Blockchain Papers

Yuen C Lo

No abstract is available for this record.

Runar Alvseike, Geir Arne Gjersvoll Iversen

Bitcoins original idea proposed a trustless monetary system, without the need of
\nintermediaries. In recent years, these very intermediaries it originally tried to circumvent, have
\ngained an increased interest in Bitcoin’s underlying technology, the Blockchain. It presents a
\ndecentralized database technology, suitable for exchanging value in an untrusted environment.
\nConsequently, it introduces an innovation in both economics and information technology.
\nIn this explorative study, we aim to investigate how Bitcoin and Blockchain technology may
\nimpact the monetary and financial system. By conducting 20 in-depth interviews from a broad
\nrange of stakeholders and a literature review in this new topic of interest, we have identified
\ntwo main themes introduced with this new technology. First, we seek to understand how the
\nfuture of money could unfold with Cryptocurrencies and Central Bank issued Digital Currency
\n(CBDC). The former is recognized to have a series of specialized architectures, spanning from
\nsimple monetary transactions to complex platforms enabling a decentralized economy to
\nevolve. CBDC is not necessarily reliant on blockchain technology, but the of digitally issued
\ncurrencies and blockchains introduces new fiscal and monetary policy toolkits. There are
\nhowever a series of intricate questions that needs to be addressed before CBDC could act as a
\ncomplement or replacement for physical currency. Lastly, we explore how the future of
\nfinance will be affected by blockchain technology and the cryptoeconomy. Banks may be
\nfacing increased competition from new entrants, where blockchain technology may facilitate
\nreduced costs in terms of regulatory compliance, efficiency in transactions and settlement, and
\nreconciliation. Moreover, new financial services are introduced by financial technology
\ninnovation. This might change the business model of banks and other financial institutions
\ndrastically. Furthermore, cryptocurrencies introduce new funding possibilities and enables
\norganizations to evolve with no governing body. This might facilitate a new economic system,
\ncalled the cryptoeconomy.
\nDevelopment in blockchain technology is mentioned to be at the same maturity stage as the
\nInternet by the early 1990s. There are several uncertainties regarding its future applications.
\nHowever, smart contracts seems to be an interesting application, facilitating automation in a
\nrange of applications.

Mark M. Lennon, Daniel Folkinshteyn

Over the past 15 years, NASDAQ, the world’s first all-electronic stock exchange, has actively engaged in efforts to serve the global digital economy by expanding its reach beyond its original domestic U.S. market. They have attempted to create a global 24/7 trading platform, to serve customers in the U.S., Japan, and Europe. These efforts have met with varying degrees of success. More recently, the renamed NASDAQ OMX Group has been experimenting with the disruptive fintech (financial technology) Bitcoin and its underlying technology blockchain to develop robust trading solutions, which drastically reduce transaction and record keeping costs. In this paper we analyze the various approaches taken by NASDAQ in its expansion ventures. We describe the similarities and differences in these undertakings, in order to identify successful strategies for firms who desire to increase the quality of their products while increasing efficiency and reducing the costs of their services. Drawing upon the strategy literature, we also develop theoretical models on how markets operate, and derive a series of propositions about the interplay between technology and markets.

David Lee Kuo Chuen

No abstract is available for this record.

Venkata Marella

Bitcoin is a social movement in the financial industry. It came into existence at a time when investors were looking for an alternative system for the traditional financial institutions. They wanted a system, which offers high transparency, low transaction fee, and high returns on their investment. Bitcoin is a decentralized system, which reveals all the transactions to the investors, providing a high degree of transparency. It operates without a centralized authority, so the transaction fee will be lower than the traditional financial institutions. The value of the Bitcoin can increase over a period and investors can expect high returns on their investment. As the market for the Bitcoin expanded, Bitcoin exchanges were formed, where investors can trade the fiat currencies for Bitcoins and vice versa. They became targets for the cyber criminals and lost bitcoins worth of millions of dollars in cyber-attacks, diminishing the value of Bitcoin. There is a lack of transparency in disclosing the details of the cyber-attacks to their customers by the exchanges. Bitcoin is failing to provide a solution for these issues and is operating like a traditional financial institution. In this paper, we will discuss how Bitcoin is a social movement using framing theory, examine various kinds of cyber-attacks that occurred on Bitcoin exchanges, their impact on Bitcoin, and make suggestions for the Bitcoin community to continue as a social movement in the financial industry.

Maria Letizia Perugini

Italian Abstract: Questo studio si propone di analizzare il complesso delle novità introdotte al sistema dei pagamenti e al trasferimento di diritti da Distributed Ledger e Blockchain, in una prospettiva che tenga conto delle applicazioni di mercato di queste innovazioni tecnologiche e della tutela giuridica degli interessi economici e delle posizioni soggettive che ne derivano. In particolar modo, l’opera vuole stimolare la discussione volta alla definizione di un quadro normativo socialmente adeguato che sostenga l’efficienza di questi strumenti in un’ottica di scambio economico globalizzato. English Abstract: This essay aims at analyzing the ensemble of innovation introduced by Distributed Ledger and Blockchain to the payment system and the transfer of rights, in a perspective considering the market applications of these new technologies and the legal protection of deriving economics interests and individual rights. Purposely, our dissertation aspires to encourage the discussion for the definition of a socially adequate legal framework sustaining the efficiency of these instruments in a global exchange perspective.

Dominik Harz

Blockchains address trust through cryptography and consensus. Bitcoin is the first digital currency without trusted agents. Ethereum extends this technology by enabling agents on a blockchain, via smart contracts. However, a systemic trust model for smart contracts in blockchains is missing. This thesis describes the ecosystem of smart contracts as an open multi-agent system. A trust model introduces social control through deposits and review agents. Trust-related attributes are quantified in 2,561 smart contracts from GitHub. Smart contracts employ a mean of three variables and functions and one in ten has a security-related issue. Moreover, blockchains restrict computation tasks. Resolving these restrictions while maintaining trust requires verifiable computation. An algorithm for verifiable computation is developed and implemented in Solidity. It uses an arbiter enforcing the algorithm, computation services providing and verifying solutions, and a judge assessing solutions. Experiments are performed with 1000 iterations for one to six verifiers with a cheater prior probability of 30%, 50%, and 70%. The algorithm shows linear complexity for integer multiplication. The verification depends on cheater prior probability and amount of verifiers. In the experiments, six verifiers are sufficient to detect all cheaters for the three prior probabilities.

Efpraxia D. Zamani, Ioannis Babatsikos

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 cryptocurrency 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 institutions, 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. However, 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 questions 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 residencybased measures, such as capital controls.

Oleksii Drozd, Yaroslav Lazur, Ruslan Serbin

The aim of this article is to study the theoretical, methodological, and legal possibilities of application of certain types of legal responsibility to the relations, which are connected with cryptocurrency (bitcoin). Some types of liability in the field of cryptocurrency relations make the subject of the study. Methodology. The research is based on a comparison of legal regulation of the sphere of cryptocurrency in Ukraine and in foreign countries. Advantages and disadvantages of different modes of cryptocurrency turnover are determined: from direct prohibition to granting the status of the official payment system. It is made on the basis of the analysis of peculiarities of the circulation of virtual money in Australia, Germany, the Netherlands, New Zealand, Singapore, Indonesia, China, the Russian Federation, Bolivia, Ecuador, Thailand, Vietnam, the USA, Japan, Spain, and some other countries. On the basis of the comparative legal study of certain provisions of the civil, administrative, tort, and criminal legislation of Ukraine, the possibilities and limits of the application of certain types of legal responsibility to violations in the field of cryptocurrency are determined. The results of the comparative legal study have shown that, unlike most foreign countries, in Ukraine, there is no legislative consolidation of the legal status of the virtual currency. In this regard, today in the national legislation, there are no direct rules that would predict the occurrence of administrative, criminal or civil liability for the offenses in the field of cryptocurrency relations. Practical impact. Since guarantees of compulsory restoration or protection of violated law play an important role in the legal regulation of any social relations, the proper legislative regulation of public relations in the sphere of crypto currency circulation is an urgent problem today, including with the help of establishing liability for the offenses in this field. Correlation/Authenticity. Comparative and legal research of legal regulation of the sphere of crypto currency gives us a better understanding of the most promising directions of development of administrative, criminal, and civil liability in this field.

Antonio T. F. Lou, Eldon Y. Li

Financial technology (FinTech) is the new business model and technology which aims to compete with traditional financial services and blockchain is one of most famous technology use of FinTech. Blockchain is a type of distributed, electronic database (ledger) which can hold any information (e.g. records, events, transactions) and can set rules on how this information is updated. The most well-known application of blockchain is bitcoin, which is a kind of cryptocurrencies. But it can also be used in many other financial and commercial applications. A prominent example is smart contracts, for instance as offered in Ethereum. A contract can execute a transfer when certain events happen, such as payment of a security deposit, while the correct execution is enforced by the consensus protocol. The purpose of this paper is to explore the research and application landscape of blockchain technology acceptance by following a more comprehensive approach to address blockchain technology adoption. This research is to propose a unified model integrating Innovation Diffusion Theory (IDT) model and Technology Acceptance Model (TAM) to investigate continuance intention to adopt blockchain technology.

Chris Reed, Uma M Sathyanarayan, Shuhui Ruan, Justine K. Collins

Blockchain technology allows the creation of distributed ledgers. These distribute control among the players rather than requiring a centralized database, and so can reduce costs and speed-up transactions. However, when it is used for assets which exist outside the blockchain itself, an unmodified adoption of the technology would bypass legal and regulatory requirements which, for these kinds of assets, cannot be bypassed without fundamental change to the law. Building those requirements into any blockchain-based system introduces features which are not necessary for performing its core functions, and we call these ‘legal impurities’. The most important legal impurities required are those relating to identification of the parties, and introducing the ability of a trusted third party to make modifications to the ledger. Not only does introducing these legal impurities make fundamental changes to the concept behind blockchain, but it is also essential that they are implemented in ways which do not threaten the integrity of the blockchain as evidence. This article has been produced by members of the Microsoft Cloud Computing Research Centre, a collaboration between the Cloud Legal Project, Centre for Commercial Law Studies, Queen Mary University of London and the Computer Laboratory, University of Cambridge. The authors are grateful to members of the MCCRC team and to attendees at the fourth Annual MCCRC Symposium (Windsor, September 2017) for helpful comments and to Microsoft for the generous financial support that has made this project possible. Responsibility for views expressed, however, remain with the authors.

Peng Xie, Hailiang Chen, Yu Jeffrey Hu

No abstract is available for this record.

Nicolas T. Courtois, Rebekah Mercer

Bitcoin is an open source payment system with a market capitalization of about 15 G$. During the years several key management solutions have been proposed to enhance bitcoin. The common characteristic of these techniques is that they allow to derive public keys independently of the private keys, and that these keys match. In this paper we overview the historical development of such techniques, specify and compare all major variants proposed or used in practical systems. We show that such techniques can be designed based on 2 distinct ECC arithmetic properties and how to combine both. A major trend in blockchain systems is to use by Stealth Address (SA) techniques to make different payments made to the same payee unlikable. We review all known SA techniques and show that early variants are less secure. Finally we propose a new SA method which is more robust against leakage and against various attacks.

Nashirah Abu Bakar, Sofian Rosbi

Cryptocurrency is a digital currency designed to work as a medium of exchange using cryptography to secure the transactions, to control the creation of additional units, and to verify the transfer of assets. The objective of this study is to evaluate the volatility condition for cryptocurrency (Bitcoin) exchange rate and return. Volatility calculated as standard deviation of logarithmic returns. This study performed normality test using Shapiro-Wilk method. Then, the high volatility detection performed using box-whisker plot and statistical process control chart. In descriptive statistical analysis, the mean for Bitcoin return is 0.006 and the deviation is 0.04458. The standard error indicates the volatility for Bitcoin is 4.458 %. This value is considered as high value of volatility.High value of volatility indicates the investment in Bitcoin is categorical as high risk investment. The important of this study is to assist investors to develop better investment portfolio in targeting better profit and lowering the loss

T. Todorov

Bitcoin is a type of crypto-currency that was launched in January 2009 as an emerging digital phenomenon in the financial technology realm by an unknown computer scientist using the pseudonym Satoshi Nakamoto. It is an innovative and independent currency that uses cryptography for its creation and for performing secure transactions. The aim of this article is targeted to introducing into the bitcoin's technology. The survey results and empirical research show that despite the bitcoin benefits over the currency of central authority people do not believe in this crypto-currency because of its speculative character.

Robert Parham

No abstract is available for this record.

Dirk G. Baur, Thomas Dimpfl, Konstantin Kuck

No abstract is available for this record.

Jonathan Rohr, Aaron Wright

Best known for their role in the creation of cryptocurrencies like bitcoin, blockchains are revolutionizing the way technology entrepreneurs finance their business enterprises. In 2017 alone, tech entrepreneurs raised over $6 billion through the sale of blockchain-based digital tokens, with some sales lasting mere seconds before selling out. In a token sale, also referred to as an “initial coin offering” or “ICO,” organizers of a project sell digital tokens to members of the public to finance the development of new technological platforms and services. After the initial sale, cryptocurrency exchanges scattered across the globe list tokens for trading and facilitate an active secondary market in which wild price fluctuations are common.\nThe recent explosion of token sales could mark the beginning of a broader shift in public capital markets. Blockchains drastically reduce the cost of exchanging value and enable anyone to transmit digitized assets around the globe in a highly trusted manner, stoking dreams of truly global capital markets that leverage the power of a blockchain and the Internet to facilitate capital formation. Lacking homogeneity, the status of tokens under U.S. securities laws is unclear. Although the SEC recently issued a Report of Investigation and has initiated several enforcement actions in which it has found that tokens are securities, confusion still surrounds the boundaries between the types of tokens that will be treated as securities and those that will not.\nIn this Article, we argue that the SEC and Congress should provide token sellers and the exchanges that facilitate token sales with additional regulatory certainty and a sensible path to compliance. Specifically, we outline extrinsic and intrinsic factors that courts and regulators should consider when applying the Howey test to digital tokens, adoption of which would help resolve the uncertainty surrounding tokens that mix aspects of consumption and use with the potential for profit. We further propose that lawmakers adopt both a compliance-driven safe harbor for online exchanges that list tokens with a reasonable belief that the public sale of such tokens is not a violation of section 5 of the Securities Act of 1933 as well as an exemption to the section 5 registration requirement that has been tailored to digital tokens.

Dr Craig S Wright, Stephane Savanah

No abstract is available for this record.

John O. McGinnis, Kyle Roche

Modern law makes currency a creature of the state and ultimately the value of its currency depends on the public’s trust in that state. While some nations are more capable than others at instilling public trust in the stability of their monetary institutions, it is nonetheless impossible for any legal system to make the pre-commitments necessary to completely isolate the governance of its money supply from political pressure. This proposition is true not only today, where nearly all government institutions manage their money supply in the form of central banking, but also true of past private banking regimes circulating their notes under the shadow of public law. However, bitcoin represents a potential third currency regime far more resistant to state control because it mints currency units that exist in no physical place, places a numerical ceiling on the number of units that can be created, and relies on scientific principles from cryptography to guarantee that ceiling and verify any person-to-person transfer. The trust required is not in any government but in the decentralized order of those who verify bitcoin transactions and those who create the software these verifiers choose to run on their connected computers.\nThis Article explores the fundamental structure of bitcoin, first by demystifying it as a technology, and second by showing how its decentralized order contrasts with other currency regimes. Unlike governments that use the power of law to compel action, bitcoin relies on a system of built-in incentives to encourage behavior that benefits not only those seeking to use bitcoin, but also bitcoin miners—those who voluntarily undertake the task of maintaining the payment network. While currently bitcoin is too volatile to compete with all but the worst government-issued currencies, the qualities of this system may give bitcoin a long-term advantage over many currencies. As the bitcoin ecosystem continues to grow, its nonlegal order can help it climb the rungs of stability created by distrust in government.\nThe technology underpinning bitcoin is the next point of innovation in the digital age—the same era that has already seen software create institutional disruption from Amazon, Facebook, and Uber, among many others. As bitcoin gains in popularity, it offers a platform for other kinds of technological alternatives to traditional legal regimes, like smart contracts. Bitcoin’s order without currency law will facilitate other forms of order with less law.\nThis is a propitious time for fundamental examination of bitcoin. Despite experiencing significant speculation and volatility throughout late 2017 and early 2018, its ten-year history demonstrates a downward trend in volatility and an upward trend in market capitalization.

Alessandra Cretarola, Gianna Figg-Talamanca, Marco Patacca

In recent literature it is claimed that BitCoin price behaves more likely to a volatile stock asset than a currency and that changes in its price are influenced by sentiment about the BitCoin system itself; in Kristoufek [10] the author analyses transaction based as well as popularity based potential drivers of the BitCoin price finding positive evidence. Here, we endorse this finding and consider a bivariate model in continuous time to describe the price dynamics of one BitCoin as well as a second factor, affecting the price itself, which represents a sentiment indicator. We prove that the suggested model is arbitrage-free under a mild condition and, based on risk-neutral evaluation, we obtain a closed formula to approximate the price of European style derivatives on the BitCoin. By applying the same approximation technique to the joint likelihood of a discrete sample of the bivariate process, we are also able to fit the model to market data. This is done by using both the Volume and the number of Google searches as possible proxies for the sentiment factor. Further, the performance of the pricing formula is assessed on a sample of market option prices obtained by the website deribit.com.

Shimeng Shi

No abstract is available for this record.

Yevhen Zolotavkin, Julián García, Carsten Rudolph

No abstract is available for this record.

Richard Thompson Ainsworth, Musaad Alwohaibi

No abstract is available for this record.