In this paper, we analyse the workings of commercial banks in a scenario where crypto-currencies are the mainstream bills of exchange. We start by explaining the concept of cryptocurrencies (also referred to as cryptocoins in this paper). Then we discuss the concept of Regulated and Sovereign Backed Cryptocurrencies (RSBCs). Later on, we envisage a scenario where cryptocoins are the main media of exchange. The banking aspects of Paper money, Bitcoins and RSBCs are then deliberated. We analyse the interplays between Banking and various currency formats. Finally, the paper concludes as to which currency is best suited to be the mainstream bill of exchange.
Information technology has become an indispensable part of the U.S. banking industry. The industries commitment to evolving advantageous technology is evident in the growing financial commitment to distributed ledger or "blockchain" technology. The advancing technology is transforming the configuration of the U.S. banking industry model established with the passing of the Federal Reserve Act in 1913. The present paper investigates the literature to provide an understanding of the transformation of the U.S. banking industry created by advancing technology.
Blockchains and Byzantine Fault Tolerance form the basis of decentralized currencies and ledgers such as Bitcoin, Ripple, ZeroCash, and Ethereum. A large slate of literature has focused on the currency aspects (e.g. anonymity, independence from central banks, etc.). We argue that, as-far-as Distributed Payment Transactions Networks (PTNs) are concerned, there are other, possibly more interesting, properties. This paper provides a systematic review of both traditional PTNs and their analogues in decentralized ledgers and associates different technological features to the corresponding business and financial requirements. We provide a conceptual classification of the key properties (value creation, payment promise, transaction fulfillment, and value preservation). We map existing (distributed) PTNs into the classification showing different alternatives are possible. Furthermore, the ideas behind distributed ledgers can be extended beyond payments and contracts. We illustrate the idea of derivatives-contracts-as-programs that are marked to market (or an account that is margined) automatically by computations run on, and whose ownership transitions are recorded, in a distributed payment network.
Sebastiaan de Hoogh, Berry Schoenmakers, Meilof Veeningen
For many applications of secure multiparty computation it is natural to demand that the output of the protocol is verifiable. Verifiability should ensure that incorrect outputs are always rejected, even if all parties executing the secure computation collude. Since the inputs to a secure computation are private, and potentially the outputs are private as well, adding verifiability is in general hard and costly. In this paper we focus on privacy-preserving linear programming as a typical and practically relevant case for verifiable secure multiparty computation. We introduce certificate validation as an effective technique for achieving verifiable linear programming. Rather than verifying the computation proper, which involves many iterations of the simplex algorithm, we extend the output of the secure computation with a certificate. The certificate allows for efficient and direct validation of the correctness of the output. The overhead incurred by the computation of the certificate is marginal. For the validation of a certificate we design particularly efficient distributed-prover zero-knowledge proofs, fully exploiting the fact that we can use ElGamal encryption for this purpose, hence avoiding the use of more elaborate cryptosystems such as Paillier encryption. We also formulate appropriate security definitions for our approach, and prove security for our protocols in this model, paying special attention to ensuring properties such as input independence. By means of several experiments performed in a real multi-cloud-provider environment, we show that the overall performance for verifiable linear programming is very competitive, incurring minimal overhead compared to protocols providing no correctness guarantees at all.
Indisputable exponential growth of the Internet use in modern banking and stock exchange operations is the basic trend in the financial industry. Important aspects of the bitcoin problem include the area for its use, the factors that influence its price, and regulatory aspects in different countries. There is also a dilemma as to whether bitcoin should be considered money or goods. In technological terms, bitcoin was realized using an open source which is available to anyone and the system is not officially in anyone's possession or under anyone's control. Bitcoin uses peer-to-peer technology that works without the interference of the central bank or commercial banks. Managing transactions and broadcasting of bitcoin is performed by the network itself. The system is not based on trust of the participants, but on the distributed control system. The issue that should be particularly addressed is the security management of a virtual currency. The authors shall propose a new way of encryption which can significantly enhance both the privacy and security segment. Thus, conclusions can be drawn that the use of bitcoin poses new challenges to the banking system, and opens up many dilemmas that the authors shall attempt to process in this paper.
There has been a huge amount of coverage in the press about the great potential uses of bitcoin-related technology for financial markets, such as improvements in efficiency. In addition to the supporters of blockchain, many have been critical of its real-life applications within the business world and suggest that what we are witnessing is nothing short of “blockchain hype, ” and that this technology can only be applied to bitcoins. This paper will demonstrate that there are real business cases for improving financial markets based on the lessons learned from cryptocurrencies, but, unlike what the hype-enthusiasts suggest, they are not application of a technology to the existing business models within financial markets. They are reforms of the business model itself. What needs to be exported from the world of cryptocurrencies are aspects of the market organization, inspiration for a different accounting and legal system, and some aspects of the technology. These can result in a huge contribution towards more robust, efficient, and stable markets. However, the process cannot be immediate and effortless, and can only be achieved within a market-wide strategic perspective. In this paper, I develop these concepts initially within a parallel analysis of cryptocurrencies and financial markets. Then, I will focus on a specific business case regarding the collateralization of financial derivatives, which will highlight quantifiable benefits in terms of reducing costs, capital, and risk. It is an example of a situation where the use of cryptocurrency technology is not more important than the business ideas developed in the analysis of cryptocurrencies; yet it was inconceivable prior to the advent of distributed ledgers, smart contracts, and oracles
Ahmed Syed, Jamal Ahmed Moge, Mohammed Shandar Siddiqui
Currency system has been constantly evolving since the concept of money has been introduced. In this age of information technology, the next level in the currency system is digital currency, popularised since the last few years by its main sub-type, the cryptocurrency. Cryptocurrencies are open-source algorithms which can be programmed by anyone and facilitates peer-to-peer financial networking without the need for third party arbitration, thereby reducing the dependency on banking system. This creates an open system which has tremendous economic potential in increasingly digitalised and globalised world. However cryptocurrency is not without its weaknesses, such as digital security, market regulation and speculative attacks among others. This paper traces the origin of cryptocurrency, how it developed over time, how it works and the scope of cryptocurrency in today's ever expanding world of online transactions. It also discusses major issues and challenges confronting cryptocurrencies and proposes some ways on how it could be tackled.
Id. (The article summarizes the process through 6 steps: (1) broadcasting the information to the network; (2) each node in the network compiles the information; (3) each node checks the information by solving a complicated process; (4) each node broadcast the proof that it solved the checking process; (5) the nodes accept the broadcast only if the information included is proven to be correct; and (6) the nodes add to the chain the new information, where it is, timestamp, and its location in the chain is contingent on the previous elements of the chain.).
Recent years have witnessed the advances of e-money systems such as Bitcoin, PayPal and various forms of stored-value cards. This paper adopts a mechanism design approach to identify some essential features of different payment systems that implement and improve the constrained optimal resource allocation in Germany. Bitcoin is a digital, decentralized, partially anonymous currency, not backed by German or any government or other legal entity, and not redeemable for gold or other commodities. Bitcoin relies on peer-to-peer networking and cryptography to maintain its integrity. Compared to most currencies or online payment services, such as PayPal, bitcoins are highly liquid, have low transaction costs, and can be used to make micropayments in Germany. Although the Bitcoin economy is flourishing, Bitcoin users are anxious about Bitcoin’s legal status. This paper examines a few relevant legal issues. The research question is to investigate how supplementary digital terminating currency Bitcoin can provide a superior fallback position as e-gold standard in Germany and worldwide. Digital self-liquidating e-Gold ounce could be distributed immediately to voters by using swipe cards used by some governments for transit facilities. Bitcoins as e-Gold ounce do not provide a viable medium of exchange because of the cost of their purchase, creation and/or exchange.
Christian Thiel, Christopher Brown, Mario Hellenkamp, Marius Spancken
Der Abschlussbericht fasst die Ergebnisse des Forschungs- und Entwicklungsprojektes 2015/2016 im Studiengang Master of Science Wirtschaftsinformatik (FH Münster) zur Themenstellung "Kryptowährungen und Smart Contracts" zusammen. Das Projekt analysierte die Einsatzzwecke, Potenziale und Architekturen von Blockchain-Anwendungen. Des Weiteren wurden verschiedene Fragestellungen zum Nutzen der Blockchain-Technologie in modernen Geschäftsprozessen und zu den technischen Herausforderungen mittels der Entwicklung zweier Prototypen betrachtet. Der erste Prototyp realisiert eine eigene Blockchain, in der verschiedene Angriffsszenarien durchgespielt werden können. Der zweite Prototyp realisiert eine Clearinghouse-Anwendung in Form einer verteilten Smart-Contract-Implementierung (in Ethereum). Der Bericht vermittelt einen Überblick über Ansätze, Strukturen, interne Abläufe und Rahmenbedingungen aktueller Blockchain-Implementierungen. Die erzielten Ergebnisse verdeutlichen neben dem Nutzen auch die Besonderheiten und Einschränkungen der Blockchain-Technologie.
The paper deals with cryptocurrencies and trading. Main goal of this article is to introduce strategy for automated trading on cryptocurrency exchange market. For this purpose we will use algorithm based of Floyd-Warshall algorithm. Article is introductory and can this method can be developed in the future. First, a general introduction to cryptocurrencies is given from the programmer's point of view, some statistics data and figure representing volatility of exchange. Then the article describes some basic strategies for automated trading. Also explained is the algorithm Floyd-Warshall and its modifications for automation arbitrage. An illustrative example is given and a trading algorithm is listed.
Abstract This article addresses contemporary art as a means to investigate how, and to what extent, financial logic impacts upon the socio-cultural sphere. Its contribution is twofold: on the one hand, the article shows that contemporary art's valuation practices increasingly reflect the logic of capitalization; on the other hand, it assesses the emancipatory potential of blockchain technology for the cultural sphere. In relation to the latter I argue that, in spite of the technological novelty of blockchain-based art projects, these nonetheless fail to challenge a received logic of finance. This exposes the limitations to technological determinism as a means of countering financial power in the socio-cultural sphere, and points to new problems for art's valuation methods in relation to the liquid logic of algorithmic finance.