E-cash has its merits comparing with other payment modes. However, there are two problems, which are how to achieve practical/complete tracing and how to achieve it in compact E-cash. First, the bank and the TTP (i.e., trusted third party) have different duties and powers in the reality. Therefore, double-spending tracing is bank's task, while unconditional tracing is TTP's task. In addition, it is desirable to provide lost-coin tracing before they are spent by anyone else. Second, compact E-cash is an efficient scheme, but tracing the coins from double-spender without TTP results in poor efficiency. To solve the problems, we present a compact E-cash scheme. For this purpose, we design an embedded structure of knowledge proof based on a new pseudorandom function and improve the computation complexity from O(k) to O(1). Double-spending tracing needs leaking dishonest users' secret knowledge, but preserving the anonymity of honest users needs zero-knowledge property, and our special knowledge proof achieves it with complete proofs. Moreover, the design is also useful for other applications, where both keeping zero-knowledge and leaking information are necessary.
The Byzantine general problem is the core problem that consensus algorithms are trying to solve, which is at the heart of the design of blockchains. As a result, we have seen numerous proposals of consensus algorithms in recent years, trying to improve the level of decentralization, performance, and security of blockchains. In our opinion, there are two most challenging issues when we consider the design of such algorithms in the context of powering blockchains in practice. First, the outcome of a consensus algorithm usually depends on the underlying incentive model, so each participant should have an equal probability of receiving rewards for its work. Secondly, the protocol should be able to resist network failures, such as cloud services shutdown, while maintaining high performance otherwise. We address these two critical issues in this paper. First, we propose a new metric, called fair validity, for measuring the performance of Byzantine agreements. Intuitively, fair validity provides a lower bound for the probability of acceptances of honest nodes' proposals. This is a strong notion of fairness, and we argue that it is crucial for the success of a blockchain in practice. We then show that any Byzantine agreement could not achieve fair validity in an asynchronous network, so we will focus on synchronous protocols. This leads to our second contribution: we propose a fair, responsive, and partition-resilient Byzantine agreement protocol able to tolerate up to 1/3 corruptions. As we will show in the paper, our protocol achieves fair validity and is responsive in the sense that the termination time only depends on actual network delay, as opposed to arbitrary, pre-determined time-bound. Furthermore, our proposal is partition-resilient. Last but not least, experimental results show that our Byzantine agreement protocol outperforms a wide variety of state-of-art synchronous protocols, combining the best from both theoretic and practical worlds.
Domhnall Carlin, Jonah Burgess, Philip O’Kane, Sakir Sezer
Traditional malicious attacks have evolved beyond file-based methods, with malicious files now existing as processes and services to evade detection. This article examines the rise of cryptojacking-the use of another's machine for profit through cryptocurrency mining-and how we're all at risk.
Unfulfilled expectations from macro-economic initiatives during the Great Recession and the massive shift into globalization echo today with political upheaval, anti-establishment propaganda, and looming trade/currency wars that threaten domestic and international value chains. Once stable entities like the EU now look fragile and political instability in the US presents unprecedented challenges to an International Monetary System (IMS) that predominantly relies on the USD and EUR as reserve currencies. In this environment, it is critical for an international organization mandated to ensure stability to plan and act ahead. This paper argues that Decentralized Ledger-based technology (DLT) is key for the International Monetary Fund (IMF) to mitigate some of those risks, promote stability and safeguard world prosperity. Over the last two years, DLT has made headline news globally and created a worldwide excitement not seen since the internet entered the mainstream. The rapid adoption and open-to-all philosophy of DLT has already redefined global socioeconomics, promises to shake up the world of commerce/finance and challenges the workings of central governments/regulators. This paper examines DLT core premises and proposes a two-step approach for the IMF to expand Special Drawing Rights (SDR) into that sphere so as to become the originally envisioned numeraire and reserve currency for cross-border transactions in this new decentralized century.
International roaming is one of the many essential services a carrier enables on its customer's subscriber identity module (SIM) cards that allows its users to send and receive calls, messages, and e-mails whenever they travel to another country. From its beginnings in voice roaming in the last 1.5 decades up to today, international roaming has been a pivotal contributor to the sales of telecommunications carriers. It does however come at a high cost, which the users end up paying, due to numerous factors such as roaming agreements between home carriers and visited carriers as well as clearinghouses needed by companies to settle disputes in agreements between the carriers involved. This paper proposes a consortium blockchain approach coupled with smart contract application. The decentralized nature of a blockchain and the automation that smart contracts provide solves two of international roaming problems-intermediaries and high cost. Together with Tendermint-a consensus mechanism that requires no mining, implementation of the consortium blockchain can be done involving all carriers around the world with them being the privileged users and verify the transactions of two engaging carriers. With this setup, the blockchain is privatized yet still able to perform the essential functions of a blockchain, which are immutability, security, and transparency of data. The proposal can eliminate the need for continually changing roaming agreements and clearing houses that increase the price for the users as well as slow down the processing time making international roaming services much more efficient, user-friendly and cost-effective for both its consumers and carriers.
The research focuses on identifying Bitcoin ecosystem factors and modeling a causal loop diagram of the complete ecosystem. Bitcoin is a complex social, economical and technical system and a brand. Defining Bitcoin is very hard or even impossible, as it is a peer-to-peer phenomenon without central authority or formal definition. System dynamics methods are used to create a causal loop diagram of the Bitcoin ecosystem. Semi-structured expert interviews are used to improve and validate the CLD model and to gain insight about what is Bitcoin, why and how it works and generally about factors related to Bitcoin. Results, in addition to the CLD model, show that Bitcoin is a complex phenomenon without definition and with loads of subjective opinions about what it really is.
Stefanos Leonardos, Daniel Reijsbergen, Georgios Piliouras
The rapid evolution of blockchain technology has brought together stakeholders from fundamentally different backgrounds. The result is a diverse ecosystem, as exemplified by the development of a wide range of different blockchain protocols. This raises questions for decision and policy makers: How do different protocols compare? What are their trade-offs? Existing efforts to survey the area reveal a fragmented terminology and the lack of a unified framework to reason about the properties of blockchain protocols. In this paper, we work towards bridging this gap. We present a five-dimensional design space with a modular structure in which protocols can be compared and understood. Based on these five axes -- Optimality, Stability, Efficiency, Robustness and Persistence -- we organize the properties of existing protocols in subcategories of increasing granularity. The result is a dynamic scheme -- termed the PREStO framework -- which aids the interaction between stakeholders of different backgrounds, including managers and investors, and which enables systematic reasoning about blockchain protocols. We illustrate its value by comparing existing protocols and identifying research challenges, hence making a first step towards understanding the blockchain ecosystem through a more comprehensive lens.
This thesis aims to contribute to the understanding of the economics of the cryptocurrency market. In the first chapter, I document the literature on cryptocurrency and the financial applications of blockchain infrastructure. Finance and economics literature on the area of cryptocurrency is relatively new and spans only the last seven years, thus this review intends to serve as a foundation to prompt future work and a deeper understanding of this field. In the second chapter, I develop an equilibrium model of proof-of-work cryptocurrencies. Equilibrium behaviour of miners and users are characterised for exogenous blockchain protocol metrics; I demonstrate that equilibrium between miners and users can be achieved in the long run. High fixed mining rewards are the reason for instability in current cryptocurrency designs. The equilibrium model has two key implications: first, decentralisation and technological improvement in mining are drivers of low transaction fees and low mining costs in a proof-of-work cryptocurrency environment; and second, limited block size and mining difficulty create an incentive mechanism that achieves cryptocurrency sustainability in the long run. In the third chapter, I study the return spillover and systemic risk in the cryptocurrency market in the context of connectedness. The data illustrates that system-wide connectedness in the cryptocurrency market, commonly observed as the level of systemic risk in the literature, changes over time with respect to the adoption rate of cryptocurrencies. Cryptocurrency protocol disputes, malicious activities in the cryptocurrency environment, and negative financial regulations on cryptocurrencies are key sources of increased connectedness over different time periods. Instead, pairwise connectedness between cryptocurrency pairs can be explained by cryptocurrency fundamentals.
About a decade ago the fundamental operating principle of the Blockchain was introduced. It took several years before the technology gained widespread recognition in industry and academic communities outside of the computer science sphere. Since then many academic communities have taken up the topic, but so far no well-defined research agenda has emerged: research topics are scattered and rigorous approaches are scarce. More often than not, use cases implemented by industry apply a trial and error approach and there exists a dearth of theory-based academic papers on the topic following robust methodologies. Being a nascent research topic, case studies on Blockchain applications are a suitable approach to systematically transfer industry experience into research agendas which benefit both theory development and testing as well as design science research. In this paper I offer guidelines and suggestions on how to design and structure Blockchain case studies to create value for academia and the industry. More specifically, I describe Blockchain characteristics and challenges, present existing Blockchain case studies, and discuss various types of case study research and how they can be useful for industry and academic research. I conclude with a framework and a checklist for Blockchain case study research.
[full article and abstract in Lithuanian; abstract in English] The main feature of the twenty-first century could be named as permanent transformation that covers all areas. Payments and money are developing and changing especially fast. Technological evolution and development have led to the emergence of new transactional techniques on the Internet, mobile phones, and credit cards. Various systems of payment / money transfer have considerably expanded payment options and possibilities. And such conditions have created opportunities for the emergence of a cryptocurrency. The purpose of the study is to investigate the cryptocurrency, its concept, advantages and disadvantages. Analysis of the scientific literature, systematization, comparison, interpretation and generalization of information research methods were used for the study. Evaluation of the reasons for the emergence of cryptocurrency let to generalise, that the process was mostly influenced by technological progress and the aspiration to find faster, cheaper and more confidential settlement tools. Cryptocurrency may be defined as digital money or property in electronical form. This currency may be characterized by properties of decentralization, uncontrollability and higher risk management. The most important advantages of using a cryptocurrency may be: the speed of settlements; cheaper financial services; additional investment opportunities. Disadvantages - unpredictable, fluctuating value; possible fraud cases; possibility to use cryptocurrency for illegal activities.
Among different concepts associated with the term blockchain, smart contracts have been a prominent one, especially popularized by the Ethereum platform. In this study, we unpack this concept within the framework of Transaction Cost Economics (TCE). This institutional economics theory emphasizes the role of distinctive (private and public) contract law regimes in shaping firm boundaries. We propose that widespread adoption of the smart contract concept creates a new option in public contracting, which may give rise to a smart-contract-augmented contract law regime. We discuss tradeoffs involved in the attractiveness of the smart contract concept for firms and the resulting potential for change in firm boundaries. Based on our new conceptualization, we discuss potential roles the three branches of government – judicial, executive, and legislative – in enabling and using this new contract law regime. We conclude the paper by pointing out limitations of the TCE perspective and suggesting future research directions.
Background: The use of bitcoin in South Africa is fairly new, but has increased as several online retailers now accept bitcoin as a means of payment. The South African Revenue Service has released a media statement regarding the normal tax treatment of cryptocurrencies (such as bitcoin), but policy regarding the value-added tax (VAT) treatment of cryptocurrencies is still pending.Aim: The objective of the study is to determine the output tax consequences for a South African VAT vendor who receives bitcoins in exchange for the supply of goods or services that are subject to VAT, and when the same South African VAT vendor exchanges the bitcoins for South African rand at a local exchange platform.Setting: This article examines existing literature in a South African VAT environment.Method: A non-empirical study based on existing literature is performed.Results: It is found that when interpreting the (current) VAT Act No. 89 of 1991, the receiving of bitcoin in exchange for the supply of goods or services, as well as the exchange of bitcoin for South African rand, is subject to output tax at the standard rate of 14%, which will lead to ‘double taxation’.Conclusion: It was shown through this study that the proposed treatment as explained in the previous section would impose ‘double taxation’.
This study examines whether the efficiency of cryptocurrency markets (Bitcoin and Ethereum) evolve over time based on Lo's (2004) adaptive market hypothesis (AMH). In particular, we measure the degree of market efficiency using a generalized least squares-based time-varying model that does not depend on sample size, unlike previous studies that used conventional methods. The empirical results show that (1) the degree of market efficiency varies with time in the markets, (2) Bitcoin's market efficiency level is higher than that of Ethereum over most periods, and (3) a market with high market liquidity has been evolving. We conclude that the results support the AMH for the most established cryptocurrency market.
Alex Murray, Scott Kuban, Matthew Josefy, Jon E. Anderson
This paper explores blockchain technology’s potential to alter contracting both in the market and within organizations. We identify and discuss how blockchain reduces certain types of transaction costs while introducing additional costs that have not been present in traditional contracts. Blockchain technology also presents a new method to mitigate or avoid certain types of agency costs that stem from contracting with agents inside the firm. Through this theoretical discussion, our paper proposes several avenues for future research on how blockchain may alter contracting.
Bitcoin is one of the original cryptocurrencies. It was introduced by an anonymous author who goes by the pseudonym of Satoshi Nakamoto (Nakamoto, n.d.). His genius proposal was based on the premise of user anonymity and decentralization (Barber, Boyen, Shi, Uzun, 2012). Bitcoin started out as a payment system among a small group of enthused users and was then mass-adopted. Most users employ it for legal activities such as investments and purchases, while some use it for illegal activities, products, and services like gambling, money laundering, tax evasion, kidnap ransoms, drugs, and prostitution (Kristoufek, 2015). In regard to reasons for using Bitcoin, studies have shown that the majority of Bitcoin owners view it as an investment rather than a currency for purchases or other financial transactions (Henry, Huynh, & Nicholls, 2018; Glaser, Zimmermann, Haferkorn, Weber & Siering, 2014). The purpose of this study was to determine what attracts and motivates consumers to own Bitcoin cryptocurrency and to fill a gap in the academic literature. The findings indicate that there is a strong relationship between owning Bitcoin and a desire for financial profit. This study concludes that the main motivation is of course profit which was driven by both finances and innovative technology led Bitcoin users to mining and installing Bitcoin clients, and then investing and trading afterwards.
Eder J. Scheid, Bruno Rodrigues, Lisandro Zambenedetti Granville, Burkhard Stiller
Service Level Agreements (SLA) are documents that specify what Service Providers (SP) are delivering to customers. They contain information about the service, such as target performance level or monthly availability, and penalties for the violations of the SLA. The information about the penalties is essential because if the SP does not deliver what is defined, the customer must be compensated accordingly. However, the current compensation process is cumbersome and complex because of the amount of involved manual effort. To address this issue, it is proposed in this paper an approach based on blockchain and Smart Contracts (SC) to automate the compensation process while enabling dynamic payments during the SLA lifetime. The proposed approach was evaluated in an use case that simulates the management of a Quality of Service SLA between an SP and a customer. Based on the performed evaluation, parts of the SLA management process were successfully automated using a decentralized solution, and the payment of the compensation occurred without the intervention of a third party.
This paper discusses the economics of how Bitcoin achieves data immutability, and thus payment finality, via costly computations, i.e., "proof-of-work." Further, it explores what the future might hold for cryptocurrencies modelled on this type of consensus algorithm. The conclusions are, first, that Bitcoin counterfeiting via "double-spending" attacks is inherently profitable, making payment finality based on proof-of-work extremely expensive. Second, the transaction market cannot generate an adequate level of "mining" income via fees as users free-ride on the fees of other transactions in a block and in the subsequent blockchain. Instead, newly minted bitcoins, known as block rewards, have made up the bulk of mining income to date. Looking ahead, these two limitations imply that liquidity is set to fall dramatically as these block rewards are phased out. Simple calculations suggest that once block rewards are zero, it could take months before a Bitcoin payment is final, unless new technologies are deployed to speed up payment finality. Second-layer solutions such as the Lightning Network might help, but the only fundamental remedy would be to depart from proof-of-work, which would probably require some form of social coordination or institutionalisation.
Christopher S. Henry, Kim P. Huynh, Gradon Nicholls
This article provides an update of the results of the 2017 Bitcoin Omnibus Survey (BTCOS) conducted by the Bank of Canada from December 12 to 15, 2017. The BTCOS was previously conducted in November and December 2016 and the results were reported in Henry, Huynh, and Nicholls (2017, forthcoming). The 2017 survey took place in an interesting time, as Bitcoin prices were increasing and reached an all-time high on December 17, 2017. During this period, the level of awareness of Bitcoin increased from 64 percent in the 2016 BTCOS to 85 percent in the 2017 BTCOS, while ownership rose from 2.9 to 5.0 percent respectively. The main reason cited by survey participants for owning Bitcoin changed from transactional purposes in 2016 to investment purposes in 2017. Further, only about half of Bitcoin owners were found to regularly use Bitcoin to buy goods or services or to send money to other people. <b>TOPICS:</b>Currency, portfolio construction, wealth management
Mario Arias-Oliva, Jorge Pelegrín Borondo, Gustavo Matías-Clavero
The first commercial transaction with the first cryptocurrency in 2010 marked the start of a revolution in transactions. Blockchain and cryptocurrencies will dramatically transform how we do transactions, just as the Internet revolutionized how we communicate. Currently, more than 2,000 cryptocurrencies are quoted on the market, and many more are being launched in initial coin offerings for use as an exchange method in a specific business ecosystem or as rights to assets or liabilities. As an emerging fintech, cryptocurrencies open up many opportunities, but they also pose significant challenges and limitations. This paper analyzes the key factors for the successful development of a cryptocurrency from a consumer-behavior perspective. Using a technology acceptance theoretical framework, we test a model able to explain almost 85% of the intention to use cryptocurrencies. Surprisingly, risk was not a significant factor. This could be because most of the respondents considered operating with cryptocurrencies to be risky; the lack of variability in their responses to the questions about perceived risk would explain this lack of explanatory power. However, willingness to manage cryptocurrency risk could be a precondition for adoption. The performance expectancy for a given cryptocurrency was the most important factor for its success. The research was conducted in Spain with college-educated adults with basic knowledge of the Internet.
The aim of this work is to study the use of decentralization and smart contracts on blockchain networks. We investigate the implementation and use of smart contracts on the platforms Bitcoin, Ethereum and Hyperledger Fabric. Additionally, we have researched consensus algorithms and their respective uses, mentioning both advantages and disadvantages where necessary. To conclude, there is an example contract that is meant to be a close to direct translation of a generic legal house rental contract to show how a legal contract can be translated.