Ingrid Bauer, Qianyu Liu, Claudio J. Tessone, Gerhard Schwabe
While a wealth of potentially valuable data is generated and stored every year, many businesses suffer from inefficiencies, information asymmetries, and high storage costs, and lack knowledge on how to monetize their data assets. Blockchain is said to offer crucial building blocks to enable a verified, traceable exchange and trading with sensitive data goods and to address current challenges. While the technology's potentials for decentralized data markets have been discussed, the question of how to realize it to optimize trading and welfare remains open. Applying design-science research methods and computational simulation to a real-world business-oriented blockchain project, this study proposes a market model. By adopting the consortium blockchain, we are thinking outside the confines of tokens tied to a blockchain when applying blockchain to the data trading market. Our marketplace is designed outside the speculative tokens space and can focus on the data trading marketplace. We evaluate the effects of different pricing functions on market welfare and trading in on-chain data goods. The results indicate that data trading and welfare can be maximized through a logarithmic pricing function. Further, in a market of heterogeneous agents, unexpectedly, we observe a tipping point in transaction fees above which market operations collapse. Monitoring the market's consumer price elasticity helps us to avoid this collapse node, and we can also impact it by controlling transaction costs. Academics and practitioners can learn about the idiosyncrasies of blockchain in market design and operation.
Purpose This paper aims to explore the problem of power imbalance within decentralized autonomous organizations (DAOs) and propose potential solutions that could contribute to enhancing the democratic nature of DAOs. Design/methodology/approach In this paper, the authors apply a qualitative methodology. Using a thematic coding analysis, the authors process data collected from interviews with 11 experts. Findings Multiple factors contribute to the perceived lack of democracy within DAOs, such as token concentration and effective stakeholder communication. Next, quadratic voting has the potential to enhance democracy within DAOs, but this mechanism must be implemented mindfully. Finally, the results were nuanced when it comes to the effectiveness of liquid democracy in DAOs to enhance voter participation and representation. Originality/value To the best of the authors’ knowledge, this paper is one of the first research contributions to propose recommendations to address the power imbalance within DAOs and to contribute to the advancement of decentralized decision-making structures.
Eric Chiquito, Ulf Bodin, Olov Schelén, Ahmed Afif Monrat
Open-cry electronic auctions have revolutionized the landscape of high-value transactions for buying and selling goods. Online platforms such as eBay and Tradera have popularized these auctions due to their global accessibility and convenience. However, these centralized auctioning platforms rely on trust in a central entity to manage and control the processing of bids, e.g., the submission time and validity. The use of blockchain technologies for constructing decentralized systems has gained popularity for their versatility and useful properties toward decentralization. However, blockchain-based open-cry auctions, are sensitive to the order of transactions and deadlines which, in the absence of a governing party, need to be provided in the system design. In this paper, we identify the key properties for the development of decentralized open-cry auctioning systems, including verifiability, transaction immutability, ordering, and time synchronization. Three prominent blockchain platforms, namely, Ethereum, Hyperledger Fabric, and R3 Corda were analyzed in terms of their capabilities to ensure these properties for gap identification. We propose a solution design that addresses these key properties and presents a proof-of-concept (PoC) implementation of such design. Our PoC uses Hyperledger Fabric and mitigates the identified gaps related to the time synchronization of this system by utilizing an external component. During the chaincode execution, the creation and submission of bids initiate requests to the time service API. This API service retrieves trusted timestamps from NTP services to obtain accurate bid times. We then analyzed the system design and implementation in the context of the identified key properties. Lastly, we conducted a performance evaluation of the time service and the PoC system implementation in time-sensitive scenarios and assessed its overall performance.
Handling congestion in blockchain systems is a fundamental problem given that the security and decentralization objectives of such systems lead to designs that compromise on (horizontal) scalability (what sometimes is referred to as the "blockchain trilemma"). Motivated by this, we focus on the question whether it is possible to design a transaction inclusion policy for block producers that facilitates fee and delay predictability while being incentive compatible at the same time. Reconciling these three properties is seemingly paradoxical given that the dominant approach to transaction processing is based on first-price auctions (e.g., as in Bitcoin) or dynamic adjustment of the minimum admissible fee (e.g. as in Ethereum EIP-1559) something that breaks fee predictability. At the same time, in fixed fee mechanisms (e.g., as in Cardano), fees are trivially predictable but are subject to relatively inexpensive bribing or denial of service attacks where transactions may be delayed indefinitely by a well funded attacker, hence breaking delay predictability. In this work, we set out to address this problem by putting forward blockchain space tokenization (BST), namely a new capability of a blockchain system to tokenize its capacity for transactions and allocate it to interested users who are willing to pay ahead of time for the ability to post transactions regularly for a period of time. We analyze our system in the face of worst-case transaction-processing attacks by introducing a security game played between the mempool mechanism and an adversary. Leveraging this framework, we prove that BST offers predictable and asymptotically optimal delays, predictable fees, and is incentive compatible, thus answering the question posed in the affirmative.
In the context of Blockchains and Decentralized Finance the notion of Maximal Extractable Value (MEV) is attracting more and more attention. MEV is the maximum gain that users-including miners and validators-can obtain by interacting with a smart contract and with its dependencies. Such profits witness attacks that also exploit strategic transaction manipulations (e.g., reordering transactions in blocks) and distort the meaning of smart contracts. The use of the notion of noninterference for modeling and analysing MEV attacks has recently been proposed in the literature. Noninterference aims to capture unwanted information flows in multi-level systems. Various definitions of noninterference have been presented, and among these those based on unwinding conditions allow the possible flows to be specifically located in a system. In this paper we investigate the use of such unwinding conditions to analyze MEV. We exploit a simple case study-the Bet contract-to highlight the advantages and disadvantages of our proposal.
This paper introduces a novel framework for rate discovery in de-centralized finance (DeFi), focusing on the unique challenges andopportunities within decentralized lending platforms. We explorethe mechanisms of interest rate formation in a decentralized en-vironment, free from traditional banking institutions’ control. Byleveraging lending pool dynamics, we propose a method that inte-grates borrowers’ risk profiles with market liquidity conditions todetermine fair borrowing rates without third party involvment. Ourmodel aims to offer a transparent and reliable solution for rate dis-covery in DeFi. Through a series of simulations, we demonstratethe potential of our framework to improve lending practices in theDeFi ecosystem, making it a viable and competitive alternative toconventional financial systems. The findings suggest that our ap-proach not only enhances the transparency and fairness of the lend-ing process but also encourages a more informed participation oflenders and borrowers, ultimately contributing to the stability andgrowth of the DeFi market.
Smart contracts are computer programs running on blockchains to automate the transaction execution between users. The absence of contract specifications poses a real challenge to the correctness verification of smart contracts. Program invariants are properties that are always preserved throughout the execution, which characterize an important aspect of the program behaviors. In this paper, we propose a novel invariant generation framework, INVCON+, for Solidity smart contracts. INVCON+ extends the existing invariant detector, InvCon, to automatically produce verified contract invariants based on both dynamic inference and static verification. Unlike INVCON+, InvCon only produces likely invariants, which have a high probability to hold, yet are still not verified against the contract code. Particularly, INVCON+ is able to infer more expressive invariants that capture richer semantic relations of contract code. We evaluate INVCON+ on 361 ERC20 and 10 ERC721 real-world contracts, as well as common ERC20 vulnerability benchmarks. The experimental results indicate that INVCON+ efficiently produces high-quality invariant specifications, achieving a recall of 80%, which can be used to secure smart contracts from 17 types of common vulnerabilities.
Decentralized Autonomous Organizations (DAOs) are organizations governed by smart contracts and blockchain technology. DAOs can use a constitution to clarify their operations. Despite their increasing prevalence, the contents of DAO constitutions and their role in governing these organizations remain relatively unexplored. This study aims to fill this gap by investigating the contents of existing DAO constitutions. Using a grounded theory approach, we collected a sample of 27 constitutional documents from active DAOs. These documents were systematically coded, resulting in a framework of unified concepts that populate DAO constitutions. Our findings reveal several thematic areas DAO constitutions, including technology, governance, finance, and community. After its creation, expert interviews validated the framework, confirming its relevance and suggesting refinements. This research contributes to a deeper understanding of the governance mechanisms within DAOs and provides a foundational framework for future studies in this area.