Blockchain Papers

Giuliano Lemme, Sara Peluso

parte di due revisori con il sistema del doppio cieco.

Percy Venegas

No abstract is available for this record.

Massimo Morini

There has been a huge amount of coverage in the press about the great potential uses of bitcoin-related technology for financial markets, such as improvements in efficiency. In addition to the supporters of blockchain, many have been critical of its real-life applications within the business world and suggest that what we are witnessing is nothing short of “blockchain hype, ” and that this technology can only be applied to bitcoins. This paper will demonstrate that there are real business cases for improving financial markets based on the lessons learned from cryptocurrencies, but, unlike what the hype-enthusiasts suggest, they are not application of a technology to the existing business models within financial markets. They are reforms of the business model itself. What needs to be exported from the world of cryptocurrencies are aspects of the market organization, inspiration for a different accounting and legal system, and some aspects of the technology. These can result in a huge contribution towards more robust, efficient, and stable markets. However, the process cannot be immediate and effortless, and can only be achieved within a market-wide strategic perspective. In this paper, I develop these concepts initially within a parallel analysis of cryptocurrencies and financial markets. Then, I will focus on a specific business case regarding the collateralization of financial derivatives, which will highlight quantifiable benefits in terms of reducing costs, capital, and risk. It is an example of a situation where the use of cryptocurrency technology is not more important than the business ideas developed in the analysis of cryptocurrencies; yet it was inconceivable prior to the advent of distributed ledgers, smart contracts, and oracles

Aleksandar Arsov

Recent years have witnessed the advances of e-money systems such as Bitcoin, PayPal and various forms of stored-value cards. This paper adopts a mechanism design approach to identify some essential features of different payment systems that implement and improve the constrained optimal resource allocation in Germany. Bitcoin is a digital, decentralized, partially anonymous currency, not backed by German or any government or other legal entity, and not redeemable for gold or other commodities. Bitcoin relies on peer-to-peer networking and cryptography to maintain its integrity. Compared to most currencies or online payment services, such as PayPal, bitcoins are highly liquid, have low transaction costs, and can be used to make micropayments in Germany. Although the Bitcoin economy is flourishing, Bitcoin users are anxious about Bitcoin’s legal status. This paper examines a few relevant legal issues. The research question is to investigate how supplementary digital terminating currency Bitcoin can provide a superior fallback position as e-gold standard in Germany and worldwide. Digital self-liquidating e-Gold ounce could be distributed immediately to voters by using swipe cards used by some governments for transit facilities. Bitcoins as e-Gold ounce do not provide a viable medium of exchange because of the cost of their purchase, creation and/or exchange.

Jill Carlson

The development of cryptocurrency technology has made it possible to transfer value securely and instantaneously without a third party intermediary such as a bank or financial institution. This is an exploratory analysis of where and why this technology has gained traction. In particular, I focus on the hypothesis that the relative popularity of cryptocurrency in Argentina can be explained by the presence of long-term capital controls. To test this hypothesis, I conducted expert interviews with market players. The main conclusion is that cryptocurrency can and has been used to evade capital controls. However, it is unlikely that substantial volumes have been moved via this mechanism. Cryptocurrency’s popularity in Argentina is attributable to more than the country’s history of capital controls or high rates of inflation. Other factors, including tax rate, levels of corruption, and history of multiple exchange rates have also contributed to adoption of this technology in Argentina. I propose further case study research on cryptocurrency in additional countries in order to develop these theories.

Trent MacDonald, Darcy W E Allen, Jason Potts

No abstract is available for this record.

Dong He, Karl Habermeier, Ross Leckow, Vikram Haksar · 11 authors

New technologies are driving transformational changes in the global financial system. Virtual currencies (VCs) and the underlying distributed ledger systems are among these. VCs offer many potential benefits, but also considerable risks. VCs could raise efficiency and in the long run strengthen financial inclusion. At the same time, VCs could be potential vehicles for money laundering, terrorist financing, tax evasion and fraud. While risks to the conduct of monetary policy seem less likely to arise at this stage given the very small scale of VCs, risks to financial stability may eventually emerge as the new technologies become more widely used. National authorities have begun to address these challenges and will need to calibrate regulation in a manner that appropriately addresses the risks without stifling innovation. As experience is gained, international standards and best practices could be considered to provide guidance on the most appropriate regulatory responses in different fields, thereby promoting harmonization and cooperation across jurisdictions.

FC 2017 Sliema, Michael 1974- Brenner, Kurt Rohloff, Joseph Bonneau · 12 authors

No abstract is available for this record.

Katya Malinova

Blockchain or, more generally, distributed ledger technology allows to create a decentralized digital ledger of transactions and to share it among a network of computers. In this paper, we argue that the implementation of this technology in financial markets offers investors new options for managing the degree of transparency of their holdings and their trading intentions. We first identify two intrinsic features of a distributed ledger that impact the availability of these new options, namely the mapping between identifiers and end-investors and the degree of transparency of the ledger, and we then examine how the implementation design of these critical features affects investor trading behavior, trading costs, and investor welfare, in a theoretical model of intermediated and peer-to-peer trading. The most transparent setting yields the highest investor welfare, despite the risk of front-running. In the absence of full transparency, welfare is weakly higher if investors are allowed to split their holdings among many identifiers.

John Barrdear, Michael Kumhof

We study the macroeconomic consequences of issuing central bank digital currency (CBDC) — a universally accessible and interest-bearing central bank liability, implemented via distributed ledgers, that competes with bank deposits as medium of exchange. In a DSGE model calibrated to match the pre-crisis United States, we find that CBDC issuance of 30% of GDP, against government bonds, could permanently raise GDP by as much as 3%, due to reductions in real interest rates, distortionary taxes, and monetary transaction costs. Countercyclical CBDC price or quantity rules, as a second monetary policy instrument, could substantially improve the central bank’s ability to stabilise the business cycle.

Ferdinando M. Ametrano, Emilio Barucci, Daniele Marazzina, Stefano Zanero

No abstract is available for this record.

Dirk G. Baur, KiHoon Hong, Adrian D. Lee

Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether bitcoin is a currency or an asset and, more specifically, what is its current usage and what usage will prevail in the future, given its characteristics? We analyse the statistical properties of bitcoin and find that it is essentially uncorrelated with traditional asset classes such as stocks, bonds and commodities, both in normal times and in periods of financial turmoil. The analysis of transaction data of bitcoin accounts shows that bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange. Bitcoin is still small relative to the size of other asset classes and, thus, does not pose an immediate risk for monetary, financial or economic stability.

Beate Sauer

Bitcoin gains more and more attention in the general public and is already the most popular virtual currency. At the same time, the acceptance of Bitcoin as a speculative asset and also as a payment vehicle increases. This is an indication that we might now be entering an era of parallel currency systems. Therefore, one could state that the Bitcoin network and the central banking system could become two rival systems with respect to issuing payment vehicles and providing cross-border payment systems. Our aim is to analyse the central bank incentives for establishing a network model that includes hacking. With our model we are able to explain why central banks have no incentive to advance Bitcoin regulation at the current stage of development, as this would reduce the critical mass of Bitcoin users. Finally, in combination with a central bank loss function, we are able to calculate an optimal level of central regulation.

Ashley S. Harrison, M. Scott Niederjohn, J. R. Clark

Economists define money as anything that is generally accepted in payment for goods and services or in the repayment of debts.1 Paper money and coins clearly fit this definition, but deposits in checking accounts are so widely accepted that they are also considered in the narrowest definition of money used by the Federal Reserve, called “M1.” M1 is the sum of all currency, checkable deposits, and travelers checks. How about savings accounts? These amounts are so quickly convertible into M1 that many economists consider them money too, part of a larger total called M2 that includes all of M1 plus all small denomination time deposits (bank CDs), savings accounts, and money market account balances. M2 then represents a form of money that is less “liquid” (less easily converted and spent) than M1. In addition to this definition, money is expected to satisfy three functions: serve as a medium of exchange, a store of value, and a unit of account. In this article, we will explore what Bitcoin is and why it has been so prevalent in the news of late. Further, we will apply the three functions of money to Bitcoin and discuss whether it should be considered a form of money. Some of the benefits and problems associated with Bitcoin will be discussed along with its future potential.

Ludovic Vigneron, Ramzi Benkraiem

Using a new and unique dataset dealing with French small and medium-sized enterprise (SME) financing that provides detailed information about 1 116 firm-bank relationships, we test how the number of banks with which a firm works and the organizational structure of its main bank influence its risk-taking behavior. We find evidence that SMEs engaged with a decentralized main bank (a local or mutual one) invest in less risky projects, especially when they work with fewer than three banks (one or two). We also find evidence that single-bank SMEs engaged with a centralized bank (a large or foreign one) take significantly more risks than the others.

Winston Moore, Jeremy Stephen

No abstract is available for this record.

Daniel Folkinshteyn, Mark M. Lennon, Tim Reilly

No abstract is available for this record.

Charles G. Cascarilla

Bitcoin is a new financial system that has the potential to have a big impact on the way the world does business. Its open ledger system and distribution network make it a valuable system. Although it is still in its infancy, as bitcoin becomes larger and more sophisticated, it may very well provide solutions to many of the current financial system’s problems.

Robert Viglione

No abstract is available for this record.

Odile Lakomski-Laguerre, Ludovic Desmedt

Depuis quelques années, nous assistons à l’émergence de monnaies d’un genre nouveau, reposant sur des procédés cryptographiques, gérées en pair à pair selon un consensus distribué. La plus représentative d’entre elles, le Bitcoin, est lancée après la crise financière de 2008 et vient contester un ordre monétaire fondé sur le crédit et le pouvoir bancaire. Ces crypto-monnaies viennent heurter la conception traditionnelle de la monnaie : unitaire, souveraine, territoriale et centralisée. Par conséquent, elles interrogent la théorie et renouvellent le débat sur la nature de la monnaie. Dans ce papier, nous proposons d’analyser le Bitcoin au filtre d’une théorie institutionnaliste de la monnaie. En tant qu’institution sociale, la monnaie est plus qu’une technologie, car elle participe à la construction d’un espace marchand s’articulant avec un ordre socio-économique. C’est pourquoi nous mettons en évidence les arguments de la contestation et les racines idéologiques qui sous-tendent le système Bitcoin : décentralisation, anti-étatisme (cryptage) et naturalisation de la monnaie (minage). En mettant en avant la notion centrale de confiance, nous nous intéressons ensuite à la capacité du projet Bitcoin à construire un ordre monétaire, certes alternatif, mais stable.

Jeanne L. Schroeder

Much of the discussion of bitcoin in the popular press has concentrated on its status as a currency. Putting aside a vocal minority of radical libertarians and anarchists, however, many bitcoin enthusiasts are concentrating on how its underlying technology – the blockchain – can be put to use for wide variety of uses. For example, economists at the Fed and other central banks have suggested that they should encourage the evolution of bitcoin’s blockchain protocol which might allow financial transactions to clear much efficiently than under our current systems. As such, it also holds out the possibility of becoming that holy grail of commerce – a payment system that would eliminate or minimize the roles of third party intermediaries. In addition, the NASDAQ and a number of issuers are experimenting with using the blockchain to record the issuing and trading of investments securities.\nIn this Article, I examine the implications for bitcoin under the Uniform Commercial Code (the “U.C.C.”). Specifically, I consider three issues. In Part 1, I discuss the characterization of bitcoin – which I am using generically to refer to any virtual or cryptocurrency – under Article 9. The bad news is that it does not, and cannot be made to fit into, the U.C.C.’s definition of “money”. If held directly by the owner, bitcoin constitutes a “general intangible”. Unfortunately, general intangibles are non-negotiable. This could greatly impinge on bitcoin’s liquidity and, therefore, its utility as a payment system.\nIn Part 2, I show how this may be mitigated by the rules of Article 8 governing investment securities. If the owner of bitcoin were to choose to hold it indirectly through a financial intermediary, then she and the intermediary could elect to have it treated as a “financial asset” which is super-negotiable. Unfortunately, this comes at the cost of eliminating one of the primary attractions of cryptocurrency, namely the ability to engage in financial transactions directly without a third-party intermediary. However, Article 8, may already provide a legal regime for another contemplated use for the blockchain – namely as a readily searchable means of recording the ownership and transfer of property generally.\nIn Part 3, I explain how cryptosecurities fall squarely within Article 8's definition of “uncertificated securities.” Ironically, therefore, the creation of bitcoin securities may finally breathe life to little used provisions that were invented almost 40 years ago in a failed attempt to solve a completely different problem.

Benjamin Munro, Julia McLachlan

We propose a high level network architecture for an economic system that integrates money, governance and reputation. We introduce a method for issuing, and redeeming a digital coin using a mechanism to create a sustainable global economy and a free market. To maintain a currency's value over time, and therefore be money proper, we claim it must be issued by the buyer and backed for value by the seller, exchanging the products of labour, in a free market. We also claim that a free market and sustainable economy cannot be maintained using economically arbitrary creation and allocation of money. Nakamoto, with Bitcoin, introduced a new technology called the cryptographic blockchain to operate a decentralised and distributed accounts ledger without the need for an untrusted third party. This blockchain technology creates and allocates new digital currency as a reward for "proof-of-work", to secure the network. However, no currency, digital or otherwise, has solved how to create and allocate money in an economically non-arbitrary way, or how to govern and trust a world-scale free enterprise money system. We propose an "Ontologically Networked Exchange" (ONE), with purpose as its highest order domain. Each purpose is defined in a contract, and the entire economy of contracts is structured in a unified ontology. We claim to secure the ONE network using economically non-arbitrary methodologies and economically incented human behaviour. Decisions influenced by reputation help to secure the network without an untrusted third party. The stack of contracts, organised in a unified ontology, functions as a super recursive algorithm, with individual use programming the algorithm, acting as the "oracle". The state of the algorithm becomes the "memory" of a scalable and trustable artificial intelligence (AI). This AI offers a new platform for what we call the "Autonomy-of-Things" (AoT).

Dirk G. Baur, Adrian D. Lee, KiHoon Hong

No abstract is available for this record.

Dirk G. Baur, KiHoon Hong, Adrian D. Lee

Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether Bitcoin is a medium of exchange or an asset and more specifically, what is its current usage and what usage will prevail in the future given its characteristics. We analyse the statistical properties of Bitcoin and find that it is uncorrelated with traditional asset classes such as stocks, bonds and commodities both in normal times and in periods of financial turmoil. The analysis of transaction data of Bitcoin accounts shows that Bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange.