This article discusses the reasons behind the Chinese government's conservative attitude toward cryptocurrencies, despite the rapid growth of the cryptocurrency market in China. Cryptocurrencies have become popular in finance because of their advantages in privacy, permanence, and scalability. However, they also pose challenges, such as regulatory un-certainties and security risks. China has banned financial institutions from facilitating bitcoin transactions and imposed restrictions on cryptocurrencies. The article suggests that China's attitude towards cryptocurrencies may be due to their defects. Clear regulations and laws are needed to normalize transactions and issuance and mitigate policy risks. The article also provides some possible solutions based on the defects of cryptocurrencies.
Babajide Oluwaseun Olaogun, Adaobu Amini-Philips, Ahmed K. Ibrahim
Efficient and accurate settlement processes are central to the operational integrity of financial institutions, particularly in the context of cross-border transactions and high-volume trading environments. Traditional reconciliation methods often involve time-consuming manual processes, delayed settlements, and operational inefficiencies, exposing institutions to settlement risk, liquidity risk, and compliance challenges. This proposes a Blockchain Settlement Impact Model designed to enhance institutional reconciliation processes while reducing operational and financial risks through distributed ledger technology (DLT). The model leverages the transparency, immutability, and real-time validation capabilities of blockchain to provide a secure and auditable framework for transaction settlement and reconciliation. The conceptual framework of the model integrates blockchain-enabled settlement layers with institutional accounting and treasury systems, enabling automated matching of debits and credits, immediate confirmation of transaction status, and streamlined exception management. Smart contracts are employed to enforce predefined settlement rules and automate conditional fund transfers, reducing manual intervention and minimizing the potential for human error. By providing a single source of truth for all settlement activity, the model improves operational efficiency, accelerates transaction finality, and enhances regulatory compliance. Quantitative and qualitative analyses within the model assess the impact of blockchain adoption on reconciliation speed, error rates, liquidity utilization, and risk exposure. Key performance indicators include settlement latency reduction, operational cost savings, and enhanced transparency in multi-party financial processes. The model also addresses risk mitigation by providing real-time visibility into settlement gaps, anomalous transactions, and counterparty exposures, enabling institutions to proactively manage liquidity and credit risk. Overall, the Blockchain Settlement Impact Model demonstrates the potential of distributed ledger technologies to transform institutional reconciliation practices. By combining automated settlement, real-time monitoring, and risk reduction mechanisms, the model enhances operational resilience, reduces systemic vulnerabilities, and provides a scalable solution for financial institutions navigating increasingly complex, high-volume transaction environments. Its adoption promises significant improvements in efficiency, transparency, and financial stability across global settlement networks.
From academia to manufacture, artificial intelligence has a wide application and influence. on financial market. Finance is one of the earliest industries have a great connection with artificial intelligence. Through accurate profiling, neural networks and a series of artificial intelligence technology apply to finance. The traditional financial products, service way, credit finance invest decisions, risk control, etc. will have an innovation. Analysis of base, impact mechanism, development directions, risks on combination between artificial intelligence and finance has great theoretical value and practical significance to promote further combination between artificial intelligence and finance. Blockchain, originated from the concept of digital currency, has an extensive application in series of industries. Governments, financial companies, technology enterprise all over the world show great interest in blockchains. Blockchain, a rising distributed database protocol, apply cryptography technology, time-stamped chain data structures and distributed consensus mechanisms, have achieved decentralization, immutability, easy traceability and many advantages. Blockchains have solved the problem, high cost and insecurity of traditional centralized system, which has broad application prospects. This article focuses on two representative technologies apply in finance, artificial intelligence and blockchains. Start with the definitions of artificial intelligence and blockchains. The significance part is analysis on application of these two technologies. It compares different charge of robo-advisor platform and analyze non-performing loans rate to show the advantage of intelligence risk control. It also introduces five types and characteristic of blockchains, and uses ripple as example to show application of blockchains in cross-broader payments.
Small and medium enterprises (SMEs) are essential in developing the world economy. However, they face financing distress due to high information asymmetry and lack of collateral and credit. From the enterprises’ sustainable development perspective in the big data era, this study explores whether and how blockchain technology can alleviate the information asymmetry problems of SMEs and further improve the convenience of accessing finance. Blockchain technology’s decentralized, unchangeable, and transparent natures can reduce information asymmetry between SMEs and the financing parties. SMEs become more creditable to the bank with a more transparent share of businesses’ operation information and financial conditions based on blockchain. At the same time, market investors can also learn more about the operation of corporate funds. Overall, this study provides new insights on how to use blockchain technology to increase SMEs’ development efficiency by lessening information asymmetry, reducing the cost of equity and bond financing for SMEs, and effectively reducing SMEs’ financing difficulties in this age of big data.
This paper explores the application of cryptocurrencies in Non-Fungible Tokens (NFTs). After introducing the concepts and historical background of NFTs and cryptocurrencies, the paper analyzes the advantages of using cryptocurrencies in NFTs, including decentralization, security, stable storage value, cross-border payment, low transaction cost, anonymity, programmability, and community support. However, the paper also highlights the shortcomings of this application, such as unclear laws and regulations, price fluctuations, environmental problems, technical obstacles, security risks, intellectual copyright issues, and moral and social issues. To address these challenges, the paper proposes several workarounds, such as using stablecoins to solve volatility problems, providing user-friendly interfaces and educational resources to solve complex problems, and increasing the number of merchants and service providers accepting cryptocurrencies as payment methods to solve the problem of a limitation. Finally, the paper analyzes the industry trend and its potential future direction. This paper contributes to a better understanding of the potential of cryptocurrencies in NFTs and provides insights into the development of this emerging field.
This article is a study on the security of decentralized finance. We summarize the background and application of decentralized finance, as well as the development history and latest research of decentralized finance. Moreover, we propose a classification framework for existing various DeFi DApps. We also manually collected attacks against decentralized financial applications and classified them by category. Through some case studies, we give some best practices for practitioners in decentralized finance industries to avoid or defend against attacks.
The scope of direct transactions globally with almost zero transaction cost and keeping transactions anonymous without facing any centralized control has caused a huge demand for cryptocurrency worldwide whereas its excess volatility, no underlying backings, no centralized control, and anonymity behind transactions have contributed significant risk for the entire financial system. Unlike cryptocurrency, Central Bank Digital Currency, being a virtual currency backed by the central bank or the monetary authority of a country serves all the functions of money, such as a store of value, a unit of account, and a medium of exchange, facilitates the attainment of macroeconomic goals and financial stability. To ensure the safeguarding of the interest of the people, business enterprises, and the financial system of a country from a broader perspective, adequate regulatory measures regarding cryptocurrency are a must. There should be proper harmonization and coordination among the countries regarding the regulatory approach as the markets of cryptocurrency are integrated globally.
This paper investigates the determinants of cryptocurrency fund performance, where we compile a unique dataset of cryptocurrency fund performance and characteristics of the funds and managers. We document substantial differences in cryptocurrency fund manager ability in terms of monthly excess returns as well as risk-adjusted returns. In particular, we find that managers with a PhD and MBA tend to generate significantly higher excess returns and higher risk adjusted returns while PhD managers are also riskier. Further, our results show that managers with previous hedge fund experience generate significantly higher appraisal ratios indicating their investment-picking ability obtained from their previous experience. However we find that cryptocurrency experience offers no explanatory power indicating that trading cryptocurrencies successfully does not require any specific knowledge in this area. Overall, our findings are consistent with the conventional wisdom that manager qualifications and experience play a significant role in fund performance.
Cryptocurrencies are digital tokens that allow people to make payments directly to each other through an online system. Since it can be used to buy and sell items and has the ability to store value and increase in value, cryptocurrency is drawing the attention of a lot of investors. As to the nature of cryptocurrency, there are different sets of opinions as to whether it is a currency or a Commodity or Security. The Finance Act 2022 was the first law to recognize Virtual Digital Assets (VDAs) in India and introduced crypto taxes. Accordingly, the income generated from investment in cryptocurrency is subject to tax. The present paper studies the emerging cryptocurrency market in India and the provisions of prevailing income tax law in India related to the taxation of cryptocurrency.
Chong Chen, Jianzhong Su, Jiachi Chen, Yanlin Wang · 10 authors
With the development of blockchain technology, smart contracts have become an important component of blockchain applications. Despite their crucial role, the development of smart contracts may introduce vulnerabilities and potentially lead to severe consequences, such as financial losses. Meanwhile, large language models, represented by ChatGPT, have gained great attention, showcasing great capabilities in code analysis tasks. In this article, we presented an empirical study to investigate the performance of ChatGPT in identifying smart contract vulnerabilities. Initially, we evaluated ChatGPT’s effectiveness using a publicly available smart contract dataset. Our findings discover that while ChatGPT achieves a high recall rate, its precision in pinpointing smart contract vulnerabilities is limited. Furthermore, ChatGPT’s performance varies when detecting different vulnerability types. We delved into the root causes for the false positives generated by ChatGPT, and categorized them into four groups. Second, by comparing ChatGPT with other state-of-the-art smart contract vulnerability detection tools, we found that ChatGPT’s F-score is lower than others for 3 out of the 7 vulnerabilities. In the case of the remaining 4 vulnerabilities, ChatGPT exhibits a slight advantage over these tools. Finally, we analyzed the limitation of ChatGPT in smart contract vulnerability detection, revealing that the robustness of ChatGPT in this field needs to be improved from two aspects: its uncertainty in answering questions; and the limited length of the detected code. In general, our research provides insights into the strengths and weaknesses of employing large language models, specifically ChatGPT, for the detection of smart contract vulnerabilities.
Phuong Duy Huynh, Thisal De Silva, Son Hoang Dau, Xiaodong Li · 6 authors
We investigate in this work a recently emerged type of scam ERC-20 token called Trapdoor, which has cost investors billions of US dollars on Uniswap, the largest decentralised exchange on Ethereum, from 2020 to 2023. In essence, Trapdoor tokens allow users to buy but preventing them from selling by embedding logical bugs and/or owner-only features in their smart contracts. By manually inspecting a number of Trapdoor samples, we established the first systematic classification of Trapdoor tokens and a comprehensive list of techniques that scammers used to embed and conceal malicious codes, accompanied by a detailed analysis of representative scam contracts. In particular, we developed TrapdoorAnalyser, a fine-grained detection tool that generates and crosschecks the error-log of a buy-and-sell test and the list of embedded Trapdoor indicators from a contract-semantic check to reliably identify a Trapdoor token. TrapdoorAnalyser not only outperforms the state-of-the-art commercial tool GoPlus in accuracy, but also provides traces of malicious code with a full explanation, which most of the existing tools lack. Using TrapdoorAnalyser, we constructed the very first dataset of about 30,000 Trapdoor and non-Trapdoor tokens on UniswapV2, which allows us to train several machine learning algorithms that can detect with very high accuracy even Trapdoor tokens with no available Solidity source codes.
In the evolving landscape of the insurance industry, the integration of advanced technologies offers transformative potential. This research explores the amalgamation of Blockchain technology, specifically through the Hyperledger platform, with AI-enhanced smart contracts to address prevailing challenges in the insurance sector. Utilizing a mixed-methods approach, the efficacy of Hyperledger-based systems in streamlining insurance operations and the augmentation of smart contracts with AI algorithms for improved automation and decision-making were examined. Preliminary findings indicate that the combined application of Hyperledger and AI-driven smart contracts can significantly enhance transparency, reduce fraudulent claims, and optimize risk assessment processes. However, the implementation of these technologies also presents certain technical and regulatory challenges. This study provides a foundational understanding for stakeholders in the insurance domain, emphasizing the strategic advantages and potential pitfalls of embracing this technological convergence.
Academic and practitioner interest in crypto-assets is gaining momentum. Different values and agendas influence regulatory policy. Competing ideologies and social norms about the efficacy of regulatory regimes, the influence of innovation philosophies, and the need to foster ethical principles and practices underpin debates on crypto-assets. Semi-structured interviews were carried out in the USA and UK with regulators, tech firms, institutional and retail investors, and crypto social media influencers. Stakeholder groups were classified as interventionists, innovators, influencers, and investors. The research builds a data structure from extant literature and empirical research. Aggregate dimensions of inchoate technology, regulatory intervention, and innovation social norms reflect complex and competing stakeholder positions on crypto assets. Findings show crypto-assets are not homogenous, but highly differentiated with potential effects and outcomes determined by algorithmic code. However, competing stakeholder agendas obfuscate policy development for decentralized finance.
The Islamic finance industry has demonstrated its ability to grow steadily and secure a strong foothold on the international financial scene. Financial technologies (fintechs) are becoming an integrated part of the financial industry at large, and therefore, Islamic finance needs to adapt and benefit from these advanced digital technologies. The adoption of fintechs by the Islamic finance industry should be guided by the established principles of Islamic law in order for the industry to preserve its identity. The use of fintechs associated with the ‘fourth industrial revolution’ can be broadly classified into three main categories: automation, disintermediation and decentralization. The use of automation and disintermediation by the Islamic finance industry does not pose any challenge to the established principles of Islamic law; it even has the potential of promoting the compliance with these principles. The technologies associated with decentralization are the most challenging to use in the context of Islamic finance. Some of the identifying characteristics of cryptocurrencies and cryptoassets are inherently incompatible with some of the established principles of Islamic law. Therefore, the Islamic finance industry should err on the side of caution when it comes to utilizing these advanced digital technologies. The Islamic finance industry dates back to the early 1970s, which makes it relatively young compared to its conventional counterpart. However, the rate of growth in terms of its assets and markets’ reach demonstrates a noticeable success story. On the one hand, it is estimated that the industry is currently worth $2.2 trillion1 with an expected continuous growth rate in 2022–2023 of about 10 per cent.2 Although in 2020 the global financial market suffered from the double shock of the Covid pandemic and the drop in oil prices, the industry grew rapidly that year albeit at a slower rate compared to 2019.3 This expansion continued throughout the year of 2021 with the rate of growth in total assets reaching 10.5 per cent.4 On the other hand, Islamic finance products are now available in all major international financial centres outside the Islamic world. The industry offers a wide range of financial products that utilizes equity- and debt-based techniques to offer financial alternatives that comply with the teachings of Islam. A prime example of its international appeal is the UK Government sovereign Sukuk al-ijara, worth £200 million, issued in 2014 and matured on 22nd July 2019. Given the success of the first issue, the UK government issued a second sovereignty Sukuk al-ijara on 25 March 2021 worth £500 million with 5 years maturity.5 Since the inception of the industry there has been a dominant trend in its business model, namely the emulation of conventional finance instruments with certain twists. It can be suggested that at the beginning the industry needed to relate to the existing market practices, which are primarily driven by debt instruments. Therefore, the Islamic finance industry relied heavily on more debt-based products rather than equity while attempting to ensure a margin of risk sharing—concerning the potential profits and possible losses as well—to maintain its compliance with the principles of Islamic law. As time moved on and Islamic finance is no longer an alien concept, the industry has not moved on from this format towards more equity-based instruments.6 This would mean more genuine profit–loss sharing among participants, especially those who are providing the capital, in business ventures. Accordingly, the industry has come under heavy criticism for lacking compliance with the spirit of the Islamic doctrines on finance. This was expressed in some of the academic writing7 and by some members of the industry. In 2007, the chairman of the board of Islamic (Sharia) scholars at the Accounting and Auditing Organization for Islamic Financial Institutions, Sheikh Muhammad Taqi Usmani, criticized some of the sukuk structures in the market, sukuk murahaba and mudaraba, for non-sharia compliance. Another example of the problematic use of debt-based instruments in Islamic finance is the saga of Dana gas sukuk, issued in 2007 using murabaha structure (ie debt based) and were declared by the issuer in 2017 as non-Sharia compliant.8 The digital technological advancements, connected to the so-called ‘fourth industrial revolution’,9 brought some new changes to how the financial industry operates its business and interacts with its client base. The term financial technology ‘fintech’ is used to summarize a range of computer-based digital innovations that have been used to utilize financial transactions and services through untraditional means and formats. Fintech has, to an extent, influenced the operations of the global financial industry most apparently in the wake of the 2008 global financial crisis. The Islamic finance industry has already explored aspects of fintech that would broaden its offering and improve its accessibility. However, it is fair to suggest that although the Islamic finance industry has come a long way on the path of standardization,10 the industry has not yet fully addressed some of the major uncertainties concerning the Sharia compliance of a range of its products. With this in mind, there seems to be a worrying trend in the industry that advocates venturing into new fintech territories that are riddled with controversies and uncertainties, namely crypto finance. This article demonstrates that the characteristics of some of the crypto finance products, namely cryptocurrency and cryptoassets, are inherently incompatible with the fundamentals of Islamic law and its finance theory. Therefore, a more cautious approach to engaging with these technologies is needed; otherwise, the industry may further risk undermining its Islamic characteristic that is central to its existence. This article is structured as follows: Section 2 examines the main categories of the advanced digital technologies (automation, disintermediation and decentralization) associated with the so-called ‘fourth industrial revolution’ and maps out their application in the context of Islamic finance; Section 3 provides an overview of Islamic law and demonstrates its inherent incompatibility with two of the decentralization products namely cryptocurrencies and cryptoassets; Section 4 reflects on the future of fintechs in the context of Islamic finance and argues that solutions could be found to address some of the issues identified as Islamically problematic regarding the use of cryptoassets as token to raise equity finance (Initial Coin Offering). For many decades, technology and the traditional financial sector have had a fruitful partnership, which allowed the latter to broaden its reach, improve its services and obtain significant financial rewards along the line. From ATMs and card payment systems to online banking, these technological advances have served well the financial sector and its customers. However, since 2008 there has been a new breed of fintechs that are not all designed to work in partnership with the traditional financial sector, rather some are more designed to challenge and disrupt the sector’s existing business models.11 The use of this new breed of digital technologies can be broadly classified into three main categories: automation, disintermediation and decentralization.12 The technological advancement in automation, namely artificial intelligence (AI) and big data analytics, is owed to the advanced computer processing powers that can analyse large sets of data using complicated algorithms to generate insights and predictions, which inform and drive business decisions.13 The application in the financial context means that established financial institutions, alongside their new start-ups competitors, are using these technologies for making investment and lending decisions at the wholesale and retail levels.14 Further, these technologies are being further developed and used to ensure institutional compliance with regulatory requirements for money laundering, fraud and illicit transactions detection.15 As for disintermediation, the premise is the use of new digital technologies to reduce the reliance on intermediaries for financing and other services. Peer to peer (P2P) finance is a prime example; the creation of a web-based platform that connects businesses with investors directly has challenged the conventional business model that required a financial institution to make the link. The use of this finance model is not exclusive to businesses but it is also utilized for credit consumers. Another example is open banking, which means the sharing of consumers’ financial data, after they consent, with trusted third-party providers (TPPs) in order to tailor services and applications to serve their best financial interests and accommodate for their financial circumstance.16 This, for example, includes applications and websites that provide automatic saving options and budgeting tips.17 Open banking also facilitates online payments in a quicker, easier and more secured way,18 as once the payment is initiated the online retailer website will connect the customer to their banking app to authenticate the payment without the use of a debit card.19 Similar to other segments of the global financial sector, the Islamic finance industry has been influenced by these digital technological advances, and Islamic fintech is a growing part of this industry with great potential. 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Jiachi Chen, Jiang Hu, Xin Xia, David Lo · 7 authors
Decentralized Finance (DeFi) uses blockchain technologies to transform traditional financial activities into\ndecentralized platforms that run without intermediaries and centralized institutions. Smart contracts are\nprograms that run on the blockchain, and by utilizing smart contracts, developers can more easily develop\nDeFi applications. Some key features of smart contracts – self-executed and immutability – ensure the\ntrustworthiness, transparency and efficiency of DeFi applications, and have led to a fast-growing DeFi market.\nHowever, misbehaving developers can add traps or backdoor code snippets to a smart contract, which are\nhard for contract users to discover. We call these code snippets in a DeFi smart contract as “DeFi Contract\nTraps" (DCTs). In this paper, we identify five DeFi contract traps and introduce their behaviors, describe\nhow attackers use them to make unfair profits, and analyse their prevalence in the Ethereum platform. We\npropose a symbolic execution tool, DeFiDefender, to detect such traps and use a manually labeled small-scale\ndataset that consists of 700 smart contracts to evaluate it. Our results show that our tool is not only highly\neffective but also highly efficient. DeFiDefender only needs 0.48s to analyze one DeFi smart contract and\nobtains a high average accuracy (98.17%), precision (99.74%), and recall (89.24%). Among the five DeFi contract\ntraps introduced in this paper, four of them can be detected through contract bytecode without the need for\nsource code. We also apply DeFiDefender to a large-scale dataset that consists of 20,679 real DeFi related\nEthereum smart contracts. We found that 52.13% of these DeFi smart contracts contain at least one contract\ntrap. Although a smart contract that contains contract traps is not necessarily malicious, our finding suggests\nthat DeFi related contracts have many centralized issues in a zero-trust environment and in the absence of a\ntrusted part
Blockchain-enabled smart contracts have revolutionized the insurance industry due to their potential to streamline backend operations, mitigate fraudulent claims, and enhance data security and transparency. Guided by the design science methodology, the authors propose two specific smart contract frameworks to enhance insurance claims processing related to vehicle damage claims and personal injury claims. These proposed frameworks can improve the overall efficiency and effectiveness of insurance claims processing by automating claims submission, review, analysis, and payment, while reducing fraud and data leakage, by merging various data sources and disintermediation. Furthermore, the authors design a smart contract template supported by eight operational algorithms to facilitate the processing of insurance claims with the help of smart contracts. This template provides practitioners with a standardized prototype for the development of secure and efficient insurance applications.
Mutamimah Mutamimah, Suryani Alifah, Made Dwi Adnjani
This study aims to design a framework of corporate governance innovation to reduce the credit risks of Micro, Small and Medium Enterprises (MSMEs) by using blockchain technology. The research design uses a qualitative approach with Grounded theory analysis for data analysis with open, axial, and selective coding. This framework consists of two stages, namely development and validation. In-depth interviews are used for data collection to develop the framework while focus group discussions are used for validation. The in-depth interviews are carried out with various stakeholders, such as the government, association, MSMEs, suppliers, and banking. Findings show that blockchain technology as corporate governance innovation framework has the potential to reduce asymmetric information and credit risk. The reason is that blockchain technology can facilitate recording, immutable, partial decentralisation, and storage of business and financial transactions on a digital network and all stakeholders can access information in a transparent and valid manner that can increase transparency, accountability, responsibility, and fairness. Results of the focus group discussion indicate the validity of the proposed framework.
Mehak Maqbool Memon, Manzoor Ahmed Hashmani, Filmann Taput Simpao, Anthony C. Sales · 6 authors
Blockchain's core attributes, including decentralization, transparency, and immutability, have positioned it as a pioneering technology in the realm of financial technology (fintech) and have rendered it highly applicable across diverse industries. The current enterprise ecosystem has faced setbacks primarily due to a lack of trust in the existing infrastructure. This issue can be traced back to the centralized management of healthcare data, making it vulnerable to tampering and fraudulent activities, resulting in financial losses. The existing enterprise ecosystem failed due to the lack of trust in the currently in-place infrastructure. This problem can be attributed to the centralized healthcare data management, which is prone to tampering and fraudulent activities leading to capital loss. The present study relates to a comprehensive survey conducted in timespan from 2018 to 2022 on the implementation of blockchain technology in the healthcare industry, identifying and discussing the key challenges facing the healthcare industry, such as fraud, and scams against healthcare data. It is found that there is an enormous inclination towards the decentralization of patient-centric data. However, a rapid decline is reported due to the privacy and security concerns of the confidential and sensitive data. Moreover, it is noticed that most of the implementations utilized either Ethereum or Hyperledger. Based on the survey's findings, the study proposed a blockchain-based healthcare framework that can address the identified challenges by providing a secure and transparent platform for collecting, storing, and sharing patient health data while prioritizing security and privacy.
As cryptocurrency evolved, new financial instruments, such as lending and borrowing protocols, currency exchanges, fungible and non-fungible tokens (NFT), staking and mining protocols have emerged. A financial ecosystem built on top of a blockchain is supposed to be fair and transparent for each participating actor. Yet, there are sophisticated actors who turn their domain knowledge and market inefficiencies to their strategic advantage; thus extracting value from trades not accessible to others. This situation is further exacerbated by the fact that blockchain-based markets and decentralized finance (DeFi) instruments are mostly unregulated. Though a large body of work has already studied the unfairness of different aspects of DeFi and cryptocurrency trading, the economic intricacies of non-fungible token (NFT) trades necessitate further analysis and academic scrutiny. The trading volume of NFTs has skyrocketed in recent years. A single NFT trade worth over a million US dollars, or marketplaces making billions in revenue is not uncommon nowadays. While previous research indicated the presence of wrongdoings in the NFT market, to our knowledge, we are the first to study predatory trading practices, what we call opportunistic trading, in depth. Opportunistic traders are sophisticated actors who employ automated, high-frequency NFT trading strategies, which, oftentimes, are malicious, deceptive, or, at the very least, unfair. Such attackers weaponize their advanced technical knowledge and superior understanding of DeFi protocols to disrupt trades of unsuspecting users, and collect profits from economic situations that are inaccessible to ordinary users, in a "supposedly" fair market. In this paper, we explore three such broad classes of opportunistic strategies aiming to realize three distinct trading objectives, viz., acquire, instant profit generation, and loss minimization.
Blockchain-based smart contracts are self-running computer programs that can automate a variety of commercial activities. Currently, the majority of these decentralized applications are developed using smart contract platforms like Polkadot, Cardano, and Ethereum. In addition to analyzing current technology developments and prospective future applications, this article provides a historical review of smart contract platforms. The study emphasizes the significance of smart contract platforms for supporting blockchain-based applications and enabling decentralized finance (DeFi). It also looks at the emergence of layer-2 scaling solutions, the introduction of non-fungible tokens (NFTs), and the growing need of interoperability among different smart contract platforms. The article also looks at the potential for multi-chain smart contracts, the effects of quantum computing, the integration of AI and ML technologies with smart contract platforms, and the potential for smart contract platforms to support decentralized autonomous organizations (DAOs). The difficulties of expanding smart contract platforms, the requirement for uniformity in the creation of smart contracts, and the potential for smart contract platforms to revolutionize sectors like healthcare, real estate, and supply chain management are also covered. The paper emphasizes the significance of ongoing innovation and development in smart contract platforms for the expansion of the blockchain ecosystem as it draws to a close.
This paper highlighted the Strengths, Weaknesses, Opportunities, and Threats to blockchain technology in financial services. Blockchain is still an evolving and therefore immature technology; it is hard to predict how successful it would be outside its only proven use domain of cryptocurrencies. History teaches us that radically new technologies take many decades to realize their full potential. Thus it is perfectly possible that blockchain would prove revolutionary in the years to come despite its patchy success so far. What is certain is that businesses should be looking at this technology and understanding it because its underlying ideas are powerful and likely to be influential. Policymakers might support the creation of teaching materials on blockchain technology. Users might be able to avoid frequent blockchain frauds, and businesses might find additional capacity to deploy the technology. Policymakers may use blockchain technology to accomplish their own unique goals. This could help organisations in public, and private sectors decide whether the technology can help solve particular issues. Organisations attempting to integrate blockchain technology with their current systems may find this to be more accessible as a result. Based on blockchain technology, policy- makers could explain current laws and regulations or create new ones. This paper presents a comprehensive overview on blockchain technology in the area of Blockchain funding, Platform finance, financial big data, financial engineering financial technology, Financial innovation, Digital economy. blockchain; FinTech; payment services; deposits and lending; financial services; Bitcoin; SWOT Analysis, Ethereum; Hyperledger, smart contract; digital wallet, Quorum, RippleNet and Stellar Network, Algorand Blockchain and Pundi-X. Blockchain technology is a mode of decentralization, which is the next key disrupting technology and worldwide computing paradigm following the mainframe, perso
Cryptocurrencies are rapidly expanding and becoming vital in digital financial markets. However, the rise in cryptocurrency-related illicit activities has led to significant losses for users. To protect the security of these platforms, it is critical to identify illicit accounts effectively. Current detection methods mainly depend on feature engineering or are inadequate to leverage the complex information within cryptocurrency transaction networks, resulting in suboptimal performance. In this paper, we present DIAM, an effective method for detecting illicit accounts in cryptocurrency transaction networks modeled by directed multi-graphs with attributed edges. DIAM first features an Edge2Seq module that captures intrinsic transaction patterns from parallel edges by considering edge attributes and their directed sequences, to generate effective node representations. Then in DIAM, we design a multigraph Discrepancy (MGD) module with a tailored message passing mechanism to capture the discrepant features between normal and illicit nodes over the multigraph topology, assisted by an attention mechanism. DIAM integrates these techniques for end-to-end training to detect illicit accounts from legitimate ones. Extensive experiments, comparing against 15 existing solutions on 4 large cryptocurrency datasets of Bitcoin and Ethereum, demonstrate that DIAM consistently outperforms others in accurately identifying illicit accounts. For example, on a Bitcoin dataset with 20 million nodes and 203 million edges, DIAM attains an F1 score of 96.55%, markedly surpassing the runner-up's score of 83.92%. The code is available at https://github.com/TommyDzh/DIAM.
This article explores the recent collapses of prominent crypto trading and lending firms Voyager and Celsius, investigates the prevailing business models of crypto firms and identifies potential causes of their failure. The insolvencies of Voyager and Celsius reveal complex legal problems, particularly concerning the determination and allocation of customer rights in deposited crypto-assets. The EU Markets in Crypto-assets Regulation (MiCAR) seeks to protect investors by requiring the safekeeping and segregation of crypto-assets held in custody. Yet it does not necessarily protect those investors who ‘lend’ their crypto-assets to crypto-lending platforms with the expectation of earning rewards. MiCAR lacks a dedicated legal framework for crypto-lending, which suffers from many classic financial sector vulnerabilities. To address this gap, we propose the adoption of a new instrument, MiCAR II. Drawing inspiration from existing regulations for financial intermediaries like banks, MiCAR II may incorporate five elements: (i) a large exposures regime, (ii) robust disclosure requirements, (iii) structural and organizational separation of custody and trading/investment activities, (iv) deposit-like guarantees and (v) a dedicated recovery and resolution regime for significant crypto firms. In 2022, the cryptocurrency market experienced a significant downturn (‘crypto winter’), which coincided with the downfall of several major market players. On 5 July 2022, the crypto trading and lending firm Voyager Digital Holdings, Inc. (Voyager) filed a voluntary Chapter 11 petition in the US Bankruptcy Court for the Southern District of New York.1 Shortly thereafter, on 13 July 2022, Celsius Network LLC, a leading crypto-lending platform, and its affiliated entities filed for bankruptcy in the same court.2 Both Voyager and Celsius acted as lenders to one of the world’s largest crypto hedge funds, Three Arrows Capital Ltd. (3AC), which since June 2022 is itself subject to the liquidation proceeding in the British Virgin Islands. In November 2022, the cryptocurrency market turmoil reached a critical point when one of the largest crypto exchanges, FTX, and its affiliated crypto trader, Alameda, collapsed. Given the complexities and ongoing investigations surrounding the cases of FTX and Alameda, we will not address them separately here.3 This article analyses the collapses of Voyager and Celsius, examines the likely causes of their demise and explores some of the typical legal issues accompanying crypto failures. It also questions whether the Markets in Crypto-assets Regulation (MiCAR), a recently introduced law aimed at harmonizing the regulation of crypto-asset service providers (CASPs) and crypto-asset services within the European Union (EU), can prevent or at least reduce the damaging effects of crypto failures and ensure sufficient protection of crypto investors. The article is structured as follows. Section 2 starts with a summary of the key features characterizing crypto failures. It continues with a discussion of a prominent issue observed in most crypto insolvencies, namely the attribution of rights in deposited crypto-assets in insolvency of a CASP. Section 3 introduces MiCAR and its provisions on the safekeeping and segregation of reserve and customer crypto-assets. Section 4 shifts the focus to Voyager and Celsius, examining their business models and addressing the legal challenges associated with crypto-lending more broadly. Section 5 consists of several parts. First, it considers the provisions of MiCAR that directly and indirectly impact the operations of crypto lenders. Second, it draws attention to the differences and similarities between crypto finance and traditional finance. Third, it puts forward several suggestions for future regulation, referred to as MiCAR II. Section 6 concludes. Instances of crypto failures are not unprecedented, with one of the most well-known examples being the infamous collapse of the Japanese crypto exchange Mt.Gox in 2014. Other notable cases include the failures of the Italian crypto exchange Bitgrail in 2019 and the New Zealand crypto exchange Cryptopia in 2020. 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This paper addresses the issue of blockchain protocol risks, a foundational category of risks affecting Distributed Ledger Technology (DLT) which underpins digital assets, smart contracts, and decentralised applications. It presents a comprehensive risk management framework developed in collaboration with financial institutions, blockchain development teams and regulators that applies a traditional risk management taxonomy to address certain overlooked blockchain protocol risks. The approach offers a structured way to identify, measure, monitor and report blockchain protocol risks. The paper provides real-world use cases to demonstrate the practicality and implementation of the proposed framework. The findings of this work contribute to the evolving understanding of blockchain protocol risks and provide valuable insights on how these risks affect the adoption of DLT by financial institutions.