Abstract Blockchain technology is transforming traditional financial systems. Cross-border money remittance industry is in a crossroad being challenged. The traditional SWIFT system is facing new comers like Ripple system which is based on the blockchain distributed ledger technology with its own crypto tokens. This paper conducts a SWOT analysis on both technologies to find out whether the blockchain technology has the potential to transform a traditional industry and how this may be possible. We conclude that Ripple has all of the advantages over SWIFT despite some minor issues. In short-term, SWIFT will still take the lead in the remittance market due to the economy of scale. However, in long-term, emerging technology like Ripple will eventually revolutionize the remittance industry or even other financial systems.
Distributed ledger technology (DLT), commonly referred to as 'blockchain' and originally invented to create a peerto-peer digital currency, is rapidly attracting interest in other sectors. The aim in this paper is (1) to investigate the applications of DLT within the built environment, and the challenges and opportunities facing its adoption; and (2) develop a multi-dimensional emergent framework for DLT adoption within the construction sector.
Sina Rafati Niya, Florian Schüpfer, Thomas Bocek, Burkhard Stiller
Abstract This work introduces the design and implementation of an Android-based Peer-to-peer Purchase and Rental Application termed PuRSCA, which leverages Smart Contracts (SC) and the Ethereum public blockchain (BC). As a Device-to-device (D2D) communication protocol, WiFi-Direct is chosen to enable the P2P data transmission between two parties. This work results in a cost-efficient, secure, SC-based, P2P, and Decentralized application (Dapp). Evaluations on performance of this Dapp is specified in terms of its D2D deployment, transaction costs, scalability, security, and privacy.
Fintech (or financial technology) is the current driving force behind innovations in the financial services industry. One of the most debated innovations is cryptocurrency, or digital currency, which uses blockchain technology to make a direct electronic payment between two people possible, without going through a third party (like a bank) or expensive intermediaries in order to save costs. This future money is pressurising central banks to manage the looming threat of redundancy as it overshadows fiat currency in a world of infinite fintech possibilities. Bitcoin, being the first decentralised cryptocurrency, will be the focus of this research. This digital currency is not produced by minting money in an unlimited supply, but through a virtual mining process designed to control the supply of money and make it more valuable. The increasing pace in financial innovation is pushing regulators to make a change in the way they define money and what money can be. Traditionally money is used to serve as a medium of exchange, legal tender for repayment of debt, standard of value, unit of accounting measure and a means to save or store purchasing power. Bitcoin may not fulfill all the functions of money but its scarcity value, anonymity (or pseudonymity), transparency, and autonomy from the government, make it attractive to users who are speculators, traders, merchants, consumers and netizens disenchanted with fiat money. Despite the alluring features of Bitcoin, it is not spared from potential abuses such as webcrimes, tax evasion, fraud, online black markets, money laundering and terrorism financing. In this paper, a forensic examination of Bitcoins benefits and risks will help regulators decide whether to adopt cryptocurrency and provide an appropriate framework to regulate it based on other jurisdictions approach. This paper recommends that Malaysia should fully embrace cryptocurrency due to global trends - the Islamic Development Bank is developing Shariah compliant contracts using blockchain technology; China is leading the drive to develop its own national cryptocurrency to complement fiat money; and a Shariah-compliant cryptocurrency has already entered the market backed by gold (Onegram). Financial and regulatory architectures in Malaysia should accommodate these changes to remain relevant. In addition, future research is recommended focusing on developing a Shariah compliant national cryptocurrency that is unique to Malaysia.
JT Hamrick, Farhang Rouhi, Arghya Mukherjee, Amir Feder · 7 authors
The surge of interest in cryptocurrencies has been accompanied by a proliferation of fraud. This paper examines a pervasive tactic long known to financial markets: pump and dump schemes. While the fundamentals of the ruse have not changed in the last century, the recent explosion of nearly 2, 000 cryptocurrencies in a largely unregulated environment has greatly expanded the scope for abuse. The paper first quantifies the scope of cryptocurrency pump and dump on Discord and Telegram, two widely popular group messaging platforms with 130 million users and 200 million users respectively. Both platforms can handle large groups with thousands of users, and they are the most popular outlets for pump and dump schemes involving cryptocurrencies. We identified 3, 767 different pump signals advertised on Telegram and another 1, 051 different pump signals advertised on Discord during a six-month period in 2018. The schemes promoted more than 300 cryptocurrencies. These comprehensive data provide the first measure of the scope of pump and dump schemes across cryptocurrencies and suggest that this phenomenon is widespread and often quite profitable. This should raise concerns among regulators. We then examine which factors that affect the "success" of the pump, as measured by the percentage increase in price near the pump signal. We find that the coin's rank (market capitalization/volume) is the most important factor in determining the profitability of the pump: pumping obscure coins (with low volume) is much more profitable than pumping the dominant coins in the ecosystem.
Decentralised issued crypto "currencies", like bitcoin, have the potential to drastically change the existing retail payment system and even the monetary system. Insights into the factors that influence their adoption are therefore crucial. Using a large representative sample of retailers that sell their products online, we find that acceptance of crypto payments is currently modest (2%), but there is substantial interest among retailers to adopt crypto payments in the near future. Consumer demand, net transactional benefits and perceived adoption effort influence adoption intention and actual acceptance by retailers. Regarding non-financial factors, our findings suggest that service providers who act as intermediaries between retailers, their customers, and providers of payment instruments play a crucial role as facilitators of competition and innovation in the online retail payments market by lowering such barriers. The most serious barrier for crypto acceptance seems to be a lack of consumer demand. Information from consumers indicate that those who possess cryptos, don't use it for online payments. It seems therefore unlikely that the adoption of cryptos by retailers will increase substantially, making it highly unlikely that cryptos like bitcoin will drastically change the existing retail payment system.
Implementing smart contracts to automate the performance of high-value over-the-counter (OTC) financial derivatives is a formidable challenge. Due to the regulatory framework and the scale of financial risk if a contract were to go wrong, the performance of these contracts must be enforceable in law and there is an absolute requirement that the smart contract will be faithful to the intentions of the parties as expressed in the original legal documentation. Formal methods provide an attractive route for validation and assurance, and here we present early results from an investigation of the semantics of industry-standard legal documentation for OTC derivatives. We explain the need for a formal representation that combines temporal, deontic and operational aspects, and focus on the requirements for the temporal aspects as derived from the legal text. The relevance of this work extends beyond OTC derivatives and is applicable to understanding the temporal semantics of a wide range of legal documentation.
Governments across the world are testing different uses of the blockchain for the delivery of their public services. Blockchain hashing–or the insertion of data in the blockchain–is one of the potential applications of the blockchain in this space. With this method, users can apply special scripts to add their data to blockchain transactions, ensuring both immutability and publicity. Blockchain hashing also secures the integrity of the original data stored on central governmental databases. The paper starts by analysing possible scenarios of hashing on the blockchain and assesses in which cases it may work and in which it is less likely to add value to a public administration. Second, the paper also compares this method with traditional digital signatures using PKI (Public Key Infrastructure) and discusses standardisation in each domain. Third, it also addresses issues related with concepts such as “distributed ledger technology” and “permissioned blockchains.” Finally, it raises the question of whether blockchain hashing is an effective solution for electronic governance, and concludes that its value is controversial, even if it is improved by PKI and other security measures. In this regard, we claim that governments need first to identify pain points in governance, and then consider the trade-offs of the blockchain as a potential solution versus other alternatives.
The authors discuss several uses of blockchain and, more generally, distributed ledger technologies outside of cryptocurrencies. They take a pragmatic view, focusing on three main areas: the role of coin economies for “data malls” (specialized data marketplaces), data provenance (a historical record of data and its origins), and “keyless payments,” which are payments that can be made without having to know other users’ cryptographic keys. They also discuss voting and other areas and give a sizable list of academic and nonacademic references. <b>TOPICS:</b>Currency, quantitative methods
At the beginning of 2018, there is a growing belief that blockchain technologies constitute a revolutionary innovation in how we transfer value electronically. In that vein, blockchain may be a suitable complement to ontologies to achieve a big part of the vision of the semantic Web by Tim Berners-Lee. We believe that if this complementarity is to be achieved blockchain and ontologies must co-evolve. In this paper, we focus on what and how to engineer models, methods, designs, and implementations for this co-evolution. As a first step in this co-evolution, we propose a conceptual design of a governance ontology represented as meta-data tags to be embedded and instantiated in a smart contract at the blockchain protocol level. We develop this design by examining and analyzing smart contracts from the infamous The DAO experiment on the Ethereum blockchain. We believe there are two contributions of this paper: it serves to inform and implore the blockchain and ontology communities to recognize and collaborate with each other; and it outlines a roadmap for engineering artifacts to bridge the gap between blockchain community focus on protocol-level blockchain interoperability and the ontology community focus on semantic-level interoperability.
The invention of crypto-currencies as an online means of transactions has lured many IT companies, freelancers and coders to this new form of currency. Nakamoto’s consensus protocol and the invention of the idea behind the blockchain network have given a new platform for this exchange to take place. The growth of blockchain can be accounted by the fact that in 2017, the total global market capital of blockchain based tokens was reported to have reached over $150B. This growth in online transactions and crypto-currencies has invited researchers and developers to work on increasing the efficiency and security of this system. This paper revolves around the 2 hop blockchain model to increase the efficiency and reduce the physical resource requirements of the system. This paper describes the shift from proof of stake (PoS) to proof of authority (PoA) in the 2 hop model proposed by Tuyet Duong. Proof of authority guarantees safety and faster working of the system by using identity as a proof to validate blocks in the blockchain network. This paper also discusses the shortcomings of proof of work (PoW) and proof of stake models. A sequential execution of PoW and PoA is suggested as an alternative in this paper.
The interrelatedness between computer systems, networks, code, and traditional law and legal frameworks continues to pose a number of important and vexed questions. This report will consider one area of the relationship: legal recognition of distributed ledger technology (DLT) or blockchain applications. Specifically, registers appended to blockchains (thereby creating “blockchain registries”), and “smart contracts” executed on blockchains
Shaen Corbet, Brian M. Lucey, Andrew Urquhart, Larisa Yarovaya
This paper provides a systematic review of the empirical literature based on the major topics that have been associated with the market for cryptocurrencies since their development \nas a financial asset in 2009. Despite astonishing price appreciation in recent years, cryptocurrencies have been subjected to accusations of pricing bubbles central to the trilemma \nthat exists between regulatory oversight, the potential for illicit use through its anonymity \nwithin a young under-developed exchange system, and infrastructural breaches influenced \nby the growth of cybercriminality. Each influence the perception of the role of cryptocurrencies as a credible investment asset class and legitimate of value.
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.
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.
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.
Stephen Chan, Jeffrey Chu, Yuanyuan Zhang, Saralees Nadarajah
In financial trading, cryptocurrencies like bitcoin use decentralization, traceability, and anonymity features to perform transactional activities. These digital currencies, using the emerging blockchain technologies, are forming the basis of the largest unregulated markets in the world. This creates various regulatory challenges, including the illicit purchase of drugs and weapons, money laundering, and funding terrorist activities. This chapter analyzes various legal and ethical implications, their effects, and various solutions to overcome the inherent issues that are currently faced by the policymakers and regulators. The authors present the result of an analysis of 30 recently published peer-reviewed scientific publications and suggest various mechanisms that can help in the detection and prevention of illegal activities that currently account for a substantial proportion of cryptocurrency trading. They suggest methods and applications that can also be used to identify the dark marketplaces in the future.
The evolution of money has accompanied the development of civilizations and technological innovations, leading to today’s cryptocurrencies. Cryptocurrencies have become a popular mode of payment globally because of their low cost, high-speed transferability and a decentralized tracking network that provides secure transactions and a high degree of anonymity. However, the decentralized system of cryptocurrencies has made global monetary systems more dynamic and therefore more prone to misuse as well as posing a threat to financial stability. Cryptocurrencies are also gaining popularity in Pakistan: its first cryptocurrency, named ‘Pakcoin’, was launched in 2015. The State Bank of Pakistan does not recognize any digital currency, and the Federal Board of Revenue and Federal Investigation Agency have taken legal action against local and internationally traded cryptocurrencies. This article reviews these risks and provides various regulatory solutions so that methods can be developed to improve the management of financial innovations and create a safer environment in which financial innovation can continue. Furthermore, developing countries such as Pakistan can take advantage of distributed ledger technology (used in cryptocurrencies) in applications including: microfinance to help the unbanked, in data identification systems and in land registries to help enforce property rights.
Using tick-level bitcoin data from February 2013 through April 2018, we show substantial arbitrage spreads between global bitcoin markets. Spreads follow multiple consistent patterns. Minimum and maximum prices show significant clustering. Spreads increase during the early hours of a day (according to coordinated universal time), when new exchanges enter markets, and following bitcoin heists and hacks. The full year 2017 and the first quarter of 2018 each had exploitable net arbitrage profit opportunities of at least USD380 million that smart money failed to capture. Based on long-term analyses, we also found that bitcoin market inefficiency has increased over time.