Bitcoin is a cryptocurrency attracting a lot of interest both from the general public and researchers. There is an ongoing debate on the question of users' anonymity: while the Bitcoin protocol has been designed to ensure that the activity of individual users could not be tracked, some methods have been proposed to partially bypass this limitation. In this article, we show how the Bitcoin transaction network can be studied using complex networks analysis techniques, and in particular how community detection can be efficiently used to re-identify multiple addresses belonging to a same user.
In the last several years, a discreet $100 billion financial system has emerged in the form of cryptocurrency markets. The extraordinary returns generated by cryptocurrencies such as Bitcoin has led to a frenzy of investment activity and interest from traditional investors. This interest has, in turn, spawned dozens of cryptocurrency-focused hedge funds to service this growing demand. Moreover, although this trading activity is highly speculative, it is subject to almost no regulatory oversight. Regulators at the IRS, CFTC, and most notably the SEC have only recently established a regulatory framework to govern cryptocurrency activity. Notably, that framework is a functional one, classifying each cryptocurrency either as a security or commodity based on its particular uses. However, most of the established and highly traded cryptocurrencies, such as Bitcoin and Ether, qualify as commodities rather than securities, and thus they are not subject to securities laws. Hedge funds that trade in these cryptocurrency commodities, or âcrypto funds,â fall almost entirely outside the extensive securities regulations that would apply to traditional hedge funds.
This article argues that these crypto funds constitute a new type of financial institution that is not, and cannot be, governed by traditional hedge fund regulation because doing so would disregard the unique operational and technological features of cryptocurrencies. Existing rules and best practices for hedge funds in key areas â such as investor asset custodianship, capital formation, and distribution of returns â are frequently nonsensical or even counterproductive in the context of crypto funds. Without regulatory guidance, crypto funds will need â and have the opportunity â to develop a set of best practices tailored to cryptocurrency trading. In doing so, crypto funds also present a significant opportunity for much-needed financial innovation and problem-solving in the cryptocurrency markets. However, crypto funds also present a far greater risk of fraud or investor losses than a traditional hedge fund, as cryptocurrency markets lack the liquidity, stability, and regulatory certainty of traditional securities markets.
This article concludes with concrete recommendations regarding several of the most salient, cryptocurrency-specific concerns currently facing crypto funds, including (i) the types of cryptocurrencies that should be traded, (ii) the types of potential investors who can provide funding, (iii) internal procedures for safeguarding client assets, (iv) optimizing tax treatment for the fund and its investors, and (v) cryptocurrency-related disclosures to investors. By encouraging the development of uniform best practices across the crypto fund industry, this article provides a starting point for regulators to adopt policies that can address investor protection concerns without strangling the innovation of the emerging cryptocurrency markets.
A recente expansĂŁo global do uso de moedas virtuais passou a ser objeto de debate nos trĂȘs Ășltimos FĂłruns das NaçÔes Unidas sobre Governança da Internet (IGF), de 2014, 2015 e 2016. A capitalização e a rĂĄpida expansĂŁo geogrĂĄfica do uso de criptomoedas chamaram a atenção de pesquisadores e mobilizaram representantes da sociedade civil e empresĂĄrios em vĂĄrias partes do mundo, que demonstraram interesse no desenvolvimento de inovaçÔes impulsionadas pela expansĂŁo do uso globalizado desse novo tipo de atividade econĂŽmica. Os principais objetivos deste trabalho sĂŁo: analisar como a recente crise financeira do capitalismo influiu no surgimento e na expansĂŁo geogrĂĄfica do uso de criptomoedas; refletir sobre serviços e atividades que usam criptomoedas, bitcoin e blockchain; e debater os desafios colocados pelo crescimento desse uso.
John Dixon, Stefano Penazzi, Amar Ramudhin, Ken Hawick
Blockchain technologies have been shown to be able to successfully underpin secure online financial services (e.g. Bitcoin), and have since developed a reputation as a fix-all solution for transparency, accountability and security issues in storing data and transactions in both public and private settings. However, cross-business consortiums with obvious use-cases, such as those evident in the logistics supply chain, are not yet regularly adopting a common blockchain for transaction storage and accountability because of a lack of understanding and trust. Furthermore, because blockchains are commonly designed to send raw data, visible to every connected node, the potential for competitors or unauthorized parties to analyze the common ledger and discover business secrets is a clear cause for apprehension. In this paper, we analyze the problems facing the uptake of blockchain technologies in supply chain management, inspect a relevant supply chain scenario with reference to the place of the blockchain within real-world logistics data management, and describe a technical and architectural approach which allows scalable, private sharing of business data whilst retaining the accountability and integrity of the blockchain.
Bitcoins are bought and sold with most major currencies, and the resulting prices are âexchange ratesâ of currencies per Bitcoin. The price of Bitcoins in national currencies have been quite volatile over the brief period of Bitcoinâs existence. Among national currencies, the possibility of triangular arbitrage leads to near equality of bilateral exchange rates and exchange rates obtained via triangular trade. We explore the relationship between a bilateral exchange rate of two major national currencies and the exchange rate that can be obtained via triangular trade through Bitcoins. Features of the Bitcoin exchanges make it difficult to meet conditions necessary for strict (risk-free) arbitrage, but market pressures from the threat of arbitrage constrain the national currency prices of Bitcoins to adjust toward the bilateral foreign exchange rate obtained in the traditional foreign exchange market. In this paper, we compare the Bitcoin implied exchange rate between the US Dollar and the Chinese Renminbi to the market US Dollar/Renminbi exchange rate, and show that the Bitcoin implied rate adjusts toward the FOREX market rate due to market pressures from the threat of triangular arbitrage. One implication is that the bilateral rate and the triangular trade rate obtained from trade in Bitcoins are cointegrated, and we study the adjustment process when these exchange rates are misaligned.
The most fundamental purpose of blockchain technology is to enable\npersistent, consistent, distributed storage of information. Increasingly common\nare authentication systems that leverage this property to allow users to carry\ntheir personal data on a device while a hash of this data is signed by a\ntrusted authority and then put on a blockchain to be compared against. For\ninstance, in 2015, MIT introduced a schema for the publication of their\nacademic certificates based on this principle. In this work, we propose a way\nfor users to obtain assured identities based on face-to-face proofing that can\nthen be validated against a record on a blockchain. Moreover, in order to\nprovide anonymity, instead of storing a hash, we make use of a scheme of Brands\nto store a commitment against which one can perform zero-knowledge proofs of\nidentity. We also enforce the confidentiality of the underlying data by letting\nusers control a secret of their own. We show how our schema can be implemented\non Bitcoin's blockchain and how to save bandwidth by grouping commitments using\nMerkle trees to minimize the number of Bitcoin transactions that need to be\nsent. Finally, we describe a system in which users can gain access to services\nthanks to the identity records of our proposal.\n
Bitcoinsâ technology brings a new level of innovation to business and communication across the world. However, the advantages of a virtual currency payment system face the threat from criminal activities occurring over a pseudonymous network where there is virtually no current regulation to cover illegal transactions. The current situation in Georgia is as follows: the second Bitcoinâs processing datacenter has opened in Georgia. While the virtual money is new even in developed countries, more unusual it is for Georgia, where local economists are more skeptical toward cryptocurrency. Therefore, they believe that electronic money is not controlled by any central bank that gives a lot of opportunities for illegal transactions. According to the Georgian experts, bitcoin is a very risky currency that can be used for money laundering, as it is completely uncontrolled. However, the Georgian central bank system claims that bitcoins are not dangerous, and the lack of awareness gives rise to talk about money laundering. The biggest challenge seems to be regulation of Bitcoin without hindering the potential for growth. While there is usually certainly a chance that Bitcoin could fail or be pushed out of existence by a more innovative technology, policymakers must be careful not to hinder a technology that could change the way global economy functions.
In recent years, hype surrounding the proliferation of blockchain-based technology has been significant. Apart from the creation of bitcoin and other cryptocurrencies, it has been difficult to determine what practical utility might lie in the adoption of blockchain, mainly because there are so few in existence at present. Even so, interest in the technology has increased tremendously. This paper is a primer for software quality professionals. It briefly describes the history of blockchain technology, attempts to define and disambiguate terminology, fosters a general understanding of how blockchain works, and discusses how and why software quality professionals might want to invest time and energy in learning about, implementing, or using blockchain-based technologies in their own organizations -- or alternatively, improving the quality of blockchain technology itself.
In 2008, following the outbreak of the global financial crisis, a new trading system emerged that was made possible by cryptographically-produced currencies. Among them, the most popular digital cryp-tocurrency is undoubtedly the Bitcoin. This alternative way of trading quickly captured the interest of both businesses and consumers. Combined with a general lack of confidence towards financial institu-tions, central governments, and the effect of capital controls imposed across several countries, Bitcoins begun being used extensively for funds transfer across borders and general payments. How-ever, it is unclear whether the use of Bitcoins is extensive enough so as to lead to complete or partial disintermediation of monetary transactions, and whether users understand how the technology works and what are the inherit risks of this alternative payment mechanism. This paper addresses these ques-tions through a survey-based study, conducted within the Greek context, where capital controls are still active and awareness regarding cryptocurrencies seems to be on the rise. Our findings show that despite that end-users of Bitcoin are somewhat concerned with regards to security issues, they are nevertheless interested in its use for identifying new business opportunities and bypassing residency-based measures, such as capital controls.
Bitcoin is a decentralized digital currency, which works peer-to-peer without a centralized repository, and is accepted as a form of payment all around the world. The âpublic ledgerâ, which registers transactions, is known as the block chain. A conventional ledger records bills and notes which are used by an organization, but in the case of Bitcoin these are simply data âentriesâ in the Blockchain sequence. Business Intelligence (BI), according to Investpedia, refers to the procedural and technical infrastructure that collect, store and analyses the data produced by a field of activities or by an individual company. BI is meant to take in all the data being generated by a business and present easy to digest performance measures and trends that will inform management decisions. The paper shows the BI steps and procedures that will help a Bitcoin user, owner or broker make the best decision possible in order to maximize their profits and financial security.
Abstract This paper argues that many soâcalled digital technologies can be construed as notational technologies, explored through the example of Monegraph, an art and digital asset management platform built on top of the blockchain system originally developed for the cryptocurrency bitcoin. As the paper characterizes it, a notational technology is the performance of syntactic notation within a field of reference, a technologized version of what Nelson Goodman called a ânotational system.â Notational technologies produce abstracted entities through positive and reliable, or constitutive, tests of socially acceptable meaning. Accordingly, this account deviates from typical narratives of blockchains (usually characterized as Turing or state machines), instead demonstrating that blockchain technologies are effective at managing digital assets because they produce abstracted identities through the performance of notation. Since notational technologies rely on configurations of socially acceptable meaning, this paper also provides a philosophical account of how blockchain technologies are socially embedded.
Open access
Blockchain Technology Applications and Security
Neuroethics, Human Enhancement, Biomedical Innovations
Cryptocurrency and blockchain technologies are recently gaining wide adoption since the introduction of Bitcoin, being distributed, authority-free, and secure. Proof of Work (PoW) is at the heart of blockchain's security, asset generation, and maintenance. Although simple and secure, a hash-based PoW like Bitcoin's puzzle is often referred to as âuselessâ, and the used intensive computations are considered âwasteâ of energy. A myriad of Proof of âsomethingâ alternatives have been proposed to mitigate energy consumption; however, they either introduced new security threats and limitations, or the âworkâ remained far from being really âusefulâ. In this work, we introduce Proof of eXercise (PoX): a sustainable alternative to PoW where an eXercise is a real world matrix-based scientific computation problem. We provide a novel study of the properties of Bitcoin's PoW, the challenges of a more ârationalâ solution as PoX, and we suggest a comprehensive approach for PoX.
Oct 1, 2017·2017 4th International Scientific-Practical Conference Problems of Infocommunications. Science and Technology (PIC S&T), Kharkov, Ukraine, 2017, pp. 456-459
In the work, a comparative correlation and fractal analysis of time series of Bitcoin crypto currency rate and community activities in social networks associated with Bitcoin was conducted. A significant correlation between the Bitcoin rate and the community activities was detected. Time series fractal analysis indicated the presence of self-similar and multifractal properties. The results of researches showed that the series having a strong correlation dependence have a similar multifractal structure.
Petra Isenberg, Christoph Kinkeldey, JeanâDaniel Fekete
We contribute a visual exploration system for analyzing the behavior of individual entities exchanging Bitcoins. Bitcoin is a cryptocurrency, popular for allowing pseudonymous financial transactions. The Bitcoin blockchain is the public ledger of the Bitcoin system holding data on millions of individual transactions between pseudonymous addresses. These addresses belong to individual entities such as people, services, or enterprises. Understanding how the Bitcoin system is used, however, is difficult because it is unclear which addresses belong to the same entities. Our tool addresses this
problem by clustering addresses and displaying transaction detail for individual entities
Abstract This paper argues that the practical implementation of blockchain technology can be considered an institution of property similar to legal institutions. Invoking Penner's theory of property and Hegel's system of property rights, and using the example of bitcoin, it is possible to demonstrate that blockchain effectively implements all necessary and sufficient criteria for property without reliance on legal means. Blockchains eliminate the need for a thirdâparty authority to enforce exclusion rights, and provide a system of universal access to knowledge and discoverability about the property rights of all participants and how the system functions. The implications of these findings are that traditional property relations in society could be replaced by or supplemented with blockchain models, and implemented in new domains.
The 2008 financial crisis had scattered incredulity around the globe regarding traditional financial systems, which made investors and non-financial customers turn to other alternative such as digital banking systems. The existence and development of blockchain technology make cryptocurrency in recent years believably become a complete alternative to traditional ones. Bitcoin is the world's first peer-to-peer and decentralized digital cash system initiated by Nakamoto [1]. Though being the most prominent cryptocurrency, Bitcoin has not been a legal trading currency in various countries. Its exchange rate has appeared to be an exceptionally high-risk portfolio with extreme volatility, which requires a more detailed evaluation before making any decision. This paper utilizes knowledge of statistics for financial time series and machine learning to (i) fit the parametric distribution and (ii) model and forecast the volatility of Bitcoin returns, and (iii) analyze its correlation to other financial market indicators. The fitted parametric time series model significantly outperforms other standard models in explaining the stylized facts and statistical variances in the behavior of Bitcoin returns. The model forecast also outperforms some machine learning methodologies, which would benefit policy makers, banks and financial investors in trading activities for both long-term and short-term strategies.
Mehrdad Salimitari, Mainak Chatterjee, Murat YĂŒksel, Eduardo L. Pasiliao
It is predicted that cryptocurrencies will play an important role in the global economy. Therefore, it is prudent for us to understand the importance and monetary value of such cryptocurrencies, and strategize our investments accordingly. One of the ways to obtain cryptocurrency is via mining. As solo mining is not possible because of the computational requirements, pool mining has gained popularity. In this paper, we focus on Bitcoin and its pools. With more than 20 pools in the network of Bitcoin and other cryptocurrencies, it becomes challenging for a new miner to decide the pool he must join such that the profit is maximized. We use prospect theory to predict the profit that a specific miner, given his hash rate power and electricity costs, is expected to make from each pool. A utility value is calculated for each pool based on its recent performance, hash rate power, total number of the pool members, reward distribution policy of the pool, electricity fee in the new miner's region, pool fee, and the current Bitcoin value. Then, based on these parameters during a certain time duration, the most profitable pool is found for that miner. We show how the utility values from a pool varies with electricity fee and dollar equivalent of a Bitcoin. To find the accuracy of our predictions, we mine Bitcoin by joining 5 different pools- AntPool, F2Pool, BTC.com, Slushl'ool, and BatPool. Using an Antminer 55 for each pool, we mine Bitcoin for 40 consecutive days. Results reveal that our prospect theoretic predictions are consistent with what we actually mine; however predictions using expected utility theory are not as close.
Open access
Blockchain Technology Applications and Security
Advanced Steganography and Watermarking Techniques
The article focuses on the advantages of distributed ledger technology in view to apply it within existing financial system. The article is highly relevant as the technology is a perfect opportunity to develop the financial system in terms of reducing costs and improving efficiency. The authors suggest a few brief definitions of such terms as distributed ledger, block-chain, bitcoin and mining. The article points out and describes special features of distributed ledger technology. Based on the definitions, the article outlines operation principles of the distributed ledger, block-chain, bitcoin and mining. Also, it compares cash against cryptocurrency - bitcoin. The article examines the possibilities of using distributed ledger technology in clearing, payment and settlement processes including ways of money transfer, payments for goods, securities and derivative financial instruments. Also, the article provides statistical data on the use of cryptocurrencies considering the cases of their capitalization, price, money supply and numbers of transactions submitted within 24 hours, 7 and 30 days. The article emphasizes the increase in volume of such transactions in the US, China, Ukraine and at the same time points to the decline in this type of transactions in Russia. In addition to statistical data, the article provides information on the types of distributed ledger systems along with comparison between different types of systems. The article describes processes of transferring money, as well as transactions with goods, securities and derivative financial instruments in modern infrastructure environment. For illustrative purposes, the authors outline how the process would proceed if distributed registry technology was implemented. The authors conclude that advantages of distributed ledger technology overweight its shortages if one takes into account operational, technical, financial and legal aspects. Application of distributed ledger technology would increase efficiency of payments, clearing and settlement, and in the long term, distributed ledger technology could eliminate most shortages of the system existing nowadays on the financial market.
Jeffrey Chu, Stephen Chan, Saralees Nadarajah, Joerg Osterrieder
With the exception of Bitcoin, there appears to be little or no literature on GARCH modelling of cryptocurrencies. This paper provides the first GARCH modelling of the seven most popular cryptocurrencies. Twelve GARCH models are fitted to each cryptocurrency, and their fits are assessed in terms of five criteria. Conclusions are drawn on the best fitting models, forecasts and acceptability of value at risk estimates.
In this paper, we consider the activities of hacker's social movement through the history of hacker culture and philosophy in modern times. Some social movements of contemporary hackers are called hactivism, but if hactivism aims for social reform, peopleâs support needs to be acquired it. Therefore, this paper considers the principle of winning the trust of citizens from the viewpoint of âjustness and legitimacyâ according to the theory of Giddens and Max Weber. Futhermore, through consideration of Wikileaks and bitcoin, we point out that there are many problems in hactivism.
A BlockChain is an open record of all digital money exchanges that have ever been executed. It is constantly growing as âcompletedâ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. Each PC associated with the Bitcoin systematize a customer that plays out the task of approving and handing-off exchanges gets a duplicate of the blockchain, which gets downloaded naturally after joining the Bitcoin arrange. The blockchain has finish data about the addresses and their adjusts ideal from the beginning piece to the most as of late finished square. Transactions between individuals have always been a part and parcel of human society for the division of labour made people interdependent. The medium of transaction has also been evolving along with the evolution of society and human consciousness from barter system to commodity money to fiat currency and now to digital currency or cryptocurrency. But as the evolution is a form of error correction, the problem of double spending in digital currency was solved by a distributed ledger system called BlockChain. Since 2008 onwards the blockchain technology has been separated from Bitcoins to be injected to many other problems related especially to banking transactions. Blockchain innovation empowers the production of decentralized monetary forms, savvy contracts and clever resources that can be controlled over the Internet.
The Bitcoin payment system involves two agent types: Users that transact with the currency and pay fees and miners in charge of authorizing transactions and securing the system in return for these fees. Two of Bitcoin's challenges are (i) securing sufficient miner revenues as block rewards decrease, and (ii) alleviating the throughput limitation due to a small maximal block size cap. These issues are strongly related as increasing the maximal block size may decrease revenue due to Bitcoin's pay-your-bid approach. To decouple them, we analyze the âmonopolistic auctionâ [8], showing: (i) its revenue does not decrease as the maximal block size increases, (ii) it is resilient to an untrusted auctioneer (the miner), and (iii) simplicity for transaction issuers (bidders), as the average gain from strategic bid shading (relative to bidding one's true maximal willingness to pay) diminishes as the number of bids increases.