Blockchain Papers

Ellen S. Podgor

No abstract is available for this record.

Ville Savolainen, Jorge Soria

No abstract is available for this record.

Pieter Hartel, Ivan Homoliak, Daniël Reijsbergen

Since it takes time and effort to put a new product or service on the market, one would like to predict whether it will be a success. In general this is not possible, but it is possible to follow best practices in order to maximize the chance of success. A smart contract is intended to encode business logic and is therefore at the heart of every new business on the Ethereum blockchain. We have investigated how to measure the success of smart contracts, and whether successful smart contracts have characteristics that less successful smart contracts lack. The appearance of a smart contract on a listing website such as Etherscan or StateoftheDapps is such a characteristic. In this paper, we present a three-pronged analysis of the relative success of listed smart contracts. First, we have used statistical analysis on the publicly visible transaction history of the Ethereum blockchain to determine that listed contracts are significantly more successful than their unlisted counterparts. Next, we have conducted a survey among more than 200 developers via an anonymous online survey about their experience with the listing process. A significant majority of respondents do not believe that listing a contract itself contributes to its success, but they believe that the extra attention that is typically paid in tandem with the listing process does contribute. Finally, based on the respondents' answers, we have drafted 10 recommendations for developers and validated them by submitting them to an international panel of experts.

Lin Lin, Dominika Nestarcova

The rise of the crypto economy brings promises and perils to the venture capital industry. Distributed ledger technologies offer new investment opportunities to venture capitalists (VCs). Traditional VCs are gradually diversifying their portfolios to invest in crypto-assets and blockchain technology projects, as well as launching crypto-centric funds. Simultaneously, venture capital funds are developing various hybrid financing models to adopt and imitate the fundraising mechanism of initial coin offerings. However, the polymorphous and evolving features of crypto-assets also introduce new risks to the venture capital market. The paper therefore examines the emerging models in the venture capital crypto landscape, identifies the new risks, and examines the current regulatory and contractual solutions. The paper also proposes recommendations for the venture capital crypto landscape going forward, including heightened regulations on crypto-centric funds and fund managers.

Ahmad B. Alkhodre, Toqeer Ali, Salman Jan, Yazed Alsaawy · 6 authors

Businesses need trust to confidently perform trade among each other. Centralized business models are the only mature solutions available to perform trades over the Internet. However, they have many problems which includes but are not limited to the fact that these create bottleneck on the server as well as requires trusted third parties. Recently, decentralized solutions have gained significant popularity and acceptance for future businesses. The wide acceptance of such systems is indeed due to the trust management among various untrusted business stakeholders. Many solutions have been proposed in this regard to provide de-centralized infrastructure for various business models. A standard solution that is acceptable to the industry is still in demand. Hyperledger umbrella Blockchain projects, that are supported by IBM and many other industry big players are gaining popularity due to its efficient and pluggable design. In this study, the author present the idea of utilizing Blockchain to design a Value-Added Tax (VAT) system for Saudi Arabia’s newly introduced tax system. The reason to select this business model for VAT is twofold. First, it provides an untampered distributed ledger, which cannot be deceived by any party. Each transaction in the system cannot go unnoticed by the smart contract. Sec-ondly, it provides a transparent record, and updates all involved parties regarding each activity performed by stakeholders. The newly proposed system will provide a transparent database of VAT transactions according to our smart contract design and at each stage of supply chain, tax will be deducted and stored on peer-to-peer network via consensus process. The author believes that the proposed solution will have significant impact on VAT collection in the Kingdom of Saudi Arabia.

Erica Pimentel, Emilio Boulianne, Shayan Eskandari, Jeremy Clark

ABSTRACT Presently, auditing firms are hesitant to accept mandates from companies that hold a significant amount of cryptoassets, primarily because the blockchain sector introduces novel, technically sophisticated, and risky propositions that auditors are unequipped to handle. Abrupt recusals by auditors operating in this sector have led to several enterprises being placed on cease trade by securities regulators for failure to produce audited financial statements on time, thus impeding these companies from raising capital and bringing new investments to fund innovation in this space. Through an iterative process of interviews with senior accounting professionals, structured brainstorming among a multidisciplinary team of accountants and blockchain experts, and a focus group with experienced auditors, we critically analyze the purported roadblocks to auditing blockchain firms and map them to traditional auditing practices. We urge auditors to reconsider their resistance to the blockchain sector by demonstrating that providing an audit opinion is challenging but not insurmountable.

Georgiana-Loredana Schipor

The financial industry is subject to a new technological age through the evolution of the cryptocurrencies, people exploring a continuous rise of interest in investing on alternative basis mechanisms. This paper aims to give an overview of the blockchain technology and its potential, with its applicability on the cryptocurrency market. We illustrate the main challenges that the cryptocurrencis must overcome in order to achieve the customers’ approval, which is strongly related to trust and cybersecurity issues. A comparative analysis of the two major cryptocurrencies emphasizes the risks and the opportunities offered by the cryptocurrency market, but also the main threats that must be addressed. Moreover, the consequences of the cryptocurrencies development for both national and international financial systems are evaluated, leading to the idea of a freedom-associated concept, where the lack of a third-party financial authority requires a significant change of perceptions and has the premises to fundamentally transform the traditional payment methods.

Kombe Kaponda

No abstract is available for this record.

Christoph H.-J. Braun, Tobias Käfer

We present an approach to verify off-chained information using Linked Data, Smart Contracts, and RDF graph hashes stored on a Distributed Ledger. We use the notion of a Linked Pedigree, i.e. a decentralised dataset for storing hyperlinked information, as modelling foundation. We evaluate our approach by comparing different ways to build the Smart Contract. We develop a cost model and show, based on our implementation, that for managing multiple Linked Pedigree instances, a single larger Smart Contract is superior to multiple smaller Smart Contracts for supply chains shorter than 50 participants.

Dominik Harz, Lewis Gudgeon, Arthur Gervais, William J. Knottenbelt

Financial deposits are fundamental to the security of cryptoeconomic protocols as they serve as insurance against potential misbehaviour of agents. However, protocol designers and their agents face a trade-off when choosing the deposit size. While substantial deposits might increase the protocol security, for example by minimising the impact of adversarial behaviour or risks of currency fluctuations, locked-up capital incurs opportunity costs. Moreover, some protocols require over-collateralization in anticipation of future events and malicious intentions of agents. We present Balance, an application-agnostic system that reduces over-collateralization without compromising protocol security. In Balance, malicious agents receive no additional utility for cheating once their deposits are reduced. At the same time, honest and rational agents increase their utilities for behaving honestly as their opportunity costs for the locked-up deposits are reduced. Balance is a round-based mechanism in which agents need to continuously perform desired actions. Rather than treating agents' incentives and behaviour as ancillary, we explicitly model agents' utility, proving the conditions for incentive compatibility. Balance improves social welfare given a distribution of honest, rational, and malicious agents. Further, we integrate Balance with a cross-chain interoperability protocol, XCLAIM, reducing deposits by 10% while maintaining the same utility for behaving honestly. Our implementation allows any number of agents to be maintained for at most 55,287 gas (ca. USD 0.07) to update all agents' scores, and at a cost of 54,948 gas (ca. USD 0.07) to update the assignment of all agents to layers.

Soehartono, U. Khaerah Pati

No abstract is available for this record.

Robert Byggmästar

Distributed ledger technology is one of the latest fintech innovations that could increase the efficiency of securities markets. The technology represents a new paradigm how the need of trusted third parties can be eliminated and how transaction cost can be lowered. The technology can be used as a platform for so-called smart contracts. The implementation of DLT and smart contracts is however not risk free, the technology is also at an early stage and it is still unsure whether it will overcome all hurdles.
\n
\nBefore the innovations can be utilized on a full scale, potential risk such as the uncertainty regarding the legal validity and enforcement of smart contracts needs to be eliminated, so that the technology can be implemented and used with a high level of predictability and trust. The research sets out to solve the research question from the view point of Finnish securities law, limiting the research to smart contracts in securities markets. General principles are deconstructed using international, European and Finnish sources to solve the legal problem.
\n
\nSmart contracts can be divided into blockchain smart contracts in crypto markets and smart contracts in securities markets, the research focuses on the latter. Smart contracts can also be divided into smart contract code and smart legal contracts. Smart contracts are defined in the research as agreements automatable by computer and enforceable by either legal enforcement of rights and obligations or by execution of code. Technology neutrality is set out as a central principle in regulating fintech. The research question is reframed as whether a contract concluded in code is valid and enforceable. By analysing electronic contracts, enforcement of code, the example of the vending machine and by teleologically interpreting the law, it is established that smart contracts concluded in code can be both legally valid and enforceable.
\n
\nValidity and enforceability from the perspective of securities law can also be seen as the execution of rights and the issuance of securities. Securities and securities markets also have special characteristics, such as being fungible, collective and anonymous. Securities markets are also already to a high degree automated, using electronic trading systems, where many securities exist only in electronic form, programming languages are also already used to express securities and their functions. Existing securities law, which is technology neutral, can therefore be applied on smart contracts in securities markets, without the need of any regulatory changes. The growing digitalisation and automation of securities markets raise however broader questions such as the elasticity of the law and its implications on the stability of the financial system.

Young-Hun Kim

No abstract is available for this record.

Dimaz Ankaa Wijaya, Joseph K. Liu, Ron Steinfeld, Dongxi Liu · 6 authors

No abstract is available for this record.

Akaki Mamageishvili, Jan Christoph Schlegel

We study optimal smart contract design for monitoring an exchange of an item performed offline. There are two parties, a seller and a buyer. Exchange happens off-chain, but the status update takes place on-chain. The exchange can be verified but with a cost. To guarantee self-enforcement of the smart contract, both parties make a deposit, and the deposits must cover payments made in all possible final states. Both parties have an (opportunity) cost of making deposits. We discuss two classes of contract: In the first, the mechanism only interacts with the seller, while in the second, the mechanism can also interact with the buyer. In both cases, we derive optimal contracts specifying optimal deposits and verification policies. The gains from trade of the first contract are dominated by the second contract, on the whole domain of parameters. However, the first type of contract has the advantage of less communication and, therefore, more flexibility.

Dumitru Roman, K. H. Vu

No abstract is available for this record.

Rüdiger Fahlenbrach, Marc Frattaroli

We conduct a detailed analysis of investors in successful initial coin offerings (ICOs). The average ICO has 4700 contributors. The median participant contributes small amounts and many investors sell their tokens before the underlying product is developed. Large presale investors obtain tokens at a discount and flip part of their allocation shortly after the ICO. ICO contributors lack the protections traditionally afforded to investors in early-stage financing. Nevertheless, returns 9 months after the ICO are positive on average, driven mostly by an increase in the value of the Ethereum cryptocurrency.

Madeleine Maslin, Millicent Watt, Christopher Yong

This paper dissects the research methodologies implemented by the Research Team for the Smart Contracts Working Group (TC-307/IT-041 Blockchain and Distributed Ledger Technologies) in developing standards to inform best practice in the design and use of blockchain and distributed ledger technologies. In doing so, it explores the origins of blockchain standardisation and outlines the high-level methodology for conducting and delivering research in this rapidly evolving space.

Panagiotis Giannakaris, Panagiotis Trakadas, Theodοre Zahariadis, Panagiotis K. Gkonis · 5 authors

The evolution of the energy production and distribution towards innovative decentralized models, dictates the introduction of emerging technologies to transform the conventional energy sector into smart

Rajendra Kulkarni, Laurie A. Schintler, Naoru Koizumi, Roger R. Stough

No abstract is available for this record.

Benjamin Geva

Abstract This chapter discusses cryptocurrencies in the context of a historical overview of the evolution of money, banking, and the payment system. The chapter is organized as follows. Section I introduces the topic. Section II addresses money, payment, and payment intermediation. Section III sets out the evolution of commercial banking to facilitate national and global networks for book-based payments. Section IV addresses both electronic banking as a form of payment intermediation and the availability to the public of central bank balances as a challenge to payment intermediation. Section V examines the challenge cryptocurrencies present to state-issued currency, payment intermediation, and the roles of banks in the payment systems. The conclusion points at an irony: even as a challenge to banking, cryptocurrencies emerged as an outgrowth of an enhancement to banking.

Long Chen, Lin William Cong, Yizhou Xiao

We introduce economic research on blockchains and its recent advances. In particular, we highlight the (i) unifying concepts on blockchain as a decentralized consensus and its core benefits, (ii) equilibrium characterizations and allegedly irreducible tensions among consensus formation, decentralization, and scalability, (iii) major issues including network security, overconcentration, energy consumption and sustainability, adoption, multi-party computation and encryption, smart contracting, and information distribution and aggregation, and (iv) future directions concerning blockchains and their applications such as informational and agency issues, as well as game-theoretical and mechanism design approaches to blockchain protocols.

Olga Labazova, Tobias Dehling, Ali Sunyaev

Blockchain is a decentralized digital ledger that challenges existing business models and theories by shifting the trust from institutions towards algorithms. However, the number of successfully developed blockchain-based systems remains low. This points towards a research gap between blockchain applications and technical blockchain characteristics. We answer the research question: What application areas fit blockchains with what technical characteristics? We develop a taxonomy, which comprises six blockchain application areas that are classified across eight technical dimensions. We demonstrate the utility of the taxonomy on ninety-nine blockchain-based systems. We contribute to the scientific literature by delimiting blockchain application areas, identifying new technical dimensions, and linking application and technical knowledge on blockchain to guide development of blockchain-based systems. For practitioners, we present an overview of current blockchain-based systems.

Han Woo Park, Bülent Özel

The blockchain is still new and unfamiliar. But blockchain appears to shake an entire technology innovation system. Blockchain is rapidly drawing attention in that it will be able to fundamentally revolutionize industry ecosystem. While cryptocurrency transactions and market capitalization have been popular in mass media, several platform operators in non-cryptocurrency areas such as jewelry, social networks, and entertainment, are also moving to introduce blockchain technology in full swing. In this brief note, we intend to present integrated theoretical strands to summarize various prospects for blockchain technology. Further, we want to provide a reflection as to whether this new technology gives opportunities, challenges, or risks to future society. Particularly, we point out one of its alternative and promising adoption that gives way to new forms of decentralized and autonomous organizations (DAOs).