On August 1, 2017, the Bitcoin blockchain experienced a hard fork.The hard fork, spurred by concerns over Bitcoin's scalability, resulted in an entirely new blockchain and an accompanying new cryptocurrency: Bitcoin Cash.However, the new blockchain relies on the history of transactions recorded on the old blockchain.Consequently, at the time of the hard fork, every holder of Bitcoin could have received an equal amount of Bitcoin Cash.This sudden receipt of Bitcoin Cash poses a variety of tax problems.Should the acquired cryptocurrency qualify as income?If so, how should taxpayers calculate this income?Current income taxation law suggests the Bitcoin/Bitcoin Cash hard fork produced gain that, for the most part, was immediately realized.Thus, most taxpayers that received Bitcoin Cash at the time of the hard fork should have reported its value as income to the Internal Revenue Service.However, due to a variety of practical concerns, including a lack of sufficient analogous situations, cryptocurrency's volatility, and the IRS's refusal to follow relevant regulations related to the taxation of "treasure trove," perhaps it would be best to reconsider this conclusion and explore a solution that permits taxation of Bitcoin Cash upon a subsequent sale.
Distributed ledger technology (DLT) is one of the latest in a long list of digital technologies, which appear to be heading towards a new industrial revolution. DLT has become very popular with the publication of the Bitcoin Blockchain in 2008. However, when we consider its suitability for dynamic networking environments, such as the Internet of Things, issues like transaction fees, scalability, and offline accessibility have not been resolved. The IOTA Foundation has designed the IOTA protocol, which is the data and value transfer layer for the Machine Economy. IOTA protocol uses an alternative blockless Blockchain which claims to solve the previous problems: the Tangle. This thesis first inquires into the theoretical concepts of both technologies Tangleand Blockchain, to understand them and identify the reasons to be compatible or not with the Internet of Things networking environments. After the analysis, the thesis focuses on the proposed implementation as a solution to address the connectivity issue suffered by the IOTA network. The answer to the problem is the development of a Neighbor Discovery algorithm, which has been designed to fulfill the requirements demanded by the IOTA application. Dealing with IOTA network setup can be very interesting for the community that is looking for new improvements at each release. Testing the solution in a peer-to-peer specific protocol (PeerSim), with different networking scenarios, allowed us to get valuable and more realistic information. Thus, after analyzing the results, we were able to determine the appropriate IOTA network configuration to build a more reliable and long-lasting network.
The objective of this article is to merge the growing phenomenon of distributed ledger technology with the airline industry. This article attempts to attain its objective by succinctly clarifying what distributed ledger technology truly is without explaining the minutest of its details. Further, this article seeks to achieve its objective by suggesting potential manners in which this technology could apply to the airline industry; this is an endeavor that, so far, does not seem to have been undertaken in a strict academic sense. Lastly, this article strives to link these potential applications to the empire of the law by shedding light on the legal implications that could arise from them. By attempting to achieve its objective in the manner laid down above, this article intends to both generate a discussion on the applicability of distributed ledger technology to the airline industry and encourage an influx of deeper studies on this innovative theme by lawyers, economists, and engineers alike.
Centralized data storage and reconciliation by trusted intermediaries has historically put financial systems in the hands of a single central parties. The emergence of bitcoin and blockchain, combined with the 2008 financial crisis, has shifted the Swedish financial sector’s traditional perspectives on democratization, centralization, transparency and automation. Trade and export finance is one of many sectors investigating how blockchain and distributed ledger technology can be used other than as a digital currency system. Swedish trade and export finance connects importers, exporters, banks, credit providers, customs, and transporters into a fragmented and complex process with many stakeholders. Sweden further has a history of quickly adopting technological innovations. Banks therefore face a dynamic environment and an inconsistent, manual operative process that removes profitability incentives in providing small enterprises with credit. The adoption of DLT could provide efficiency gains and cost savings in administration, communication, reconciliation and accounting. In this thesis, the costs, benefits, and remaining barriers of implementing distributed ledger technology in Swedish trade finance are identified. Further, Swedish contextual factors’ effect on the rate of adoption is addressed. The chosen methodology of deep interviews and thorough studying of literature provides an assessment of the potential transition dynamics, forming a foundation for future investment decisions. The conclusions drawn suggest that the main costs related to adoption lie in research and development and implementation. R&D costs for distributed ledgers in the Swedish financial sector during 2019 were approximated to USD 40 million. The main benefits of automation, efficiency and reduced level of complexity were concluded to likely outweigh the costs within approximately ten to twenty years. Experience will allow companies to optimize governance structures and consensus mechanisms, while learning to expose parts of networks into public space. The innovative, adaptive Swedish market environment presumably enables faster than average diffusion of innovation, while remaining barriers in cooperation, trust, interoperability and regulation may extend the adoption process
Identity-based cryptosystems mean that public keys can be directly derived from user identifiers, such as telephone numbers, email addresses, and social insurance number, and so on. So they can simplify key management procedures of certificate-based public key infrastructures and can be used to realize authentication in blockchain. Linearly homomorphic signature schemes allow to perform linear computations on authenticated data. And the correctness of the computation can be publicly verified. Although a series of homomorphic signature schemes have been designed recently, there are few homomorphic signature schemes designed in identity-based cryptography. In this paper, we construct a new ID-based linear homomorphic signature scheme, which avoids the shortcomings of the use of public-key certificates. The scheme is proved secure against existential forgery on adaptively chosen message and ID attack under the random oracle model. The ID-based linearly homomorphic signature schemes can be applied in e-business and cloud computing. Finally, we show how to apply it to realize authentication in blockchain.
Jingjing Gu, Binglin Sun, Xiaojiang Du, Jun Wang · 6 authors
To address the problem of detecting malicious codes in malware and extracting the corresponding evidences in mobile devices, we construct a consortium blockchain framework, which is composed of a detecting consortium chain shared by test members and a public chain shared by users. Specifically, in view of different malware families in Android-based system, we perform feature modeling by utilizing statistical analysis method, so as to extract malware family features, including software package feature, permission and application feature, and function call feature. Moreover, for reducing false-positive rate and improving the detecting ability of malware variants, we design a multi-feature detection method of Android-based system for detecting and classifying malware. In addition, we establish a fact-base of distributed Android malicious codes by blockchain technology. The experimental results show that, compared with the previously published algorithms, the new proposed method can achieve higher detection accuracy in limited time with lower false-positive and false-negative rates.
Yunhua He, Hong Li, Xiuzhen Cheng, Yan Liu · 6 authors
In distributed peer-to-peer (P2P) applications, peers self-organize and cooperate to effectively complete certain tasks such as forwarding files, delivering messages, or uploading data. Nevertheless, users are selfish in nature and they may refuse to cooperate due to their concerns on energy and bandwidth consumption. Thus each user should receive a satisfying reward to compensate its resource consumption for cooperation. However, suitable incentive mechanisms that can meet the diverse requirements of users in dynamic and distributed P2P environments are still missing. On the other hand, we observe that Blockchain is a decentralized secure digital ledger of economic transactions that can be programmed to record not just financial transactions and Blockchain-based cryptocurrencies get more and more market capitalization. Therefore in this paper, we propose a Blockchain based truthful incentive mechanism for distributed P2P applications that applies a cryptocurrency such as Bitcoin to incentivize users for cooperation. In this mechanism, users who help with a successful delivery get rewarded. As users and miners in the Blockchain P2P system may exhibit selfish actions or collude with each other, we propose a secure validation method and a pricing strategy, and integrate them into our incentive mechanism. Through a game theoretical analysis and evaluation study, we demonstrate the effectiveness and security strength of our proposed incentive mechanism.
Electricity is the commonest commodity for most businesses in our world today. The use of electricity has been a breakthrough for the discovery of new technologies and has become the main driving force behind several innovations. With the introduction of smart grid systems, there have been improvements in how utility companies interact with their customers with regards to electricity use. However, since the readings are done via the Internet, there is the tendency for the data to be compromised when it gets into the hands of the wrong people. Moreover, customers mostly do not know why they pay huge amounts and which appliances use more electricity, since they are not privy to the readings. The sovereign blockchain technology, which provides transparency and provenance, is utilized in this paper to mitigate these above mentioned problems. A smart contract, which executes laid down procedures to provide a trust-based system between participants on the network is also implemented. Our system proves very efficient as the user can monitor how the electricity is used, and it also provides a platform where there is no manipulation from either party.
This paper offers an analysis of cryptocurrencies and blockchain’s technical underpinnings, specifically of Non-Fungible tokens and “cryptocollectibles”, and the changes these innovations can bring about in the art market and creative industries at large. The paper is based on a resource-based analysis of creative industries, their value chains and the various bargaining powers and revenue sharing of the industries’ agents.
Field of study: Blockchain technology, decentralized autonomous organizations, smart contract and their resistance to attacks and failures. Theoretical and practical significance: Due to the fact that such a form of organization is experimental, participants often face problems of attacks on the organization, the consequences of incorrectly written rules and of fraud. The task of creating decentralized autonomous organizations that are resistant to failures and attacks, and research on the causes of such problems has become relevant for software developers and architects. Goals and objectives of work: Investigation of attack algorithms and development of methods for ensuring the sustainability of decentralized autonomous organizations for attacks on the basis of analysis of the subprocesses of border events and logs using the methods of Process Mining. The methods to be developed should promptly identify and prevent inconsistencies between the alleged and actual behavior of smart contracts that lead to such errors in the operation, such as the content of spam contracts, empty transactions, increased block processing time, etc.
Open access
Economic and Technological Systems Analysis
Advanced Research in Systems and Signal Processing
In 2009, Gradwohl, Naor, Pinkas, and Rothblum proposed physical zero-knowledge proof protocols for Sudoku. That is, for a puzzle instance of Sudoku, their excellent protocols allow a prover to convince a verifier that there is a solution to the Sudoku puzzle and that he/she knows it, without revealing any information about the solution. The possible drawback is that the existing protocols have a soundness error with a non-zero probability or need special cards (such as scratch-off cards). Thus, in this study, we propose new protocols to perform zero-knowledge proof for Sudoku that use a normal deck of playing cards and have no soundness error. Our protocols can be easily implemented by humans with a reasonable number of playing cards.
The consensus algorithm is a mechanism that allows you to protect the network against attacks. The work of the algorithm is to provide rules that act on the network members. Proof of Work is one of the consensus algorithms based on the calculation of a complex algorithmic problem. This algorithm requires significant computing power to maintain its performance and therefore is superfluous. An alternative algorithm -Proof of Stake does not require so many resources to maintain network performance, but has a number of shortcomings.
This paper explores how entrepreneurs can use fungible tokens—whereby they issue digital assets and commit to only accept those tokens as payment for future products or services—to fund venture development. We show that tokens can acquire value through a mechanism where entrepreneurs generate buyer competition by setting divide-the-money prices, despite lacking traditional equity-like cash flow rights. However, we uncover a fundamental tension: when ventures face ongoing operational costs, they must retain tokens to credibly commit to fair pricing, yet this conflicts with their need to sell tokens to raise development capital. We prove this leads to an impossibility result for simple token structures and demonstrate how observed practices such as vesting schedules, multi-stage offerings, and pre-committed buybacks resolve this tension. Our analysis reveals that while venture returns are independent of token supply growth, initial fundraising is maximized by setting that growth to zero. Beyond traditional ICOs, our model applies to various token-based financing mechanisms including layer-1 protocols, DeFi platforms, and Web3 applications, providing insight into how these mechanisms facilitate coordination among stakeholders in digital ecosystems.
Abstract: A classic legal problem is whether breach of contract may give rise to a remedy. Under common law this is discussed under the doctrine of excuses. Its civil lawequivalent is the attributability of causes of non-performance of an obligation, and its converse, force majeure. Despite the variety of approaches in various jurisdictions, the general outlines are roughly equivalent as far as translation into smart contracts is concerned: the main issue is what is the cause of non-performance and whether this cause can be attributed. Smart contracts can deal with the general outline of this structure, but may in practice only approximate the refinement that contract law offers. Themain problems are: determining the actual cause of the non-performance by means of automated oracles or the smart contract on its own (without relying on human judgment), dealing with multiple causality and impediments due to the creditor, determining attributability of the cause of non-performance. Smart contracts may offer no more than an approximation of the detailed rules of contract law, by hard-and-fast rules. This may suffice for certain categories of contracts, but may need additional effort to obtain a closer approximation of contract law rules where larger interests are concerned. The related doctrine of withholding performance is similarly difficult to realize appropriately in smart contracts. As regards hardship or unforeseen circumstances, it is best to disallow this in smart contracts,which leaves open the questionwhether partiesmight go to court for relief. The reliance on oracles furthermore opens a weakness to the automatic performance of smart contracts, due to possible liability of oracles for perceived incorrect assessment.
Purpose The purpose of this paper is to analyze underpricing in initial coin offerings (ICO). It bridges the gap between findings in initial public offering (IPO) literature and empirical results from ICOs. Design/methodology/approach The sample set consists of 279 ICOs between April 2013 and January 2018. A regression analysis is performed with data from the ICOs. Findings The results show an average level of underpricing of ICOs of 123 percent in the USA and 97 percent in the other countries. The results for the US ICOs are significantly higher than for US IPOs on average and also higher than US IPOs at the beginning of the dot.com bubble. The authors also study the determinants of ICO underpricing. The authors use proxies based on asymmetric information from the IPO literature as well as ICO-related variables. First-day trading volume and a good sentiment on the ICO market go together with more ICO underpricing. Moreover, hot markets make first-day investors to benefit less. Finally, companies that use a large issue size or a pre-ICO (a sale of cryptocurrencies before the ICO) leave less money on the table. Research limitations/implications A first restriction is that the authors focus on ICOs and not on crowdfunding, though there are similarities in that both of them are novel ways to finance projects. A second restriction is that the authors had to decide on the definition of a listing day. Cryptocurrencies are traded on many exchanges, and if the exchange is tailored to the cryptocurrency itself, the data on, e.g., close prices are not necessarily to be trusted. The authors, therefore, decided to use close price data from coinmarketcap.com, which requires a listing on two exchanges. This choice implies that there may have been trades before the listing day itself. A third restriction arises from the relative newness of the ICO phenomenon. The authors gathered data on underpricing from coinmarketcap.com and combined that with project information from icobench.com. However, the data were not simply matched and they required manual adjustments based on several other sources. The authors hope that in due time data on ICOs will be as adequate as data on IPOs and that they become more readily available. It might help if regulators or the crypto community would institute publication requirements. Adherence to such requirements would also reduce the extent of fraud and of asymmetric information, so that solid issuers with good projects might benefit from less underpricing. Practical implications The research may help in reducing underpricing, as the authors find that issuers can reduce it by holding a pre-ICO and by considering larger issue sizes. If they do so, investors will get fewer opportunities to benefit from underpricing. Investors can, nevertheless, also profit from the knowledge generated in this paper. When market sentiment is positive and first-day trading volume is expected to be high, investing in ICOs is likely to give them higher first-day returns. Finally, the authors hope that this paper will serve as a basis for further research into the exciting and dynamic world of cryptocurrencies. Originality/value There is hardly any research on underpricing of ICOs. The paper is interesting for its table with a brief comparison of ICOs and IPOs. It also searches for variables from the asymmetric information theory behind IPOs to be applied in explaining ICOs. It shows high levels of ICO underpricing in comparison to IPOs. It also gives suggestions for issuers of (and investors in) ICOs.
Purpose This paper aims to present a methodology for constructing cointegrated portfolios consisting of different cryptocurrencies and examines the performance of a number of trading strategies for the cryptocurrency portfolios. Design/methodology/approach The authors apply a series of statistical methods, including the Johansen test and Engle–Granger test, to derive a linear combination of cryptocurrencies that form a mean-reverting portfolio. Trading systems are designed and different trading strategies with stop-loss constraints are tested and compared according to a set of performance metrics. Findings The paper finds cointegrated portfolios involving four cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC), and the corresponding trading strategies are shown to be profitable under different configurations. Originality/value The main contributions of the study are the use of multiple altcoins in addition to bitcoin to construct a cointegrated portfolio, and the detailed comparison of the performance of different trading strategies with and without stop-loss constraints.