The prevalence of maximal extractable value (MEV) in the Ethereum ecosystem has led to a characterization of the latter as a dark forest. Studies of MEV have thus far largely been restricted to purely on-chain MEV, i.e., sandwich attacks, cyclic arbitrage, and liquidations. In this work, we shed light on the prevalence of non-atomic arbitrage on decentralized exchanges (DEXes) on the Ethereum blockchain. Importantly, non-atomic arbitrage exploits price differences between DEXes on the Ethereum blockchain as well as exchanges outside the Ethereum blockchain (i.e., centralized exchanges or DEXes on other blockchains). Thus, non-atomic arbitrage is a type of MEV that involves actions on and off the Ethereum blockchain. In our study of non-atomic arbitrage, we uncover that more than a fourth of the volume on Ethereum's biggest five DEXes from the merge until 31 October 2023 can likely be attributed to this type of MEV. We further highlight that only eleven searchers are responsible for more than 80% of the identified non-atomic arbitrage volume sitting at a staggering $132 billion and draw a connection between the centralization of the block construction market and non-atomic arbitrage. Finally, we discuss the security implications of these high-value transactions that account for more than 10% of Ethereum's total block value and outline possible mitigations.
Deigo de Saldnha, Adam Trope, Omokolade Akinsomi, Daramola Olapade · 5 authors
The advancement in digital technologies such as cryptography, blockchain, artificial intelligence (AI), virtual and augmented realities has blurred the difference between reality and the digital world. Through the Metaverse, a 3D virtual environment that serves as a hub for all types of business, education, and leisure experiences; investment activities akin to those in real world are being carried out with the help of augmented and virtual reality services. People now invest in virtual real estate and other digital assets using Non-Fungible Token (NFT). It is however unclear how investors in developing economies such as South Africa view such an investment option. This paper examines the perception of investors in South Africa (SA) on investing in virtual real estate in the Metaverse. This study employs a mixed method approach involving questionnaire administration and interview. Questionnaire were administered on 20 selected investors in South Africa (SA). This was followed up by interview. The results were analysed using descriptive approach. The findings reveal that is a high awareness level (85%) among the selected SA investors on investment in virtual real estate, the willingness to invest in it is however lower (65%) and only 15% of the investors have investment in virtual real estate. The low entry rate of investment in virtual real estate in the Metaverse amidst a high level of willingness to invest shows that there are certain factors preventing investments in it. The study recommends that a robust governance should be put in place to allay the security concern and high volatility expressed by investors This paper is among the few studies that have considered investment in the Metaverse from a real estate perspective.
Adopting Blockchain Technology (BT) to enhance effectiveness and efficiency in different industries is an emerging field of study. Given the complexity and costliness of the property transaction process, as well as the unaffordable property prices in Hong Kong, there is a pressing need for innovative solutions to simplify the processes and enhance the accessibility to real estate investment. This research examines the potential application of BT in the Hong Kong real estate market and evaluates its capacity to revolutionize the sector, as well as the potential obstacles it might face. This research employed a multi-faceted research methodology, by commencing with a comprehensive literature review on different BT concepts such as tokenization, decentralization, smart contracts, Non-Fungible Tokens (NFTs), fractional ownership, and the current transaction processes in Hong Kong real estate market. Then, combined with the interviews with experts and case studies of the successful adoption of BT in the foreign real estate market to analyse the feasibility and potential impact of adopting BT on Hong Kong real estate transactions. The result of this research reveals that BT could have a significant impact on Hong Kong’s real estate market by enabling fractional ownership, creating an efficient one-stop online transaction platform, and innovating the NFT crowdfunding method. It could offer transformative benefits such as enhanced security, transparency, efficiency, and lower the threshold for real estate investment. However, the traditional transaction methods remain deeply entrenched in Hong Kong real estate market and the technological landscape of BT is still nascent. Implementing BT in Hong Kong real estate transactions would face several challenges including regulatory hurdles, high integration costs, and market resistance. The revolution is undoubtedly challenging and necessitates careful consideration and strategic planning.
ABSTRACT Using comprehensive transaction level loan data for the MakerDAO protocol (2019–2023), this study investigates decentralized finance (DeFi) lending dynamics, focusing on the deter- minants of loan demand and the interplay between leverage, skill, and user performance. We document a counterintuitive positive relationship between the cost of borrowing and loan demand, consistent with yield seeking behavior. Moreover, blockchain- and protocol-specific frictions, such as gas fees shape borrowing activity. At the vault level, leverage universally reduces returns and amplifies liquidation risk, with unskilled users incurring significantly greater losses than skilled counterparts under extreme leverage. While skilled users mitigate moderate leverage risks through active management, excessive leverage erodes performance across all skill levels, with forced liquidations accounting for a significant proportion of this decline. The findings reveal critical trade-offs in DeFi permissionless architecture. While skilled participants exploit leverage strategically, systemic design features disproportionately penalize less sophisticated users.
In recent years, Decentralized Autonomous Organizations (DAOs) have advanced significantly, transforming organizational operations through blockchain technology by replacing traditional hierarchical management with community-driven decision-making via smart contracts. Despite early skepticism and regulatory challenges, DAOs have evolved into various forms, particularly Investment DAOs, which facilitate pooled asset management and democratize investment opportunities across sectors such as Web3 and real estate tokenization. Given this evolution, a comprehensive financial framework is urgently needed to address the specific governance structures of DAOs. Traditional financial metrics like the Current Ratio, Cash Flow Management, and Liquidity Coverage Ratio (LCR) must be adapted to the unique dynamics of decentralized organizations, promoting a deeper understanding of financial health and operational efficiency while ensuring transparency and accountability. As DAOs now manage treasuries exceeding $40 billion, robust financial oversight is essential. Integrating traditional accounting principles with blockchain’s transparency can revolutionize financial reporting, risk management, and governance, enabling stakeholders to make informed decisions and fostering trust and collaboration within the DAO ecosystem. This fusion of accounting methods and technology will not only enhance internal governance but also ensure sustainable growth. In conclusion, the increasing prominence of DAOs within the financial landscape highlights the need for forward-looking financial structures that blend established accounting practices with cutting-edge technological solutions, ensuring their continued success in a rapidly changing environment.
Nuno Baptista, João Fragoso Januário, Carlos Oliveira Cruz
Real estate markets play a crucial role in the economy, providing opportunities for investment and housing. However, there are several challenges in both direct and indirect investment mechanisms affecting its social and financial sustainability. These challenges include high costs, lengthy processes, limited transparency, and restricted investor control. Additionally, the dominance of large investors in the market intensifies these issues, creating barriers to smaller investors. This raises concerns around social inequality and sustainability among small investors, that represent, in number, the largest share of investors. Blockchain technology has emerged as a possible solution to address these issues in the real estate sector, with the potential to improve its long term social and financial sustainability. Features such as smart contracts and tokenization can enhance efficiency, transparency, security, and accessibility in property transactions. In the case of smart contracts, these enable self-executing and automated agreements, and tokenization allows for fractional ownership and increased liquidity. To assess the knowledge and perceptions of professionals in the real estate sector and evaluate the possible impact of the technology in the market, a survey-based methodology was followed. It targeted individuals actively involved in the industry, including professionals from real estate investment companies and real estate agencies. The data revealed that most professionals in the Portuguese real estate market have little to no knowledge about blockchain technology. Yet, those who possess knowledge recognize the potential benefits it can bring to the industry. This lack of awareness can be attributed to the relatively recent emergence of blockchain and its limited discussion within the real estate sector.
Paolo Mistrangelo, Lavinia Chiara Tagliabue, Algan Tezel
The real estate market is widely considered a favorable sector for investment, although it ties up capital in the short term. However, long-term asset appreciation is an attractive prospect for investors. The concept of a "divisible" asset can help remove some of the obstacles and difficulties faced by owners, while promoting liquidity and providing access for those with different financial and social backgrounds. Ownership of the asset is shared, freeing up financial resources for the primary owner and offering retail investors the opportunity to purchase a portion of the asset via an NFT (non-fungible token).
Ashish Rath, R. K. Pateriya, Deepak Singh Tomar, Surendra Singh
Abstract The tokenization of rental real estate assets using blockchain technology has recentlygained attention as a novel way to enhance the liquidity and transparency of the real estate market. Inthis paper, we propose a smart contract-based system for the tokenization of rental estate assets usingthe Solidity programming language along with the framework. The system aims to provide a secureand transparent way to buy and sell a fraction of ownership of rental estate assets by leveraging thedecentralized and immutable nature of blockchain technology. Our study showcases the outcomes ofthe regression analysis conducted on synthetic historical data of rental estate returns and risk factors.The findings revealed a significant positive correlation between rental estate returns or rental yieldand risk-return factors. Additionally, we describe the Analysis of Variance(ANOVA) analysis, whichconfirms the statistical significance of our proposed model. Our findings suggest that tokenizationof rental estate assets using blockchain technology can bring substantial benefits to estate investors,such as increased liquidity and reduced transaction costs. This study contributes to the developmentof the estate industry by proposing a novel model of blockchain technology in the context of rentalestate asset tokenization.
This systematic literature review summarizes the extant research in the Behavioral Finance (BeFi) and digital asset spaces to understand better the interactions of behavioral effects on the pricing of assets constructed, enabled, and exchanged in Decentralized Finance (DeFi) markets. We find that asset pricing in these rapidly evolving markets is better explained through BeFi than through traditional finance (TradFi) theory. Investor attention, sentiment, heuristics and biases, and network effects interact to form a highly volatile and dynamic market. We offer a deterministic research framework with propositions for future research. We further provide investors with a theoretically and empirically supported structure to better inform their decisions through an understanding of BeFi applications to DeFi.
Double-entry accounting has been used globally for the past six hundred years and has become the base for all corporate financial reporting. Blockchain technology with distributed ledger now provides a new method of accounting termed “triple-entry accounting”. This method consists of recording and storage of business transactions, as a third entry on the blockchain. This third entry is expected to deliver a system that is trustworthy, immutable, and transparent. This study conducts a detailed review of the present literature on triple-entry accounting with blockchain technology and its impact on fraudulent practices. The review shows current literature has limited information on how this methodology will deter financial and accounting fraud. Drawing on the case studies of twenty-four companies involved in fraudulent practices globally, this paper describes common practices in manipulating financial statements, falsifying accounting records, and fraudulent banking transactions. The study explains the mechanics of how these practices can be prevented using triple-entry accounting in the blockchain environment and how the technique will bring about changes in the audit process and in the roles of internal and external auditors in the organization. The study recommends research propositions focused on governance and financial performance of a company when this method is adopted.
This paper investigates the causes and the consequences of the FTX digital currency exchange’s failure in November 2022. Analysing on-chain data, we report that FTX heavily relied on leveraging and misusing its native token, FTT, and we show how this behaviour exacerbated the company’s fragile financial situation. To gain further insights into the downfall, we employ state-of-the-art network science instruments to model the evolutionary dependency structures of 199 cryptocurrencies on an hourly basis, and we investigate tick-by-tick public trades at the time of the events. We identify the collapse of the Terra-Luna ecosystem as the pivotal event that triggered a significant decrease in the exchange’s liquidity. Results suggest that the crash was actively accelerated by Binance tweets causing a systemic reaction in the cryptocurrency market. Finally, identifying the actors who mostly benefited from the FTX’s collapse and highlighting a generalised trend toward centralisation in the crypto space, we emphasise the importance of genuinely decentralised finance for a transparent, future digital economy.
Norazmawati Md. Sani Abd. Rahim, Muhammad Shafiq Kamaruddin
Affordable housing has become the main issue of concern among Malaysians, especially those from low-income background in Klang Valley. Limited housing supply in key areas within Klang Valley due to no interest from private developers has forced low-income people to live far from their workplaces. It is considered unprofitable by many private developers because of heavily regulated policies sanctioned by the government, decentralization of affordable housing agencies, and requiring specific design, which can drive the cost of development. Furthermore, access to home financing for low-income people is limited due to their current economic situation and financial constraints. The research focuses on the factors to facilitate private developers in financing and the possibility for the private developers to venture into a home financing structure and analyze other possibilities and solutions that can be implemented with the collaboration between the developers and government.
Using transaction data from a large non-fungible token (NFT) trading platform, this paper examines how the behavioral bias of selection-neglect interacts with extrapolative beliefs, accelerating the boom and delaying the crash in the recent NFT bubble.We show that the pricevolume relationship is consistent with extrapolative beliefs about increasing prices which were plausibly triggered by a macroeconomic shock.We test the hypothesis that agents prone to selection-neglect formed even more optimistic beliefs and traded more aggressively than their counterparts during the boom.When liquidity for NFTs declined, observed NFT prices were subject to severe selection bias due in part to seller loss aversion delaying the onset of the crash.Finally, we show that market participants with sophisticated bidding behavior were less subject to selection bias and performed better.
When entering into a tontine, the value of the tontine for the participant highly depends on its composition (e.g. the age of the participants, the amount invested by each of them already invested in the tontine). However, participants subscribe to the scheme without any knowledge of either the composition of the tontine, or, in some cases, its exact payout scheme. Herein, we quantify the value of this information using certainty equivalents in the expected utility setting and a measure for model risk that allows us to obtain bounds on the tontine value subject to uncertainty in certain characteristics. We then propose a smart contract that offers full disclosure of information in a tontine. We discuss the practical implementation of such a tontine and present some new risks that could arise.
Darren Aiello, Tetyana Balyuk, Marco Di Maggio, Mark J. Johnson · 6 authors
This paper uses transaction-level data across millions of accounts to identify cryptocurrency investors and evaluate how fluctuations in individual crypto wealth affect household consumption, equity investment, and local real estate markets.We estimate an MPC out of unrealized crypto gains that is more than double the MPC out of unrealized equity gains but smaller than the MPC from exogenous cash flow shocks.This MPC is mostly driven by increases in cash/check spending and mortgages.Moreover, households sell crypto to increase both discretionary as well as housing spending.As a result, crypto wealth causes house price appreciation-counties with higher crypto wealth see higher growth in home values following high crypto returns.Our results indicate that cryptocurrencies have substantial spillover effects on the real economy through consumption and investment into other asset classes.