Blockchain Papers

Usman W. Chohan

No abstract is available for this record.

Ben Van Vliet

No abstract is available for this record.

Andrew Urquhart

No abstract is available for this record.

Till Neudecker, Hannes Hartenstein

No abstract is available for this record.

Nashirah Abu Bakar, Sofian Rosbi, Kiyotaka Uzaki

This paper analyses the operation of cryptocurrency system in perspective of Islamic finance. The purpose of this study is to evaluate the cryptocurrency framework whether it is meet the Islamic Finance rule. In addition, this study performed in providing the Islamic minded investor a proper information regarding investment in Bitcoin. Cryptocurrency is a digital currency in which encryption techniques that implement to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. A transaction is a transfer of Bitcoin value that is broadcast to the network and collected into blocks. A transaction typically references previous transaction outputs as new transaction inputs and dedicates all input Bitcoin values to new outputs. This cryptocurrency has no physical form and exists only in the network. Bitcoin also has no intrinsic value in that it is not redeemable for another commodity, namely gold. Then, this study evaluates the framework according to Islamic Finance rule. The bitcoin account holder is anonymous. Therefore, it is difficult to track the real account holder if any suspicious activity occurs. In addition, the value of Bitcoin is unstable because of high volatility. Bitcoin also suffers variance in perceptions of Bitcoin’s store of value and method of value. All of these three conditions contribute to uncertainty in transaction framework of Bitcoin. As a conclusion, Bitcoin transaction is classified as a transaction with high uncertainty (gharar).

Louis Tessler, Tim Byrnes

Bitcoin is a digital currency and payment system based on classical cryptographic technologies which works without a central administrator such as in traditional currencies. It has long been questioned what the impact of quantum computing would be on Bitcoin, and cryptocurrencies in general. Here, we analyse three primary directions that quantum computers might have an impact in: mining, security, and forks. We find that in the near-term the impact of quantum computers appear to be rather small for all three directions. The impact of quantum computers would require considerably larger number of qubits and breakthroughs in quantum algorithms to reverse existing hash functions.

Evita Stenqvist, Jacob Lönnö

Programmatically deriving sentiment has been the topic of many a thesis: it’s application in analyzing 140 character sentences, to that of 400-word Hemingway sentences; the methods ranging from naive rule based checks, to deeply layered neural networks. Unsurprisingly, sentiment analysis has been used to gain useful insight across industries, most notably in digital marketing and financial analysis. An advancement seemingly more excitable to the mainstream, Bitcoin, has risen in number of Google searches by three-folds since the beginning of this year alone, not unlike it’s exchange rate. The decentralized cryptocurrency, arguably, by design, a pure free market commodity – and as such, public perception bears the weight in Bitcoins monetary valuation. This thesis looks toward these public perceptions, by analyzing 2.27 million Bitcoin-related tweets for sentiment fluctuations that could indicate a price change in the near future. This is done by a naive method of solely attributing rise or fall based on the severity of aggregated Twitter sentiment change over periods ranging between 5 minutes and 4 hours, and then shifting these predictions forward in time 1, 2, 3 or 4 time periods to indicate the corresponding BTC interval time. The prediction model evaluation showed that aggregating tweet sentiments over a 30 min period with 4 shifts forward, and a sentiment change threshold of 2.2%, yielded a 79% accuracy.

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

Zero-confirmation transactions, i.e. transactions that have been broadcast but are still pending to be included in the blockchain, have gained attention in order to enable fast payments in Bitcoin, shortening the time for performing payments. Fast payments are desirable in certain scenarios, for instance, when buying in vending machines, fast food restaurants, or withdrawing from an ATM. Despite being quickly propagated through the network, zero-confirmation transactions are not protected against double-spending attacks, since the double-spending protection Bitcoin offers relies on the blockchain and, by definition, such transactions are not yet included in it. In this paper, we propose a double-spending prevention mechanism for Bitcoin zero-confirmation transactions. Our proposal is based on exploiting the flexibility of the Bitcoin scripting language together with a well-known vulnerability of the ECDSA signature scheme to discourage attackers from performing such an attack.

Dirk G. Baur, Thomas Dimpfl

No abstract is available for this record.

Nashirah Abu Bakar, Sofian Rosbi

The cryptocurrency is a decentralized digital money. Bitcoin is a digital asset 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 forecast Bitcoin exchange rate in high volatility environment. Methodology implemented in this study is forecasting using autoregressive integrated moving average (ARIMA). This study performed autocorrelation function (ACF) and partial autocorrelation function (PACF) analysis in determining the parameter of ARIMA model. Result shows the first difference of Bitcoin exchange rate is a stationary data series. The forecast model implemented in this study is ARIMA (2, This model shows the value of Rsquared is 0.444432. This value indicates the model explains 44.44% from all the variability of the response data around its mean. The Akaike information criterion is 13.7805. This model is considered a model with good fitness. The error analysis between forecasting value and actual data was performed and mean absolute percentage error for ex-post forecasting is 5.36%. The findings of this study are important to predict the Bitcoin exchange rate in high volatility environment. This information will help investors to predict the future exchange rate of Bitcoin and in the same time volatility need to be monitor closely. This action will help investors to gain better profit and reduce loss in investment decision.

Dirk G. Baur, Daniel Cahill, Keith M. Godfrey, Zhangxin Liu

No abstract is available for this record.

Svetlana Sapuric, Angelika Kokkinaki, Ifigenia Georgiou

This study provides a comparative financial and statistical analysis between the largest and most trad- ed cryptocurrencies. In particular, the exchange rates of Bitcoin, Litecoin, Ripple and Ethereum were collected from August 2010 until May 2017. The raw annualized volatility of cryptocurrencies is compared as well as to fiat currencies and major exchange rates. The results show that Bitcoin is the least volatile cryptocurrency with low correlations with the altcoins, providing possible diversification benefits to cryptocurrency investing. In addition, our results indicate that Bitcoin is the only cryptocurrency that has causality effects on the other cryptocurrencies.

Joseph M. Woodside, Fred K. Augustine, Will Giberson

Purpose: The purpose of this paper is to review the acceptance and future use of blockchain technology. Given the rapid technological changes, this paper focuses on a managerial overview and framework of how the blockchain, including its implementations such as Bitcoin have advanced and how blockchain can be utilized in large-scale, enterprise environments. The paper begins with a technological overview that covers the history of the technology, as well as describing the computational, cryptographic theory that serves as the basis for its notable security features. This paper also covers several key application areas such as finance, accounting, and marketplaces where blockchain technology is seeing major investments from some of the world’s largest organizations. Analysis Methods: Triangulation is utilized for this paper, which combines multiple methodologies, such as qualitative and quantitative methods, as complementary components for improving research study accuracy. The triangulation methods chosen for this paper include a secondary data environment analysis, a text analysis, and financial analysis in order to successfully manage and review the adoption diffusion of innovative technologies like blockchain. The blockchain stands to disrupt many areas of society with the proper application and thus it is important to examine its use with as many viewpoints as possible. Contributions and Conclusion: The contribution this paper describes the potential drivers and drawbacks of blockchain technology in real world applications and highlights the managerial implications of its use. This paper also expands the theoretical contributions for identifying blockchain technology progress on the diffusion of innovation curve. As it stands, the blockchain is within the innovation stage in terms of its application in multi-national enterprises, but with major firms making investments, the blockchain could see growing normalization and acceptance, and at an inflection point akin to the Internet of the 1990s.

Mattias Scherer

The blockchain technology started as the innovation that powered the cryptocurrency Bitcoin. But in recent years, leaders in finance, banking, and many more companies has given this new innovation more attention than ever before. They seek a new technology to replace their system which are often inefficient and costly to operate. However, one of the reasons why it not possible to use a blockchain right away is because of the poor performance. Public blockchains, where anyone can participate, can only process a couple of transaction per second and is therefore far from usable in the world of finance. Permissioned blockchains is another type of blockchain where only a restricted set of users have the rights to decide what will be recorded in the blockchain. This allows permissioned blockchains to have a number of advantages over public blockchains. Most notably is the ability to split the network into segments where only a subset of nodes needs to validate transactions to aparticular application, allowing the use of parallel computing and better scaling. Moreover, the validating nodes can be trusted, allowing the use of consensus algorithm which offer much more through put. In this paper, we compare public blockchain with permissioned blockchain and address the notable trade-offs: decentralization, scalability and security, in the different blockchain networks. Furthermore, we examine the potential of using a permissioned blockchain to replace the old systems used in financial institutes and banks by launching a Hyperledger Fabric network and run stress tests. It is apparent that with less decentralization, the performance and scalability of Hyperledger Fabric network is improved and it is feasible that permissioned blockchain can be used in finance.

Massimo Bartoletti, Livio Pompianu

Smart contracts are computer programs that can be consistently executed by a network of mutually distrusting nodes, without the arbitration of a trusted authority. Because of their resilience to tampering, smart contracts are appealing in many scenarios, especially in those which require transfers of money to respect certain agreed rules (like in financial services and in games). Over the last few years many platforms for smart contracts have been proposed, and some of them have been actually implemented and used. We study how the notion of smart contract is interpreted in some of these platforms. Focussing on the two most widespread ones, Bitcoin and Ethereum, we quantify the usage of smart contracts in relation to their application domain. We also analyse the most common programming patterns in Ethereum, where the source code of smart contracts is available.

Zac Zimmer

Bitcoin, the digital cryptocurrency, has been celebrated as the future of money on the Internet. Although Bitcoin does present several forward-looking innovations, it also integrates a very old concept into its digital architecture: the mining of precious metals. Even though Bitcoin explicitly invokes mining as a metaphor and gold as an example for understanding the cryptocurrency, there has been little critical work on the connections between Bitcoin and previous metalist currency regimes. The following essay proposes a historical comparison with colonial South American silver mining and the global currency regime based on the New World silver peso it created as a way to interrogate Bitcoin. The comparison with colonial South America, and specifically the silver mining economy around the Cerro Rico de Potosí, will help to develop a historical and political understanding of Bitcoin's stakes, including questions of resources, labor, energy, and ecology. Mining and the extractive apparatus that accompanies it always imply massive-scale earthworks that reshape the planet itself, a process known as terraforming. The Potosí comparison will reveal Bitcoin to form part of a similar process of digital primitive accumulation we can provisionally name cryptoforming.

Philipp Hacker, Chris Thomale

Cryptocurrencies, such as bitcoin and ethereum, have not only risen to public attention as novel means of payments, but also as facilitators of initial coin offerings (ICOs, also called token sales). In these entirely online-mediated offerings, entrepreneurs sell tokens registered on a blockchain in exchange for cryptocoins. Buyers receive tokens that can be understood as cryptographically-secured coupons which embody a bundle of rights and obligations. In July 2017, the SEC released an investigative report that highlighted that such tokens can be subject to the full scope of US securities regulation. It is unclear, however, to what extent EU securities regulation is applicable to ICOs and, particularly, whether issuers have to publish and register a prospectus in order to avoid criminal and civil prospectus liability in the EU. In conceptual terms, this depends on whether tokens are considered “securities” under the EU prospectus regulation regime. Against this background, this paper develops a nuanced approach that distinguishes between three archetypes of tokens: currency, investment, and utility tokens. It analyzes the differential implications of each of these types, and their hybrid forms, for EU securities regulation, and develops policy proposals for their regulation.

Leopoldo Catania, Stefano Grassi

From the Washington University Senior Honors Thesis Abstracts (WUSHTA), 2017. Published by the Office of Undergraduate Research. Joy Zalis Kiefer, Director of Undergraduate Research and Associate Dean in the College of Arts & Sciences; Lindsey Paunovich, Editor; Helen Human, Programs Manager and Assistant Dean in the College of Arts and Sciences Mentors: Mina Lee and Li Yang

Yanuar Andrianto

The emergence of financial technology in the last 10 years has created a new type of asset that is Cryptocurrency. Cryptocurreny offers a small transaction fee without involving a third party in its transaction and the ability to make its users anonymous. It became one of its main selling points and was quickly accepted widely in the financial world. Cryptocurrency price movements become volatile. For examples, Bitcoin issued in 2009, the value is not more than USD 10, but in early June 2017, Bitcoin is worth about USD 3000 (Bloomberg, July 5th, 2017). Many investors are interested to invest in Cryptocurrency, especially investors with high risk tolerance. This study aims to find the effects of Cryptocurrency on well-formed portfolios. The assets we use are Foreign Currency, Commodity, Stock, and ETF. The Cryptocurrency we will use is Bitcoin, Ripple and Litecoin. Using the Modern Portfolio Theory approach, we can create an investment portfolio. The results show that the portfolio with Cryptocurrency indeed increases the effectiveness of the portfolio in two ways. The first is to minimize the standard deviation and the second is to create more allocation options for investors to choose from. The optimum allocation of Cryptocurrency is from 5% to 20% depending on the risk tolerance of the investor.

Shaen Corbet, Charles Larkin, Brian M. Lucey, Andrew Meegan · 5 authors

No abstract is available for this record.

Michel Rauchs, Garrick Hileman

The world of money and finance is transforming before our eyes. Digitised assets and innovative financial channels, instruments and systems are creating new paradigms for financial transaction and forging alternative conduits of capital. The Cambridge Centre for Alternative Finance, since its founding in 2015, has been at the forefront of documenting, analysing and indeed critically challenging that digital financial transformation. This Global Cryptocurrency Benchmarking Study is our inaugural research focused on alternative payment systems and digital assets. Led by Dr Garrick Hileman, it is the first study of its kind to holistically examine the burgeoning global cryptocurrency industry and its key constituents, which include exchanges, wallets, payments and mining. The findings are both striking and thought-provoking. First, the user adoption of various cryptocurrencies has really taken off, with billions in market cap and millions of wallets estimated to have been ‘active’ in 2016. Second, the cryptocurrency industry is both globalised and localised, with borderless exchange operations, as well as geographically clustered mining activities. Third, the industry is becoming more fluid, as the lines between exchanges and wallets are increasingly ‘blurred’ and a multitude of cryptocurrencies, not just bitcoin, are now supported by a growing ecosystem, fulfilling an array of functions. Fourth, issues of security and regulatory compliance are likely to remain prevalent for years to come. I hope this study will provide value to academics, practitioners, policymakers and regulators alike. We thank Visa very much for its generous support of independent academic research in this important area.

Joerg Osterrieder, Stephen Chan, Jeffrey Chu, Saralees Nadarajah

We analyze statistical properties of the largest cryptocurrencies (determined by market capitalization), of which Bitcoin is the most prominent example. We characterize their exchange rates versus the U.S. Dollar by fitting parametric distributions to them. It is shown that returns are clearly non-normal, however, no single distribution fits well jointly to all the cryptocurrencies analysed. We find that for the most popular currencies, such as Bitcoin and Litecoin, the generalized hyperbolic distribution gives the best fit, while for the smaller cryptocurrencies the normal inverse Gaussian distribution, generalized t distribution, and Laplace distribution give good fits. The results are important for investment and risk management purposes.

David Lee Kuo Chuen, Li Guo, Yu Wang

Bitcoin was the first cryptocurrency to use blockchain and has been the market leader since the first bitcoin was mined in 2009. After the birth of Bitcoin with the genesis block, more than 1,000 altcoins and crypto-tokens have been created, with at least 919 trading actively on unregulated or registered exchanges. This entire class of cryptocurrencies and tokens has been classified by some tax authorities as having the same status as commodities. If cryptocurrency is viewed in the same class as commodities, how different is it in terms of its risk and return structure? This article sets out to help readers understand cryptocurrencies and to explore their risk and return characteristics using a portfolio of cryptocurrency represented by the Cryptocurrency Index (CRIX). Substantial discussions are centered on Bitcoin and its close variants. Some questions are raised about the potential of cryptocurrencies as an investment class. Results show that the return correlations between cryptocurrencies and traditional assets are low and that adding CRIX returns to a traditional asset portfolio improves risk–return performance. Sentiment analysis also indicates the CRIX has a relatively high Sharpe ratio. Although we should view the results with care, a new form of financing for cryptocurrency and blockchain start-ups is born. The disruption brought about by Bitcoin may be felt beyond payments through what is known as initial crypto-token offerings or initial token sales. <b>TOPICS:</b>Currency, risk management, performance measurement, mutual funds/passive investing/indexing

Guglielmo Maria Caporale, Luis A. Gil‐Alana, Alex Plastun

This paper examines persistence in the cryptocurrency market. Two different long-memory methods (R/S analysis and fractional integration) are used to analyse it in the case of the four main cryptocurrencies (BitCoin, LiteCoin, Ripple, Dash) over the sample period 2013–2017. The findings indicate that this market exhibits persistence (there is a positive correlation between its past and future values), and that its degree changes over time. Such predictability represents evidence of market inefficiency: trend trading strategies can be used to generate abnormal profits in the cryptocurrency market.