Blockchain Papers

Peder Østbye

No abstract is available for this record.

Susan Alkadri

Digitalization makes almost everything quicker, sleeker, and more efficient. Many argue cryptocurrency is the future of money and payment transfers. This paper explores how the unique nature of cryptocurrencies creates barriers to a strict application of traditional regulatory strategies. Indeed, state and federal regulators remain uncertain if and how they can regulate this cutting-edge technology. Cryptocurrency businesses face difficulty navigating the unclear regulatory landscape, and consumers frequently fall prey to misinformation. To reconcile these concerns, this paper asserts cryptocurrency functions as “currency” or “money” and should be treated as such for regulatory purposes. It also proposes each state implement a uniform cryptocurrency-specific framework following the Uniform Regulation of Virtual-Currency Business Act. Such a harmonious approach would reduce compliance costs for cryptocurrency businesses, protect consumers, and provide satisfactory state and federal oversight.

Jesús Fernández‐Villaverde

Abstract This article reviews what cryptocurrencies are, and it frames them within the context of historical monetary experiences and contemporary monetary economics. The article argues that, as pure fiduciary private money, cryptocurrencies are a bubble without a fundamental value and they will not provide, in general, optimal amounts of money or deliver price stability. Nevertheless, cryptocurrencies can play a role in improving the current means of payments and in disciplining central banks into providing better government‐run fiduciary monies.

Jesús Fernández‐Villaverde

Advocates of cryptocurrencies such as Bitcoin believe that having currency competition will help achieve the economic objective of price stability. This Issue Brief summarizes research that explores whether competition among privately issued fiat currencies can actually produce price stability. The research finds that in most cases, a system of private monies does not deliver price stability. And even when it does, it always is subject to self-fulfilling inflationary episodes, and it supplies a suboptimal amount of money. Although there is no economic reason to curb the use of cryptocurrencies at the moment, it is important to review key regulatory issues that policymakers need to consider now, before the use of cryptocurrencies becomes even more widespread.

Alistair Milne

Abstract This paper documents inconsistent terminologies and misleading analogies in current discussions of digital money and payments. It offers a more consistent framework for understanding the potential of technological innovation in providing the functions of money and payments: as media of exchange, stores of value, and units of account and the implications of cryptographic technologies underpinning cryptocurrencies for the future of money and payments. These could support efficiency gains in money and payments, but decentralization is not inherent to their application. Radical reform leading to improved economic outcomes is conceivable, but not through disruptive displacement of existing institutional arrangements.

Usman Chohan

No abstract is available for this record.

Chris Berg, Sinclair Davidson, Jason Potts

No abstract is available for this record.

Daniel Haberly, Duncan MacDonald-Korth, Michael Urban, Dariusz Wójcik

While contemporary technological disruption is increasingly conceptualized in terms of the logic and paradoxes of the digital platform economy, discussions of “FinTech” have only engaged to a limited extent with these debates—particularly from an economic geographic standpoint. Here we fill this gap by proposing an adapted Global Financial Network (GFN) framework for conceptualizing the organizational and geographic logic of the digital platform economy in finance, and applying it to examine the impact of the digital platform model on asset management. As we will show, asset management is being profoundly disrupted by what we dub digital asset management platforms—or DAMPs—which encompass services including index fund and ETF provision, robo-advising, and analytics and trading support. Like other digital platforms, DAMPs do not so much leverage technology to enhance their competitiveness within markets, as to radically restructure the market itself. Also, like other platforms, their rise has produced a winner-take-all paradox of centralization through democratization that defies predictions of technology-enabled industry decentralization. However, the logic and implications of the rise of DAMPs diverges, in other respects, from non-financial digital platforms, as finance has long possessed an informational intensity and regulatory and organizational fluidity characteristic of the digital platform economy. Consequently, the digital platform model has mostly developed endogenously in asset management through incremental innovation by major financial firms—in a process that has reinforced the position of leading incumbent asset management centers, and above all New York—rather than being introduced from the outside by upstart technology firms and clusters.

Hossein Nabilou, André Prüm

Abstract Cryptocurrencies are expected to have a significant impact on banking, finance, and monetary systems. Due to the uncertainty as to the possible future trajectories of the evolving cryptocurrency ecosystem, governments have taken a relatively hands-off approach to regulating such currencies. This approach may be justified within the theoretical information-economics framework of this paper, which draws parallels between the information economics of money and quasi-money creation within the current central banking, commercial banking, and shadow banking systems with that of the cryptocurrency ecosystem. In particular, drawing lessons from the literature on the role of information in creating ‘safe assets’, in this paper the authors find that by building on symmetric (common) knowledge as to the inner workings of the Bitcoin Blockchain—though in a different way—bitcoin possesses a degree of endogenous information insensitivity typical of safe assets. This endogenous information insensitivity could support bitcoin’s promise of maturing into a viable store of value and a niche medium of exchange. This finding should not be overlooked in the policy discussions for potential future regulatory interventions in the cryptocurrency ecosystem.

Cristina Pérez‐Solà, Sergi Delgado-Segura, Guillermo Navarro‐Arribas, Jordi Herrera‐Joancomartí

Unspent Transaction Outputs (UTXOs) are the internal mechanism used in many cryptocurrencies to represent coins. Such representation has some clear benefits, but also entails some complexities that, if not properly handled, may leave the system in an inefficient state. Specifically, inefficiencies arise when wallets (the software responsible for transferring coins between parties) do not manage UTXOs properly when performing payments. In this paper, we study three cryptocurrencies: Bitcoin, Bitcoin Cash and Litecoin, by analysing the state of their UTXO sets, that is, the status of their sets of spendable coins. These three cryptocurrencies are the top-3 UTXO-based cryptocurrencies by market capitalization. Our analysis shows that the usage of each cryptocurrency presents some differences, and led to different results. Furthermore, it also points out that the management of the transactions has not always been performed efficiently and therefore, the current state of the UTXO sets is far from ideal.

Emiliano Pagnotta

No abstract is available for this record.

John Taskinsoy

No abstract is available for this record.

Raffaella Barone, Donato Masciandaro

No abstract is available for this record.

David Procházka

The invention of blockchain technology has radically changed the perception of how monetary systems can be structured and operated. Central banks and state authorities mostly refuse to acknowledge that cryptocurrencies are money, yet the number of payment transactions using cryptocurrencies is increasing and cryptocurrencies form a non-negligible stake of wealth. As with other economic phenomena, cryptocurrencies shall be addressed in the financial statements of the entities using them, albeit without any accounting guidance in current financial reporting standards. This paper fills this void by suggesting, comparing, and assessing potential accounting models under IFRS. Based on evidence from literature review, as well as recent time-series data on the price volatility of cryptocurrencies, the paper shows that fair value accounting is the most relevant source of useful information for users of financial statements when cryptocurrencies are acquired for investment purposes. Furthermore, the paper identifies scenarios under which cryptocurrencies shall be treated as (foreign) currencies, even though financial system regulators do not consider cryptocurrencies as being money (fiat currency).

Usman W. Chohan

This discussion paper examines the recent history of cryptocurrency thefts and exchanges shutdowns, focusing specifically on the largest cryptoinstrument: Bitcoin. The examination of thefts and shutdowns are intended to draw academic attention to the accountability deficits that pervade the cryptocurrency space, and the findings of the paper suggest that a much more robust accountability, transparency, and oversight architecture must be put in place vis-a-vis cryptocurrencies.

Aleksander Berentsen, Fabian Schär

We characterize various currencies according to their control structure, focusing on cryptocurrencies such as Bitcoin and government-issued fiat money. We then argue that there is a large unmet demand for a liquid asset that allows households and firms to save outside of the private financial sector. Central banks could offer such an asset by simply allowing households and firms to open accounts with them. Finally, we conclude that a central bank will not issue cryptocurrencies in the sense of a truly decentralized and permissionless asset that allows users to remain anonymous.

Dirk G. Baur, Thomas Dimpfl

Abstract In December 2017, both the Chicago Board Options Exchange and the Chicago Mercantile Exchange introduced futures contracts on bitcoin. We investigate to what extent they provide useful information for the price discovery of bitcoin. We rely on the information share methodology of Hasbrouck (1995, J Finance , 50, pp. 1175–1199) and Gonzalo and Granger (1995, J Bus Econ Stat, 13, pp. 27–35) and find that the spot price leads the futures price. We attribute this result to the higher trading volume and the longer trading hours of the globally distributed bitcoin spot market, compared to the relatively restricted access to the US‐based futures markets.

Linda Schilling, Harald Uhlig

In a novel model of an endowment economy, we analyze coexistence and competition between traditional fiat money (Dollar) and another intrinsically worthless medium of exchange, not controlled by a central bank, such as Bitcoin. Agents can trade consumption goods in either currency or hold on to currency for speculative purposes. A central bank ensures a Dollar inflation target, while Bitcoin mining is decentralized via proof-of-work. We analyze Bitcoin price evolution and interaction between the Bitcoin price and monetary policy which targets the Dollar. We obtain a fundamental pricing equation, which in its simplest form implies that Bitcoin prices form a martingale. We derive conditions, under which Bitcoin speculation cannot happen, and the fundamental pricing equation must hold. We show that the block rewards are not a tax on Bitcoin holders: they are financed by Dollar taxes imposed by the Dollar central bank. We discuss monetary policy implications and characterize the range of equilibria.

Jakub Jedlinský, Ingeborg Němcová

Článek pomocí simulace provedené v programu Minsky zkoumá efekty předdefinované a neměnné monetární politiky podle vzoru fungování kryptoměny Bitcoin a porovnává je s výsledky současného měnového systému kreditní fiat měny. Minsky je specializovaný software pro tvorbu SFC ekonomických modelů. Pracuje ve spojitém čase. Bitcoin je na rozdíl od eura aktivní měna, která není vytvářená účetně proti dluhu a neumožňuje fiduciární emisi. Studie zkoumá komplexně ekonomiku EU se zaměřením na její měnový systém, a to za použití dat poskytovaných Eurostatem. Následně mění pravidla systému tak, aby odpovídala pravidlům protokolu Bitcoinu. Provedené simulace ukazují po čase odlišné dopady těchto systémových nastavení na rozdělení bohatství mezi jednotlivé skupiny ekonomických agentů a na stabilitu ekonomiky jako celku.

Yaşar GÜLTEKİN, Yetkin Bulut

Bitcoin, 2009 yılında ortaya çıkan ve ardından sayısız kripto para biriminin dolaşıma girmesine zemin hazırlayan yenilikçi bir dijital para birimidir. Bitcoin; sahip olduğu market kapitalizasyonu, gün geçtikçe artan işlem adeti ve hacmi, zaman içinde daha stabil hale gelen piyasa değeri ile daha fazla birey tarafından kullanılan bir varlık haline gelmiştir. Bitcoin teknik olarak, "blok zinciri" adı verilen tüm işlemleri kapsayan ve kullanıcının bilgisayarının bir işlemin geçerliliğini doğrulamasına izin veren bir altyapı kullanır. Finansal anlamda ise Bitcoin, paranın değişim aracı olma, hesap birimi olma, vadeli işlemlerde ödeme aracı olma ve servet biriktirme aracı olma gibi temel fonksiyonlarını bir şekilde yerine getiren bir varlıktır. Bitcoin aynı zamanda, paranın basılması sürecinde madencilik ( mining ), paranın bireysel ve kurumsal hesaplarda korunumunu sağlayan e-cüzdan uygulamaları, teknik altyapıya odaklanan ve/veya para biriminin değeri üzerine teknik analiz hizmeti sağlayan finansal hizmetler, paranın işlem görmesini sağlayan ve diğer para birimleri ile takasını sağlayan bir borsa işlevi gören değişim aracıları, para biriminin mal ve hizmetlerin alım satımında bir ödeme aracı olarak kullanılmasına imkan veren ödeme işlemcileri ve bu hizmetlerin birden fazlasını sunan şirketlerini içeren yeni bir ekonomi oluşturmuştur. Bu yeni ekonomi fırsatları da beraberinde getirmiş ve risk sermayesi yatırımlarını kendine çekmektedir. Bu çalışma, Bitcoin ve ona bağlı olarak oluşan alt-sektörlerin oluşturmuş olduğu yeni ekonomi hakkında bilgi vermeyi amaçlamaktadır. Bununla birlikte çalışma, bu yeni ekonominin geleceğine dair bir perspektif geliştirme amacını taşımaktadır ve bu konuda yapılacak ileriki çalışmalar için bir öncül çalışma olarak kullanılabilecektir.

Marco Sachy

This thesis will begin with a critique to the orthodox paradigm in monetary economics. Secondly, I will offer a theoretical, economic, structural and biopolitical analyses of the origin, nature and effects of money on society. After a critique to conventional paradigm of money, I will then propose a semiotic genealogy of money followed by an analysis of the Common, the Multitude together with a tentative fourfold proposal for monetary reform, i.e. a monetary dispositif for the socio-economic emancipation of the Multitude from the rule of capital to build a new paradigm of money. In particular, I will discuss the literatures on basic income and the emerging notion for bottom-up welfare named Commonfare; the Neo-Chartalist approach to money; complementary, viz. subaltern currencies; and crypto-currencies and distributed ledgers technology. In turn, I will present the two qualitative methodologies that I endorsed to design and research four sites of inquiry in Iceland, Spain, Finland and Italy: Participatory Action Research and Critical Muti-Sited Ethnography. A discussion of fieldwork findings will follow. Moreover, I will offer a comparative analysis on fieldwork findings by identifying not only commonalities and differences among the four sites, but also by eliciting the limits of methodological choices. I will conclude this thesis by arguing to refine the theoretical framework introduced in the literature review; and notwithstanding personal and objective limitations to the application of the monetary dispositif in the real world, I will advocate for further inquiry on Money for the Common Wealth of the Multitude to increase the quality and effectiveness of the debate on suggestions for monetary reform.

Daniel Broby, Greig Paul

The internet and digital transfer of money is set to fundamentally change the way financial audits are conducted. This paper critically assesses the way that such assets are currently audited when stored in distributed ledgers, transmitted via a blockchain or whose value is stored in crypto rather than sovereign currency form. In it, we identify the self-verifying nature of such financial data which negates the need for traditional audit methods. Despite the promise of such methods, we highlight the many weaknesses that still exist in the blockchain and how these presents issues for verification. We address distributed transaction and custody records and how these present auditing challenges. We suggest how auditors can use smart contracts to address these and at the same time provide arbitration and oversight. Our contribution is to propose a protocol to audit the movement of blockchain transmitted funds in order to make them more robust going forward.

Petros Kavassalis, Harald Stieber, Wolfgang Breymann, K. E. Saxton · 5 authors

Purpose: The purpose of this study is to propose a bearer service, which generates and maintains a “digital doppelgänger” for every financial contract in the form of a dynamic transaction document that is a standardised “data facility” automatically making important contract data from the transaction counterparties available to relevant authorities mandated by law to request and process such data. This would be achieved by sharing certain elements of the dynamic transaction document on a bearer service, based on a federation of distribution ledgers; such a quasi-simultaneous sharing of risk data becomes possible because the dynamic transaction document maintain a record of state in semi-real time, and this state can be verified by anybody with access to the distribution ledgers, also in semi-real time. Design/methodology/approach: In this paper, the authors propose a novel, regular technology(RegTech) cum automated legal text approach for financial transaction as well as financial risk reporting that is based on cutting-edge distributed computing and decentralised data management technologies such as distributed ledger, distributed storage, algorithmic financial contract standards, automated legal text and document engineering methods and techniques. This approach is equally inspired by the concept of the “bearer service” and its capacity to span over existing and future technological systems and substrates. Findings: The result is a transformation of supervisors’capacity to monitor risk in thefinancial systembased on data which preserve informational content offinancial instruments at the most granular level, incombination with a mathematically robust time stamping approach using blockchain technology. Practical implications: The RegTech approach has the potential to contain operational risk linked toinadequate handling of risk data and to rein in compliance cost of supervisory reporting.

Iris M. Barsan

Initial Coin Offerings (ICO) – a term intentionally mirroring Initial Public Offerings (IPO) – seem to be the new hype of the virtual currency community leading to an all-time high of the bitcoin of almost 5,000$ this year1. There is indeed a frenzy developing around ICOs reaching a record high of $1.7 billion in 20172 sparking an increasing interest from regulators on the American and Asian continents. Thus, ICOs have become a venture capital-raising tool for start-ups developing projects and applications on the blockchain and trying to escape the constraints of regulation. Regulation however seems to chatch up with ICOs. This paper analyzes ICOs from a legal perspective with a particular focus on European and French law.