liquidations. He sees the initial shortage of incentives stems from blockchain creators’ earlier priority: building minimally viable systems.

However, he emphasized that it is now possible to go further. “Redistributing profits by design could lead to greater decentralization and more engagement from technically skilled participants in the ecosystem,” Marko claims.

Addressing Fairness and Centralization

Answering the question of why the blockchain industry has largely failed to prioritize fairness for contributors, Marko explained that the first blockchain, Bitcoin, was ideologically designed to allow everyone to earn by strengthening decentralization, which in turn enhances the system’s security.

“Mining initially didn’t require significant computational power. On paper and in theory, it’s still accessible to everyone. However, in practice, it’s now viable only for players with massive computational resources and access to large amounts of cheap electricity,” he points out.

Marko observed that, over time, no better alternative had been devised to address the centralization challenges in blockchain. He noted that in Ethereum, “serious discussions are now taking place about the centralization crisis and the possibility of moving away from the dominance of just two builders.” One proposed solution, he explained, is to provide incentives to those who seal blocks. Another, he added, is to find ways to incentivize other system participants, such as transport node operators.

That is why Marko and his team brainstormed and developed a feature they called income generation from entry-point (transport) nodes, which enables node operators to earn rewards directly from transaction fees.

Balancing Decentralization and Efficiency

When asked about the challenges of decentralization and how a truly fair and efficient blockchain infrastructure should look like, Marko responded that decentralization is not inherently valuable but holds value because of the security it provides.

“A properly designed decentralized system is more resilient to hacks or failures of its components. It is also often better equipped for negative censorship,” he explains.

Discussing the trade-offs between convenience and security in blockchain systems, Marko said that these two concepts are often in conflict. He noted, “It is safer to create complex passwords, but it’s more convenient to remember simple ones. Similarly, it’s safer to distribute access among multiple individuals, but for convenience, one person may often have access to everything.” This same dynamic, he pointed out, applies to blockchain systems.

“It’s very convenient to have a block every 250 milliseconds, as in Arbitrum, but it’s not very secure to rely on such centralization and a single point of failure in the form of a sequencer,” Marko observed. “On the other hand, Bitcoin is secure because of the immense computational effort required to create blocks, but it’s inconvenient with its slow transactions and massive energy costs.”

Marko concluded that the solution lies somewhere in the middle. According to him, blockchain systems should avoid a single point of failure and also should not rely on energy-intensive mechanisms that slow down the network. He stated, “PoA (Proof of Authority) and PoS (Proof of Stake) consensus mechanisms seem the most favorable. However, in the case of PoA, there must not be a single block creator, as this would introduce a critical point of failure.”

Challenges in Achieving Mass Adoption

When asked why blockchain ventures struggle to achieve mass adoption, Marko pointed out that the unfamiliarity of blockchain systems remains a significant barrier for traditional Web2 users. He elaborated, “Blockchain systems are inherently different from what Web2 users are accustomed to. They lack the ability to recover lost data and require complex asset management across multiple networks.”

This complexity, Marko explained, has given rise to crypto products like exchanges that aim to simplify the experience by offering traditional interfaces. However, he added, “These products often damage the reputation of blockchain when hacks or scams occur, as there’s widespread confusion between blockchain systems and crypto products in the public consciousness.”

Marko tied this challenge back to the trade-off between convenience and security. He noted, “While progress is being made with solutions like user-friendly accounts through innovations like EIP-4337, it’s unclear whether simplification of interfaces will come first or whether users will gradually adapt to less familiar systems.”

He further observed that during cryptocurrency market booms, users are often compelled to navigate complex interfaces in the hope of profiting, which temporarily accelerates adoption but does not resolve the fundamental issues.

According to Marko, the biggest hurdle to mass adoption is clear: blockchains must make security and convenience mutually inclusive by deploying innovative solutions that achieve both goals. Technologies such as reputation-based trust systems, modular account recovery features, scalable algorithms like Polymer 2.0 that improve transaction speed and reduce costs, and Zero-Knowledge Proofs (ZKPs)—which ensure privacy while maintaining trust—are some examples of how blockchain can achieve this.

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