Blockchain Papers

Nurettin Menteş, İlyas Yolbaş, Mahmut Bulut

Aim: Cryptocurrency trading is similar to problematic gambling behavior, with its high-risk factors and its methods of use. In this sense, it can become addictive. The aim of this study is to develop a valid and reliable scale to measure Problematic Cryptocurrency Trading among individuals who trade cryptocurrency. Method: ) goodness of fit criteria were used. The Amos 23 software package was used for the data analysis. Results: As a result of the exploratory factor analysis, a two-factor structure was obtained. For the total scores of the scale, Cronbach's alpha reliability value was found to be 0.913, and for the sub-factors, Cronbach's alpha values were found to be 0.897 and 0.866. The factor loadings of items varied between 0.786 and 0.597 for the first sub-factor and between 0.869 and 0.683 for the second sub-factor. The confirmatory factor analysis confirmed the two-factor structure of the scale, and the goodness of fit criteria were found to be at acceptable levels. Conclusion: It was determined that the Problematic Cryptocurrency Trading Scale is a valid and reliable scale.

Mark Utting, Liam Kent

We describe the verification of an existing smart contract for a simple casino application, using the Whiley specification and programming language, with a fully automated verification engine based on Boogie and Z3. After finding and fixing several specification and code issues in the smart contract, we are able to verify all the operations of the smart contract.

Paul Delfabbro, Daniel L. King, Jennifer N. Williams

BACKGROUND AND AIMS: Crypto-currency trading is a rapidly growing form of behaviour characterised by investing in highly volatile digital assets based largely on blockchain technology. In this paper, we review the particular structural characteristics of this activity and its potential to give rise to excessive or harmful behaviour including over-spending and compulsive checking. We note that there are some similarities between online sports betting and day trading, but also several important differences. These include the continuous 24-hour availability of trading, the global nature of the market, and the strong role of social media, social influence and non-balance sheet related events as determinants of price movements. METHODS: We review the specific psychological mechanisms that we propose to be particular risk factors for excessive crypto trading, including: over-estimations of the role of knowledge or skill, the fear of missing out (FOMO), preoccupation, and anticipated regret. The paper examines potential protective and educational strategies that might be used to prevent harm to inexperienced investors when this new activity expands to attract a greater percentage of retail or community investors. DISCUSSION AND CONCLUSIONS: The paper suggests the need for more specific research into the psychological effects of regular trading, individual differences and the nature of decision-making that protects people from harm, while allowing them to benefit from developments in blockchain technology and crypto-currency.

Harun Olcay Sonkurt, Ali Ercan Altınöz

Investment behaviour and gambling overlap from time to time. It is stated that there is a spectrum between gambling and investment behaviour, and there are “speculative” investment tools in the middle of the spectrum. Considering that it presents a higher risk because of its high volatility compared to traditional investment instruments, trading cryptocurrencies can become pathological and gambling-like. This study aims to investigate the pathological trading behaviour and frequency among cryptocurrency investors, to investigate additional gambling disorders, and to investigate the relationship between cryptocurrency investment behaviour and impulsivity. An online questionnaire was created to investigate these issues. In the questionnaire, the Pathological Trading Scale, the South Oaks Gambling Screen Test and the Barratt Impulsivity Scale were all used. A total of three hundred persons were evaluated. We found that total pathological traders were 48.7% of all traders, impulsivity in 18–25 age group was higher, high-frequency traders were more pathological, and their impulsivity was higher; also margin traders and day traders show more pathological behaviour. It seems that an important part of cryptocurrency traders may be pathological, and certain of them may have cryptocurrency addiction, which can be evaluated as a subtype of gambling disorder.Résumé Le comportement de l’investisseur et celui du joueur se chevauchent de temps à autre. On dit qu’il existe un spectre entre ces deux comportements, au milieu duquel se trouvent des outils d’investissement « spéculatif ». Compte tenu de leur risque plus élevé dû à leur plus grande volatilité par rapport aux instruments d’investissement traditionnels, les échanges de cryptomonnaies peuvent devenir pathologiques et s’apparenter aux jeux de hasard. Cette étude vise à analyser le comportement des investisseurs de cryptomonnaies et la fréquence de leurs opérations afin d’examiner d’autres troubles liés à la pratique des jeux de hasard et la relation entre le comportement des investisseurs de cryptomonnaies et l’impulsivité. Un questionnaire en ligne a été créé à cette fin et la Pathological Trading Scale, le South Oaks Gambling Screen Test et la Barratt Impulsivity Scale y étaient utilisés. En tout, 300 personnes ont été évaluées. Nous avons constaté que les joueurs pathologiques représentaient 48,7% de tous les spéculateurs, que l’impulsivité dans le groupe des personnes de 18 à 25 ans était plus élevée, et que les spéculateurs qui effectuaient des transactions plus souvent étaient plus pathologiques et faisaient preuve d’une plus grande impulsivité; de plus, les spéculateurs sur marge et les spéculateurs sur séance affichaient un comportement plus pathologique. Il semble qu’une proportion importante des spéculateurs de cryptomonnaies peuvent être pathologiques, et que certains d’entre eux peuvent être dépendants à l’égard des cryptomonnaies, ce qui peut être évalué comme un sous-type de jeu compulsif.

Matthias Scharnowski, Stefan Scharnowski, Stefan Scharnowski, Lukas Zimmermann

No abstract is available for this record.

Craig Wright

No abstract is available for this record.

Atte Oksanen, Eerik Mantere, Ilkka Vuorinen, Iina Savolainen

OBJECTIVES: Online platforms enable real-time trading activities that are similar to those of gambling. This study aimed to investigate the associations of traditional investing, real-time stock trading, and cryptocurrency trading with excessive behavior and mental health problems. STUDY DESIGN: This was a cross-sectional population-based survey. METHODS: The participants were Finnish people aged 18-75 years (N = 1530, 50.33% male). Survey asked about monthly regular investing, real-time stock-trading platform use, and cryptocurrency trading. The study had measures for excessive behavior: gambling (Problem Gambling Severity Index), gaming (Internet Gaming Disorder Test), internet use (Compulsive Internet Use Scale), and alcohol use (Alcohol Use Disorders Identification Test). Psychological distress (Mental Health Inventory), perceived stress (Perceived Stress Scale), COVID-19 anxiety, and perceived loneliness were also measured. Background factors included sociodemographic variables, instant loan taking, and involvement in social media identity bubbles (Identity Bubble Reinforcement Scale). Multivariate analyses were conducted with regression analysis. RESULTS: Within the sample, 22.29% were categorized into monthly regular investors only, 3.01% were investors using real-time stock-trading platforms, and 3.59% were cryptomarket traders. Real-time stock-trading platform use and cryptocurrency trading were associated with younger age and male gender. Cryptomarket traders were more likely to have an immigrant background and have taken instant loans. Both real-time stock-trading platform use and cryptomarket trading were associated with higher excessive behavior. Cryptomarket traders especially reported higher excessive gambling, gaming, and internet use than others. Cryptomarket traders reported also higher psychological distress, perceived stress, and loneliness. CONCLUSIONS: Regular investing is not a risk factor for excessive behavior. However, rapid online trading platforms and applications were significantly more commonly used by participants reporting excessive behavior and mental health problems. The strong association between cryptomarket trading and excessive behavior in particular underlines the need to acknowledge the potential risks related to real-time trading platforms.

Hee Jin Kim, Ji Sun Hong, Hyunchan Hwang, Sun Mi Kim · 5 authors

Bitcoin has unique characteristics that have inspired people to invest in it as well as distinct drawbacks. With a rapid increase in Bitcoin prices in the short term, more investors enthusiastically began investing in it, raising concerns about a speculative bubble. This study investigated the multiple factors involved in the Bitcoin craze despite concerns about its shortcomings. In what concerns to personality traits and psychological states, online use patterns, and investment patterns, we first hypothesized that Bitcoin investors would show differences in multiple factors when compared to share investors. Based on our assumptions about these differences, we secondly hypothesized that investors’ personality, psychological states, and investment patterns could predict whether they would invest in Bitcoin or shares. In total, 307 respondents completed the research protocol and were sorted into Bitcoin investors (n = 101), share investors (n = 102), and non-investors (n = 104). A self-report questionnaire on demographic data, online use patterns, investment patterns as well as the Fear of Missing Out (FoMO) scale, Temperament and Character Inventory-Revised-Short (TCI-RS), Mood Disorder Questionnaire (MDQ), trait anxiety part of the State-Trait Anxiety Inventory (STAI-T), and the Korean version of the Canadian Problem Gambling Index (K-CPGI) were administered. The results of this study indicated that Bitcoin investments can be attributed to the interaction of multiple factors, among which personality, psychological states, and investment patterns are particularly important. Specifically, the investment pattern is the strongest predictive factor for Bitcoin investment. Bitcoin investors were distinct with regard to higher novelty seeking, higher gambling tendencies, and unique investment patterns. Thus, personality, psychological states, and investment patterns could explain the substantial investments in Bitcoin.

Jonathan Meng, Feng Fu

The statistical concept of gambler’s ruin suggests that gambling has a large amount of risk. Nevertheless, gambling at casinos and gambling on the Internet are both hugely popular activities. In recent years, both prospect theory and laboratory-controlled experiments have been used to improve our understanding of risk attitudes associated with gambling. Despite theoretical progress, collecting real-life gambling data, which is essential to validate predictions and experimental findings, remains a challenge. To address this issue, we collect publicly available betting data from a DApp (decentralized application) on the Ethereum blockchain, which instantly publishes the outcome of every single bet (consisting of each bet’s timestamp, wager, probability of winning, userID and profit). This online casino is a simple dice game that allows gamblers to tune their own winning probabilities. Thus the dataset is well suited for studying gambling strategies and the complex dynamic of risk attitudes involved in betting decisions. We analyse the dataset through the lens of current probability-theoretic models and discover empirical examples of gambling systems. Our results shed light on understanding the role of risk preferences in human financial behaviour and decision-makings beyond gambling.

Avigail Gurin-Schleifer, Ouri Poupko, Ehud Shapiro, Nimrod Talmon

We envision a self-sovereign, grassroots, digital community that grows in a bottom up, decentralized manner, and aim to integrate for it the following previously-proposed building blocks: a mechanism that accepts members into the community while keeping a bounded number of sybils; digital social contracts that define the possible interactions of a community bounded by such a contract; a design for a fault-tolerant distributed ledger implementation of digital social contracts; and a digital social contract for the egalitarian and just minting of digital currency, which also offers a form of universal basic income. We augment these building blocks with a mechanism that allows the community to maintain sovereignty over the economy, by making it sybil-resilient. To do so, we assume that the community has the means for exposing sybils and we extend the basic egalitarian currency digital social contract with means to balance the economy so that money minted by sybils is eventually retrieved and burned. This leads---asymptotically---to distributive justice among the genuine agents, with the amount of money minted being equal to the number of genuine agents, multiplied by the time each agent was a member of the community. We then argue that this approach constitutes a mechanism that deters the creation of sybils and incentivizes sybil hunting.

Oliver James Scholten, David Zendle, James Alfred Walker

Decentralised gambling applications are a new way for individuals to engage in online gambling. Decentralised gambling applications are distinguished from traditional online casinos in that individuals use cryptocurrency as a stake. Furthermore, rather than being stored on a traditional server, decentralised gambling applications are stored on a cryptocurrency’s blockchain.Previous work in the player behaviour tracking literature has examined the spending profiles of gamblers on traditional online casinos. However, parallel work has not taken place in the decentralised gambling domain. The profile of gamblers on decentralised gambling applications are therefore not known.This paper explores 2,232,741 transactions from 24,234 unique addresses to three such applications operating atop the Ethereum cryptocurrency network over 583 days. We present spending profiles across these applications, providing the first detailed summary of spending behaviours in this technologically advanced domain. We find that the typical user spends approximately \$110 equivalent across a median of 6 bets in a single day, although heavily involved bettors spend approximately \$100,000 equivalent over a median of 644 bets across 35 days. Our findings suggest that the use of decentralised gambling applications typically involves lower and less frequent expenditures than other online casinos, but that the most heavily involved players in this new domain spend substantially more. Our findings also demonstrate the use of these applications as a research platform, specifically for large scale longitudinal in-vivo data analysis.

Sinyong Choi, Kyung-Shick Choi, Yesim Sungu-Eryilmaz, Heekyung Park

The Darknet and Bitcoins have been widely utilized by those who wish to anonymously perform illegal activities in cyberspace. Restricted in many countries, gambling websites utilize Bitcoin payments that allow users to freely engage in illegal gambling activities with the absence of a formal capable guardian. Despite the urgency and limited knowledge available to law enforcement regarding this issue, few empirical studies have focused on illegal gambling websites. The current study attempts to examine the characteristics and operations of online gambling websites on both the Darknet and Surface Web, which allow Bitcoin payments. The findings suggest that both websites on the Surface Web and Darknet have similar and distinctive features that attract and encourage online users to engage in extensive illegal gambling activities and potentially other illegal activities as well. The study concludes with policy recommendations to remedy the issue of online gambling.

Klaus Grobys, Juha-Pekka Junttila

This is the first paper that explores lottery-like demand in cryptocurrency markets. Since recent research provides evidence that cryptocurrency returns appear to be short-memory processes, we modify Bali, Cakici and Whitelaw’s (2011) and Bali, Brown, Murray, and Tang’s (2017) MAX measure and employ a weekly forecast horizon and daily log-returns from the previous week to calculate the metric for our portfolio sorts. From an econometric point of view, this study proposes statistical tests that are robust to unknown dynamic dependency structures in the cryptocurrency data. Our results show that average raw and risk-adjusted return differences between cryptocurrencies in the lowest and highest MAX quintiles exceed 1.50% per week. These results are robust after controlling for Bitcoin risk or potential microstructure effects. Our findings are important also from a theoretical point of view because they suggest that parallel to stock markets, similar behavioral mechanisms of underlying investor behavior are present also in new virtual currency markets.

Yongrae Jo, Chanik Park

We propose BlockLot, a blockchain based verifiable lottery. BlockLot provides transparent, immutable, fair, and verifiable lottery services enhanced by recent blockchain technologies such as append-only (replicated) distributed ledger and smart contract. In addition, BlockLot allows all participants to perform various verification to ensure that the system is actually working as expected. We implement BlockLot services which includes open, query, subscribe, and draw in smart contracts. We also develop webbased user interface for using the lottery services provided by BlockLot. The web interface allows the user to verify the lottery as well.

Oliver James Scholten, Nathan Hughes, Sebastian Deterding, Anders Drachen · 6 authors

Ethereum crypto-games are a booming and relatively unexplored area of the games industry. While there is no consensus definition yet, 'crypto-games' commonly denotes games that store tokens, e.g. in-game items, on a distributed ledger atop a cryptocurrency network. This enables the trading of game items for cryptocurrency, which can then be exchanged for regular currency. Together with their chance-based mechanics, this makes crypto-games part of the recent convergence of digital gaming and gambling. In a first effort to scope the field, this paper surveys popular crypto-games, which use the Ethereum cryptocurrency, to tease out characteristic technical properties and gameplay. It then compares the games' features with criteria found in current legal and psychological definitions of gambling. We find that the popular crypto-games selected meet a combined legal and psychological definition of gambling, and conclude with ramifications for future research.

Oliver James Scholten, David Zendle, James Alfred Walker

This paper describes the York Combined Transaction Set (YCTS), which offers a single consolidated list of publicly available gambling related transactions derived from the Ethereum blockchain. This data includes over 1.4M individual transactions across 17,000+ unique addresses, which represent spending on decentralised gambling smart contracts. These contracts, and corresponding applications, have been selected based on their popularity as presented by an officially recognised ranking service, and have transacted over £240M by naive estimation over the past 10 months. Given the historical opacity of data driven gambling research, our contribution is to identify, and make available in a simple form, the transaction data found on the Ethereum blockchain such that existing questions surrounding player spending can be explored, and differences between decentralised and traditional forms of gambling can be identified.

Leonardo José Mataruna-Dos-Santos, Vanissa Wanick

Games have their own economic models. Today, players can not only collect digital currencies, but they can also use real currencies to buy virtual goods. Business models in games such as freemium and in-app purchases, for example, sustain this structure. Within this context, there is also the expansion of models outside the game realm like eSports, which happens in the form of tournaments. With this, there is constant exchange of value that emerges from games, which could also include the use of cryptocurrencies. In this chapter, we give an overview of the current state of the art of economic models within games and eSports. The current chapter aims to situate and analyse the application of these business models derived from games, e-sport and the future of ludic economies.

Thomas Conlon, Richard McGee

No abstract is available for this record.

Cyril Grunspan, Ricardo Pérez-Marco

We review the so called selfish mining strategy in the Bitcoin network and compare its profitability to honest mining.We build a rigorous profitability model for repetition games. The time analysis of the attack has been ignored in the previous literature based on a Markov model,but is critical. Using martingale's techniques and Doob Stopping Time Theorem we compute the expected duration of attack cycles. We discover a remarkable property of the bitcoin network: no strategy is more profitable than the honest strategy before a difficulty adjustment. So selfish mining can only become profitable afterwards, thus it is an attack on the difficulty adjustment algorithm. We propose an improvement of Bitcoin protocol making it immune to selfish mining attacks. We also study miner's attraction to selfish mining pools. We calculate the expected duration time before profit for the selfish miner, a computation that is out of reach by the previous Markov models.

Nicolas Werle, Liina Lehtonen

Since its initial inception, cryptocurrency has hit the world with both intrigue and skepticism. It was acting as an alternative form of currency that people could use that required no regulative authority to back it. As such, people had the option to make purchases in anonymous manners, leading to what most would consider unethical behaviours, and ultimately resulted in cryptocurrency gaining a poor reputation. However, specific trends in society have helped cryptocurrency growth to continue. A societal loss of trust in the traditional banking system and the positive perception towards the blockchain technology, which is a peer-to-peer system that cryptocurrencies, such as Bitcoin, operate on are two such trends. Furthermore, recent years have witnessed exponential increases in the prices of cryptocurrencies, such as Bitcoin. This has led to widespread stories of people getting rich through cryptocurrency ownership, having been “wise-enough” to buy in on the cryptocurrency trend early enough to reap in the rewards of such as decision. And as a result, leading to more people wanting to be the next big success story and buying in on the cryptocurrency trend. This growing trend has also gained the attention of several multi-national companies, such as Expedia, Subway and Microsoft, who have begun accepting cryptocurrency as a form of payment. Even though specific cases have seen this strategy implemented successfully, the volatility of cryptocurrency still poses a risk that has hindered the ability of cryptocurrency to become a widespread payment option. Given the current trend surrounding cryptocurrency, this thesis serves the purpose is to investigate another alternative option for cryptocurrency use. That option being the potential for cryptocurrency to be used as an alternative payment option in the online gambling industry. Where it has been used as a payment option in other areas, it would be interesting to identify whether there is potential for the cryptocurrency to be adopted and used in this particular industry as well. In order to investigate this phenomenon from both the consumer and industry point-of-views, this thesis used a mixed-methods study, which consisted of a qualitative study and quantitative study. Our qualitative study focused on the industry side of the phenomena. To carry it out, we conducted a series of semi-structured interviews with managers of a large online gambling company in order to gain deeper knowledge on their perspectives regarding their perceptions towards how cryptocurrency adoption would affect the online gambling industry. Based on the information gained from the interviews, specific themes were identified and further analyzed through a thematic analysis. Those themes included blockchain in online gambling, holding cryptocurrency, regulation and the reputation of cryptocurrency. Our results indicated that managers did not believe the industry was ready to adopt cryptocurrency due to specific regulatory factors, but that it had future potential, mainly regarding its association to blockchain. Our quantitative study focused on interpreting the perceptions of online gamblers regarding cryptocurrency use in online gambling. Specifically, identifying what would motivate them to use cryptocurrency in online gambling and if they were willing to accept it as a payment option. Based on the results obtained through a survey we distributed, we used linear regression to identify if online gamblers were willing to accept cryptocurrency. The resulting outcome was a moderate level of rejection towards cryptocurrency acceptance. The linear regression model also allowed us to interpret which predictor variables held the greatest level of importance towards predicting cryptocurrency acceptance. Those specific variables included cryptocurrency anonymity, usability, ownership, and belief in the future of cryptocurrency. When comparing the results from both studies through triangulation, we were able to conclude that both consumers and the industry were not ready to fully accept cryptocurrency usage in online gambling. However, both sides indicated positive outlooks towards its future potential as a payment method.

Kim Kaivanto, Daniel Prince

Fintech business models based on distributed ledgers -- and their smart-contract variants in particular -- offer the prospect of democratizing access to faster, anywhere-accessible, lower cost, reliable-and-secure high-quality financial services. In addition to holding great, economically transformative promise, these business models pose new, little-studied risks and transaction costs. However, these risks and transaction costs are not evident during the demonstration and testing phases of development, when adopters and users are drawn from the community of developers themselves, as well as from among non-programmer fintech evangelists. Hence, when the new risks and transaction costs become manifest -- as the fintech business models are rolled out across the wider economy -- the consequences may also appear to be new and surprising. The present study represents an effort to get ahead of these developments by delineating risks and transaction costs inherent in distributed-ledger- and smart-contracts-based fintech business models. The analysis focuses on code risk and moral-hazard risk, as well as on mixed-economy risks and the unintended consequences of replicating bricks-and-mortar-generation contract forms within the ultra-low transaction-cost environment of fintech.

Piotr J. Piasecki

This paper discusses the game theory behind self-contained smart contract provably fair casinos, how they can be gamed by attackers with a large amount of money and computing power, as well as what are the necessary conditions to assure the system cannot be taken advantage of under various configurations.

Andrew Miller, Iddo Bentov

We present cryptocurrency-based lottery protocols that do not require any collateral from the players. Previous protocols for this task required a security deposit that is $O(N^2)$ times larger than the bet amount, where $N$ is the number of players. Our protocols are based on a tournament bracket construction, and require only $O(\log N)$ rounds. Our lottery protocols thus represent a significant improvement, both because they allow players with little money to participate, and because of the time value of money. The Ethereum-based implementation of our lottery is highly efficient. The Bitcoin implementation requires an $O(2^N)$ off-chain setup phase, which demonstrates that the expressive power of the scripting language can have important implications. We also describe a minimal modification to the Bitcoin protocol that would eliminate the exponential blowup.