In this paper we explores as to whether cryptocurrency returns exhibit asymmetric reverting patterns and we test the presence of regime changes in the GARCH volatility dynamics of Bitcoin log-returns. For these reason, we uses non-linear autoregressive and Markov-switching GARCH (SETAR-MSGARCH) models. We finds strong evidence of regime changes in the mean and GARCH process. In addition, we conclude that bad news and good news of the same size have same impacts for investors.
Creating fair, transparent and genuinely democratic modes of decentralized decision-making has been a key concern for many developers and users of blockchains. This article evaluates several popular methods of maintaining consensus and achieving decentralized decision-making on blockchain networks in order to assess the extent to which blockchains challenge the norms of the liberal-democratic order. In particular, it compares and contrasts Proof-of-Work, Proof-of-Stake and Practical Byzantine Fault Tolerance consensus mechanisms, assessing not just how they operate in a technical sense but also (and most important) the political, economic and social dimensions of these different blockchain governance strategies. This comparison highlights efforts by blockchain communities to redefine or push the bounds of democracy, as well as the challenges they have faced in their efforts to create digital democracies that do not reproduce the same economic and social inequalities present in traditional democratic systems.
Veronica Martinez, Michael Zhao, Ciprian Blujdea, Han Xia · 6 authors
Purpose The purpose of this paper is to investigate the effects of Blockchain on the customer order management process and operations. There is limited understanding of the use and benefits of Blockchain on supply chains, and less so at processes level. To date, there is no research on the effects of Blockchain in the customer order management process. Design/methodology/approach A twofold method is followed. First, a Blockchain is programmed and implemented in a large international firm. Second, a series of simulations are built based on three scenarios: current with no-Blockchain, 1-year and 5-year Blockchain use. Findings Blockchain improves the efficiency of the process: it reduces the number of operations, reduces the average time of orders in the system, reduces workload, shows traceability of orders and improves visibility to various supply chain participants. Research limitations/implications The research is based on a single in-depth case that has the scope to be tested in other contexts in future. Practical implications This is the first study that demonstrates with real data from an industrial firm the effects of Blockchain on the efficiency gains, reduction on the number of operations and human-processing savings. A detailed description of the Blockchain implementation is provided. Furthermore, this research shows a list of the resources and capabilities needed for building and maintaining a Blockchain in the context of supply chains. Originality/value This is the first study that demonstrates with real data from an industrial firm the effects of Blockchain on the efficiency gains, the reduction in the number of operations and human-processing savings. A detailed description of the Blockchain implementation is provided. This paper contributes to the resource-based view of the firm, by demonstrating two new competitive valuable capabilities and a new dynamic capability that organisations develop when implementing and using Blockchain in a supplyâdemand process. It also contributes to the information processing theory by highlighting the analytics capabilities required to sustain Blockchain-related operations.
This paper presents a system architecture to promote the development of smart transportation systems. Thanks to the use of distributed ledgers and related technologies, it is possible to create, store and share data generated by users through their sensors, while moving. In particular, IOTA and IPFS are used to store and certify data (and their related metadata) coming from sensors or by the users themselves. Ethereum is exploited as the smart contract platform that coordinates the data sharing and provisioning. The necessary privacy guarantees are provided by the usage of Zero Knowledge Proof. We show some results obtained from some use case scenarios that demonstrate how such technologies can be integrated to build novel smart services and to promote social good in user mobility.
The technology that makes smart contracts possible was developed with a view to enabling transactions to be made end-to-end without the intervention of third parties, intermediaries, adjudicators or courts. In this sense, it achieves in principle complete freedom of interaction. Whether this is the same thing as freedom of contract, however, remains to be seen. It is not yet clear, for example, which smart contracts will be legally enforceable, either because the parties do not want them to be, and/or because the courts do not recognise them as being so. What seems inevitable at this stage in the development of smart contract technology is that conventional contract law in its current form is unlikely to be the most effective way of adjudicating smart contract disputes. One reason for this is that securing performance will be far less of a problem under smart contracts than it is in relation to conventional contracts: the automated nature of the former means that actions are far more likely to be executed than those promised in the traditional way, albeit that their results might not accord with the partiesâ expectations. Any issues are therefore far more likely to arise (or at least to be brought to a courtâs attention) after a transaction has occurred. Automated execution means that parties are free to determine the contents of their agreements, and that machines will abide by those agreed instructions. The way in which smart contracts operate, therefore, means that any adjudication of them is likely to need to emphasise restorative rather than enforcement remedies. The extent to which the law chooses to do this will effectively determine how free smart technology users are to make legally recognised contracts.
From a consumersâ perspective, Blockchain Technology (BCT) holds the potential to decrease transaction costs, improve privacy and redesign social interactions, which potentially leads to enhanced consumer power in transactional relationships. Nevertheless, only a few consumers use Blockchain-based applications consciously. By combining earlier research about BCT acceptance with different conceptualisations in the technology acceptance field (i.e. the Technology Acceptance Model and Rogersâ Diffusion Theory), a Blockchain-specific model to explain the usage intention has been developed and validated by conducting an online survey among 157 German consumers. While most of them have recognised the technologyâs existence and confirmed its general relevance, many consumers do not know how to access and profit from BCT. Integrating the results of a Structural Equation Model and Pairwise Comparisons between typical attributes of Blockchain-based applications, specific beliefs about BCT usage are found to have a remarkable impact on consumersâ acceptance. Based on the results, strategies to promote the acceptance of BCT among consumers are discussed from a marketerâs, developerâs and researcherâs point of view.
Seyed Hamidreza Ghaffar, Matthew Burman, Nuhu Braimah
The challenges of sustainable construction, industrial growth and importance of resource efficiency are clearly recognised by the UK government and are now at the forefront of strategy and policy. A critical component of the governmentâs sustainability strategies concerns way in which construction and demolition waste (C&DW) is managed. In this study a mixed method approach was adopted to investigate current practices of C&DW management and circular construction (re-use, recycle and recovery of materials) concept awareness in the UK. Relevant stakeholders from the construction industry (contracting, demolition and C&DW organisations) were selected and their views solicited on arguments about circular construction to help establish common visions and further encourage sustainable behaviour across the sector. The study revealed that legislation by the government on the re-use and recycling threshold for every new project can substantially improve circularity within the built environment. More specifically, focus should be on smart dismantling of buildings and ways of optimising cost effective processes. This will enable fair competition between stakeholders and eventually lead to investments in innovative approaches for resource recovery from C&DW. Further incentives and appreciations from government should also be given to stakeholders who are innovating and setting benchmarks in circular construction. This can lead to harmonised technological and non-technological solutions, closed-loop material processes and a circular economy.
Jan Heinrich Beinke, Christian Fitte, Frank Teuteberg
BACKGROUND: Data security issues still constitute the main reason for the sluggish dissemination of electronic health records (EHRs). Given that blockchain technology offers the possibility to verify transactions through a decentralized network, it may serve as a solution to secure health-related data. Therefore, we have identified stakeholder-specific requirements and propose a blockchain-based architecture for EHRs, while referring to the already existing scientific discussions on the potential of blockchain for use in EHRs. OBJECTIVE: This study aimed to introduce blockchain technology for EHRs, based on identifying stakeholders and systematically eliciting their requirements, and to discuss the key benefits (KBs) and key challenges (KCs) of blockchain technology in the context of EHRs. METHODS: The blockchain-based architecture was developed in the framework of the design science research paradigm. The requirements were identified using a structured literature review and interviews with nine health care experts. Subsequently, the proposed architecture was evaluated using 4 workshops with 15 participants. RESULTS: We identified three major EHR stakeholder groups and 34 respective requirements. On this basis, we developed a five-layer architecture. The subsequent evaluation of the artifact was followed by the discussion of 12 KBs and 12 KCs of a blockchain-based architecture for EHRs. To address the KCs, we derived five recommendations for action for science and practice. CONCLUSIONS: Our findings indicate that blockchain technology offers considerable potential to advance EHRs. Improvements to currently available EHR solutions are expected, for instance, in the areas of data security, traceability, and automation by smart contracts. Future research could examine the patient's acceptance of blockchain-based EHRs and cost-benefit analyses.
With the interest and attention that the Blockchain and the Distributed Ledger Technologies (DLTs) have recently demanded, the technology is advancing at a very high rate. With investors and applications in a wide variety of fields, a lot of funding and efforts are being driven into bringing the technology to everyday use. The community and companies are coming up with new ways to collaborate, which makes the blockchain ecosystem evolve at full tilt. Consequently, this paperâs aim is to review the academic and grey literature and to provide readers with information about the evolution, benefits and challenges of the Public Distributed Ledger Technologies and to discuss the latest solutions, which are being developed for bringing decentralization closer to the mainstream. The paper reviews the Directed Acyclic Graph (DAG) structured distributed ledgers with focus on the Hedera Hashgraph, a novelty DLT bringing a unique consensus algorithm with new use-cases enabled by new cryptoeconomic mechanisms, as well as vital services, such as Solidity smart contracts and distributed file storage. Then, we are going to explore second-layer network protocols, a major topic for solving scalability issues and for decentralizing cryptocurrency exchanges. The article tries also to identify the particularities of these technologies and how they bring specific answers to the blockchain trilemma, consisting in three themes - scalability, interoperability and sustainability.
We introduce a new cryptographic protocol, called Deep Ocean, that implements a blockchain-agnostic dark pool for cryptocurrencies. Deep Ocean is a layer-two protocol, meaning that it can work with any two cryptocurrencies, as long as there exists an underlying settlement mechanism, for example performing atomic swaps.
The out-of-gas error occurs when smart contract programs are provided with inputs that cause excessive gas consumption, and would be easily exploited to make the DoS attack. Multiple approaches have been proposed to estimate the gas limit of a function in smart contracts to avoid such error. However, under estimation often happens when the contract is complicated. In this work, we propose V-Gas, which could automatically generate inputs that maximizes the gas cost and reduce the under estimation cases. V-Gas is designed based on feedback-directed mutational fuzz testing. First, V-Gas builds the gas weighted control flow graph (CFG) of functions in smart contracts. Then, V-Gas develops gas consumption guided selection and mutation strategies to generate the input that maximize the gas consumption. For evaluation, we implement V-Gas based on js-evm, a widely used ethereum virtual machine written in javascript, and conduct experiments on 736 real-world transactions recorded on Ethereum. 44.02\% of the transactions would have out-of-gas errors under the estimation results given by solc, means that the recorded real gas consumption for those recorded transactions is larger than the gas limit value estimated by solc. While V-Gas could reduce the under estimation ratio to 13.86\%. Furthermore, V-Gas has exposed 25 previously unknown out-of-gas vulnerabilities in those widely-used smart contracts, 5 of which have been assigned unique CVE identifiers in the US National Vulnerability Database.
Out-of-gas errors occur when smart contract programs are provided with inputs that cause excessive gas consumption and which will be easily exploited to perform Denial-of-Service attacks. Various approaches have been proposed to estimate the gas limit of a function in smart contracts to avoid such error. However, underestimation often occurs when the contract is complex In this work, we propose V-Gas, which automatically generates inputs that maximize the gas cost and reduce underestimation. V-Gas is designed based on static analysis and feedback-directed mutational fuzz testing. First, V-Gas builds the gas weighted control flow graph of functions in smart contracts. Then, V-Gas develops gas consumption guided selection and mutation strategies to generate the input that maximize the gas consumption. For evaluation, we implement V-Gas based on js-evm, a widely used Ethereum virtual machine written in Javascript, and conduct experiments on 736 real-world transactions recorded on Ethereum. A total of 44.02% of the transactions would have out-of-gas errors based on the estimation results given by solc, meaning that the recorded real gas consumption for those transactions is larger than the gas limit estimated by solc. In comparison, V-Gas could reduce the underestimation ratio to 13.86%. To evaluate the performance of feedback-directed engine in V-Gas, we implemented other directed fuzzing engines and compared their performance with that of V-Gas. The results showed that V-Gas generates the same or higher gas estimation value on 97.8% of the transactions with less time, usually within 5 minutes. Furthermore, V-Gas has exposed 25 previously unknown out-of-gas vulnerabilities in widely used smart contracts, 6 of which have been assigned unique CVE identifiers in the U.S. National Vulnerability Database.
The Nakamoto longest chain protocol is remarkably simple and has been proven to provide security against any adversary with less than 50% of the total hashing power. Proof-of-stake (PoS) protocols are an energy efficient alternative; however existing protocols adopting Nakamoto's longest chain design achieve provable security only by allowing long-term predictability (which have serious security implications). In this paper, we prove that a natural longest chain PoS protocol with similar predictability as Nakamoto's PoW protocol can achieve security against any adversary with less than 1/(1+e) fraction of the total stake. Moreover we propose a new family of longest chain PoS protocols that achieve security against a 50% adversary, while only requiring short-term predictability. Our proofs present a new approach to analyzing the formal security of blockchains, based on a notion of adversary-proof convergence.
In order to scale transaction rates for deployment across the global web, many cryptocurrencies have deployed so-called "Layer-2" networks of private payment channels. An idealized payment network behaves like a Credit Network, a model for transactions across a network of bilateral trust relationships. Credit Networks capture many aspects of traditional currencies as well as new virtual currencies and payment mechanisms. In the traditional credit network model, if an agent defaults, every other node that trusted it is vulnerable to loss. In a cryptocurrency context, trust is manufactured by capital deposits, and thus there arises a natural tradeoff between network liquidity (i.e. the fraction of transactions that succeed) and the cost of capital deposits. In this paper, we introduce constraints that bound the total amount of loss that the rest of the network can suffer if an agent (or a set of agents) were to default - equivalently, how the network changes if agents can support limited solvency guarantees. We show that these constraints preserve the analytical structure of a credit network. Furthermore, we show that aggregate borrowing constraints greatly simplify the network structure and in the payment network context achieve the optimal tradeoff between liquidity and amount of escrowed capital.
Anwar Hasan Abdullah Othman, Adam Abdullah, Razali Haron
As crypto-currencies hold dual nature of a medium of exchange (currency) and an investment asset, some questions may arise about the potentiality of including crypto-currencies as liquid investment asset in financial institutions particularly in the banking sector to enhance their liquidity risk management and improve their portfolio diversification investment strategy. The objective of this study therefore is to examine the characteristics of Bitcoin currency based on the requirements of High-Quality Liquid Assets (HQLA) standards of Basel III and compare its volatility structure with other traditional asset classes that are already recommended by Basle III as HQLA. The study utilizes both descriptive and quantitative analysis using the GARCH family models to examine the volatility structures of these assets. The findings show that Bitcoin currency holds the same characteristics of HQLA, however; the risk of legality and recognition is still under consideration by legal authorities around the world and this risk will be eradicated in the future as crypto-currencies derive their legality from their real intrinsic value, multi-economic usefulness and not by law as in the case of fiat money currency. Furthermore, the symmetric volatility structure analysis shows the continuing persistence of volatility and predictability behavior in return series of Bitcoin currency and other- traditional asset classes in the U.S. market. However, Bitcoinâs stability has gradually improved over time. With regard to the asymmetric informative response, Bitcoin returns respond more to negative shock but it has no statistical significance, thus suggesting the lack of leveraging effect in Bitcoin market but this effect was found to be statistically persistent in other traditional asset class markets. In addition, Bitcoin returns show very low correlation with other traditional asset classes. All these imply that Bitcoin is a potential candidate as a hedge and asset diversifier, which is recommended to be included in the HQLA. This study provides some support to recent theoretical work on crypto asset return behaviour and liquidity risk management. The findings provide appropriate information about Bitcoin asset behaviour compared to other traditional asset classes which will enable them to make the right investment decision with regard to hedging, diversification and liquidity risk management. The findings of this study may assist in evaluating the suitability of including crypto assets into HQLA to improve the liquidity requirement standards and ensure that banks have an adequate amount of HQLA specifically during times of financial turmoil.
The modernization of democratic institutions has been greatly influenced by the intensive development of technology. Various innovations in the field of digital communications have affected a rather traditional sphere of popular votings. The widespread introduction of the distributed ledger technology has enormously changed approaches to organizing them. Distributed registers gained the widest popularity after the technology of the chain of blocks (blockchain) was introduced. Despite the fact that initially this technology was considered exclusively as an element of the development of information, and later financial technologies, at the present stage it is gradually becoming increasingly common in other areas of human activity due to a high degree of security and confidentiality. The paper deals in detail with the world practice concerning using this technology in popular voting. Also, the author analizes the technical solutions applied in the most actively developing projects aimed at developing a software used to conduct electronic voting with the use of blockchain technology. The article investigates some problems of voting with the use of blockchain technology, such as identification and secrecy of the vote.
Purpose: The article analyzes the content of economic and legal mechanisms of state control over the emerging market of ICO (Initial Coin Offering). Methodology: This was analytical-logical research based on content analysis. Result: Regarding the considered areas of legal regulation, it is worth noting that in regulating the protection of intellectual rights, counteracting legalization and laundering of money obtained by criminal means, as well as in regulating the protection of personal data, most states use the current legislation without any changes. Applications: This research can be used for universities, teachers, and students. Novelty/Originality: In this research, the model of the analysis of foreign experience in the regulatory framework of distributed ledgers and ICO (initial coin offering) within innovative economy is presented in a comprehensive and complete manner.
The Nakamoto longest chain protocol has served Bitcoin well in its decade long existence. It is remarkably simple and uses only basic cryptographic primitives, but its proof-of-work framework is energy wasting. Proof-of-stake (PoS) protocols are an energy efficient alternative; however they are significantly complicated and promise weaker security guarantees. An effort to mimic the Nakamoto protocol directly in the PoS setting is made in [10, 11] with security shown only for a class of purely private attacks. In this paper we demonstrate a new, and fatal, attack on the protocol of [10, 11]. This attack motivates the design of a new family of Nakamoto-style longest chain PoS protocols, with a formal proof of their security against all possible attacks in a general security model.
The proof-of-stake (PoS) protocols aim to reduce the unnecessary computing power waste seen in Bitcoin. Various practical and provably secure designs have been proposed, like Ouroboros Praos (Eurocrypt 2018) and Snow White (FC 2019). However, the essential security property of unpredictability in these protocols remains insufficiently explored. This paper delves into this property in the cryptographic setting to achieve the "best possible" unpredictability for PoS. We first present an impossibility result for all PoS protocols under the single-extension design framework, where each honest player extends one chain per round. The state-of-the-art permissionless PoS protocols (e.g., Praos, Snow White, and more), are all under this single-extension framework. Our impossibility result states that, if a single-extension PoS protocol achieves the best possible unpredictability, then this protocol cannot be proven secure unless more than 73% of stake is honest. To overcome this impossibility, we introduce a new design framework called multi-extension PoS, allowing each honest player to extend multiple chains using a greedy strategy in a round. This strategy allows us to construct a class of PoS protocols that achieve the best possible unpredictability. It is noteworthy that these protocols can be proven secure, assuming a much smaller fraction (e.g., 57%) of stake to be honest.
Georgios Birmpas, ÎÎ»ÎŻÎ±Ï ÎÎżÏ ÏÏÎżÏ ÏÎčÎŹÏ, Philip Lazos, Francisco J. Marmolejo-CossĂo
Bitcoin is a decentralised digital currency that serves as an alternative to existing transaction systems based on an external central authority for security. Although Bitcoin has many desirable properties, one of its fundamental shortcomings is its inability to process transactions at high rates. To address this challenge, many subsequent protocols either modify the rules of block acceptance (longest chain rule) and reward, or alter the graphical structure of the public ledger from a tree to a directed acyclic graph (DAG). Motivated by these approaches, we introduce a new general framework that captures ledger growth for a large class of DAG-based implementations. With this in hand, and by assuming honest miner behaviour, we (experimentally) explore how different DAG-based protocols perform in terms of fairness, i.e., if the block reward of a miner is proportional to their hash power, as well as efficiency, i.e. what proportion of user transactions a ledger deems valid after a certain length of time. Our results demonstrate fundamental structural limits on how well DAG-based ledger protocols cope with a high transaction load. More specifically, we show that even in a scenario where every miner on the system is honest in terms of when they publish blocks, what they point to, and what transactions each block contains, fairness and efficiency of the ledger can break down at specific hash rates if miners have differing levels of connectivity to the P2P network sustaining the protocol.
In multi-path routing schemes for payment-channel networks, Alice transfers funds to Bob by splitting them into partial payments and routing them along multiple paths. Undisclosed channel balances and mismatched transaction fees cause delays and failures on some payment paths. For atomic transfer schemes, these straggling paths stall the whole transfer. We show that the latency of transfers reduces when redundant payment paths are added. This frees up liquidity in payment channels and hence increases the throughput of the network. We devise Boomerang, a generic technique to be used on top of multi-path routing schemes to construct redundant payment paths free of counterparty risk. In our experiments, applying Boomerang to a baseline routing scheme leads to 40% latency reduction and 2x throughput increase. We build on ideas from publicly verifiable secret sharing, such that Alice learns a secret of Bob iff Bob overdraws funds from the redundant paths. Funds are forwarded using Boomerang contracts, which allow Alice to revert the transfer iff she has learned Bob's secret. We implement the Boomerang contract in Bitcoin Script.
Henry Kim, Marek Laskowski, Michael Zargham, Hjalmar Turesson · 6 authors
The study of how to set up cryptocurrency incentive mechanisms and to operationalize governance is token economics. Given the $250 billion market cap for cryptocurrencies, there is compelling need to investigate this topic. In this paper, we present facets of the token engineering process for a real-life 80-person Swiss blockchain startup, Insolar. We show how Insolar used systems modeling and simulation combined with cryptocurrency expertise to design a mechanism to incentivize enterprises and individual users to use their new MainNet public blockchain network. The study showed subsidy pools that incentivize application developers to develop on the network does indeed have the desired positive effect on MainNet adoption. For a startup like Insolar whose success hinge upon how well their model incentivizes various stakeholders to participate on their MainNet network versus that of numerous alternatives, this token economics simulation analysis provides invaluable insights.