Practical Applications of Footprints on a Blockchain: Trading and Information Leakage in Distributed Ledgers

Abstract

<h3>Practical Applications Summary</h3> In <b>Footprints on a Blockchain: <i>Trading and Information Leakage in Distributed Ledgers</i></b>, from the Summer 2017 issue of <b><i>The Journal of Trading</i></b>, authors <b>Rune Tevasvold Aune</b>, <b>Adam Krellenstein</b> (both of <b>Symbiont</b>) <b>Maureen O’Hara</b> (<b>Cornell University School of Management</b>) and <b>Ouziel Slama</b> (formerly of Symbiont and now with <b>Legolas</b>), describe a creative solution to a potential limitation to the use of distributed ledger technology in financial market contexts. This complication relates to the disclosure of proprietary trading information that could be used to “front-run” certain investors. The authors outline a solution to this problem, which involves the use of a cryptographic hash to indicate prioritization of transactions. This solution could facilitate widespread usage of blockchain technology in a variety of financial contexts. <b>TOPICS:</b>Quantitative methods, exchanges/markets/clearinghouses