Blockchain Papers

Natkamon Tovanich, Stefania Marcassa, Stefan Kitzler, Christos Makridis · 5 authors

No abstract is available for this record.

Harsh Saudarshan

No abstract is available for this record.

Geun-Cheol Lee, Hoon-Young Koo, Heejung Lee

In this study, we propose a valuation methodology for Non-Fungible Tokens (NFTs), focusing on the profile picture (PFP) NFT category represented by the Bored Ape Yacht Club (BAYC). To identify the attributes that influence the value of individual BAYC NFTs, we develop a hedonic pricing model that uses the NFT’s value as the dependent variable and its properties as independent variables. We apply Term Frequency-Inverse Document Frequency (TF-IDF) to quantify attributes of NFTs. Three hedonic models—linear, quadratic, and full quadratic—are proposed. For the full quadratic model, we introduce a systematic procedure to select first-order, second-order, and interaction terms in the model. To evaluate the performance of the proposed models, we carried out comparative computational experiments. We collected actual BAYC transaction data and split it into a training set (70%) and a validation set (30%). For benchmarking purposes, we compare the proposed models against four machine learning algorithms: Random Forest, Support Vector Regression (SVR), XGBoost, and LightGBM. The machine learning models perform well on the training set, however, this was largely due to overfitting. In contrast, the proposed hedonic models maintained consistent performance with minimal degradation from the training to the validation set. Among them, the full quadratic model demonstrates the highest explanatory power on the validation set in terms of adjusted R² and other evaluation metrics.

Shabnam Bolandhemat

Blockchain-based tokenization is transforming the real estate sector, presenting a compelling alternative to the traditional model of Real Estate Investment Trusts (REITs). As the industry shifts from financialization to decentralization, driven by technological advancements, these two models offer different approaches to democratizing real estate investment.REITs have been a foundational aspect of real estate financialization, enabling individual investors to participate in large-scale real estate ventures through fractional ownership of diversified property portfolios. This has broadened the investor base and improved market liquidity. However, the emergence of blockchain technology and decentralized finance (DeFi) introduces a new paradigm: real estate ownership can now be fractionalized into digital tokens. This enhances liquidity, transparency, and accessibility through global 24/7 trading platforms. While REITs have made significant strides in expanding access to real estate investment, blockchain-based tokenization can further enhance these achievements by lowering entry barriers, reducing transaction costs, and decentralizing market operations. Nevertheless, the adoption of blockchain technology in real estate also comes with challenges, including regulatory uncertainties, technological risks, and the need for robust governance frameworks. As the lines between finance and technology continue to blur, it is essential to adapt regulatory frameworks and investment strategies to navigate this evolving landscape. The critical review highlights the future implications of these trends, emphasizing the importance of continued research and regulatory innovation to fully realize the potential of decentralized real estate markets. This is particularly relevant in addressing issues of housing inequality and affordability, as housing serves not only as an investment vehicle but also as a fundamental shelter for people.

Ang Liu, Cheng Chen

No abstract is available for this record.

T Abhishek, M S Chandan, G Darshan, G Vyshnavi · 5 authors

In the evolving world of technology and digital assets, Non-fungible tokens (NFTs) have emerged as a ground-breaking innovation. These digital assets represent ownership of unique intangible items and hold significant value. Unlike cryptocurrencies such as Ethereum or Bitcoin, NFTs are indivisible and cannot be exchanged on a one-to-one basis due to their unique nature. New financial services and opportunities are created for artists, creators, and buyers through the introduction of NFTs. The proposed approach aims to revolutionize financing in a decentralized marketplace by utilizing NFTs generated from digital arts. The NFT lending system can enable owners to leverage their assets as collateral for loans. This process eliminates intermediaries, thereby resulting in liquidity being unlocked. This work’s main focus is on Viz., the design and implementation of an NFT lending system, detailing the mechanisms for valuation, risk assessment, and smart contract deployment. The system ensures transparency, security, and trustless transactions by employing DeFi protocols. This state-of-the-art method automates borrower-lender interactions through smart contracts while securely storing data using blockchain technology. Smart contracts play a key role in executing lending agreements and collateral transfers within predefined parameters. By leveraging the Ethereum blockchain, this project aims to provide consumers with access to a platform offering a wide range of financial services. This study entails how NFT lending and borrowing are managed through smart contracts, ensuring secure and trustworthy transactions.

Fei Wu, Thomas Thiery, Stefanos Leonardos, Carmine Ventre

The block-building process on the Ethereum network has changed significantly with an upgrade of its consensus protocol. Network participants access blocks through block building auctions at a decentralized financial market, termed builder market, where builders vie for the right to build blocks and earn Maximal Extractable Value (MEV) rewards. This paper employs empirical game-theoretic analysis to examine builders’ strategic bidding incentives in the Ethereum block building auctions, termed MEV-Boost auctions. We study various scenarios with different auction game settings and evaluate how critical elements such as network connectivity and access to MEV opportunities impact builders’ strategic bidding incentives. Through our analyses, we highlight the challenge of creating a decentralized yet competitive builder market.

Rajani H. Pillai, S. Deeksha, Roopa Adarsh, Arpita Sastri · 6 authors

No abstract is available for this record.

Huned Materwala, Shraddha M. Naik, Ali S. Taha, Tala Abdulrahman Abed · 5 authors

Decentralized Finance (DeFi) leverages blockchain-enabled smart contracts to deliver automated and trustless financial services without the need for intermediaries. However, the public visibility of financial transactions on the blockchain can be exploited, as participants can reorder, insert, or remove transactions to extract value, often at the expense of others. This extracted value is known as the Maximal Extractable Value (MEV). MEV causes financial losses and consensus instability, disrupting the security, efficiency, and decentralization goals of the DeFi ecosystem. Therefore, it is crucial to analyze, detect, and mitigate MEV to safeguard DeFi. Our comprehensive survey offers a holistic view of the MEV landscape in the DeFi ecosystem. We present an in-depth understanding of MEV through a novel taxonomy of MEV transactions supported by real transaction examples. We perform a critical comparative analysis of various MEV detection approaches, evaluating their effectiveness in identifying different transaction types. Furthermore, we assess different categories of MEV mitigation strategies and discuss their limitations. We identify the challenges of current mitigation and detection approaches and discuss potential solutions. This survey provides valuable insights for researchers, developers, stakeholders, and policymakers, helping to curb and democratize MEV for a more secure and efficient DeFi ecosystem.

Md. Mokshud Ali, Tanbina Tabassum

This research study offers a comprehensive overview of current advancements in financial practices in the United States. This research will examine recent shifts in American financial habits and offer stakeholders guidance on how to effectively manage the evolving financial landscape. A thorough assessment of prior literature reviews and empirical studies on digital finance in the US is part of the research methodology.The literature review focuses on how developments in financial technology (FinTech), regulatory changes, a growing emphasis on sustainability, and shifting consumer behavior have significantly altered the financial sector.. The influence of regulatory barriers, ESG integration, evolving consumer behavior, and the complex interactions affecting US financial practices are the main topics of discussion. The results underscore the significance of digital transformation, regulatory impediments and campaigns, consumer inclinations, the advantages and challenges of decentralized financing (DeFi), and cybersecurity and privacy issues. Recommendations are provided based on the results to enhance regulatory flexibility, raise financial literacy and awareness, fund cybersecurity infrastructure, encourage cooperation and information exchange, welcome responsible innovation, and track and react to market dynamics. By putting these recommendations into practice, stakeholders can better navigate the complexity of digital banking in the US and foster innovation, inclusion, and trust in the digital financial ecosystem while averting the dangers and difficulties that come with it.

Shuzheng Wang, Yue Huang, Wenqin Zhang, Yuming Huang · 6 authors

Ethereum, as a representative of Web3, adopts a novel framework called Proposer Builder Separation (PBS) to prevent the centralization of block profits in the hands of institutional Ethereum stakers. Introducing builders to generate blocks based on public transactions, PBS aims to ensure that block profits are distributed among all stakers. Through the auction among builders, only one will win the block in each slot. Ideally, the equilibrium strategy of builders under public information would lead them to bid all block profits. However, builders are now capable of extracting profits from private order flows. In this paper, we explore the effect of PBS with private order flows. Specifically, we propose the asymmetry auction model of MEV-Boost auction. Moreover, we conduct empirical study on Ethereum blocks from January 2023 to May 2024. Our analysis indicates that private order flows contribute to 54.59% of the block value, indicating that different builders will build blocks with different valuations. Interestingly, we find that builders with more private order flows (i.e., higher block valuations) are more likely to win the block, while retain larger proportion of profits. In return, such builders will further attract more private order flows, resulting in a monopolistic market gradually. Our findings reveal that PBS in current stage is unable to balance the profit distribution, which just transits the centralization of block profits from institutional stakers to the monopolistic builder.

Tri Wahyuningsih

This study explores the emerging virtual property market within the digital world, with a focus on identifying the key factors influencing property prices, market activity, and sales volume. Using a dataset of 2,000 virtual property transactions, the research provides a comprehensive analysis of market dynamics in this new frontier of digital real estate. The findings reveal significant volatility in transaction activity, with a peak of 1,222 transactions in January 2022 followed by a sharp decline to 539 in February 2022 and just 24 in March 2022, indicative of a nascent and speculative market. The analysis identifies land price as the most significant determinant of virtual property values, showing a near-perfect correlation of 0.992 with sales prices. This highlights the critical role of location and land value, similar to traditional real estate markets. Additionally, the study finds that properties attracting more bids tend to sell at higher prices, with a moderate correlation of 0.380 between bids count and sales price, reflecting the impact of competitive bidding in driving up values. However, the market is relatively illiquid, with a mean sales count of just 1.79, indicating that most properties are held as long-term investments rather than frequently traded assets. Interestingly, the research also uncovers a weak negative correlation of -0.051 between sales price and the underlying cryptocurrency, MANA, suggesting that the value of virtual properties may be increasingly decoupled from cryptocurrency volatility as the market matures. These insights provide valuable guidance for investors, developers, and policymakers navigating the evolving landscape of virtual real estate. The study concludes with a discussion of the implications for future market stability and potential areas for further research.

Babatunde Odusami, Omokolade Akinsomi

No abstract is available for this record.

Carlos Eduardo Almeida Martins de Andrade Andrade

Submitted by Nadir Basilio (nadirsb@uninove.br) on 2024-12-19T16:56:05Z No. of bitstreams: 1 Carlos Eduardo Almeida Martins de Andrade.pdf: 3699194 bytes, checksum: fded002079294c9d01b391c3d89a4f4b (MD5)

Kristof Lommers, Jack Kim

This study discusses the valuation and asset pricing of non-fungible tokens (NFTs), which are digital assets that represent unique items. The authors put forward a comprehensive framework for pricing NFTs and implementing asset pricing models in the NFT asset class. NFTs present a relatively difficult pricing problem, as the numerous idiosyncrasies of the NFT market have to be taken into account. The difficulties include the unique heterogeneous nature of NFTs, illiquid trading, limited data availability, high dimensionality of features relative to the available data, and the volatile time-varying price dynamics. The framework presented could potentially be expanded to the pricing of other “non-fungible” assets such as art, collectibles, and real estate.

Jackson Rogers

This paper provides the first analysis of non-fungible token (NFT) collection liquidity by applying a suite of widely used proxies that capture different dimensions of liquidity. Using transaction-level data from the OpenSea marketplace, manipulative trades are flagged and two novel methodologies for calculating liquidity are applied before performing a family of regressions to investigate its dynamics. I find that collection-specific attributes directly account for both NFT-specific liquidity idiosyncrasies and the impacts of manipulative trading. Following robustness tests, I identify that this collection-level power only exists in bull markets, similarly to real estate ZIP-code groupings. Finally, the estimated models reveal a non-linear liquidity pattern across a collection’s lifetime, with successful collections dipping in liquidity before recovering quickly. This paper deepens our understanding of how liquidity operates at the collection level in NFTs, offering findings for liquidity researchers in non-fungible asset markets.

Jun Zhu, Man Zhu, Zhiwei Yang

No abstract is available for this record.

Manoel Fernando Alonso Gadi, Maximilian Schmidt, Noah Ruemmele, Miguel‐Ángel Sicilia

Stock market indices are pivotal tools for establishing market benchmarks, enabling investors to navigate risk and volatility while capitalizing on the stock market's prospects through index funds. For participants in decentralized finance (DeFi), the formulation of a token index emerges as a vital resource. Nevertheless, this endeavor is complex, encompassing challenges such as transaction fees and the variable availability of tokens, attributed to their brief history or limited liquidity. This research introduces an index tailored for the Ethereum ecosystem, the leading smart contract platform, and conducts a comparative analysis of capitalization-weighted (CW) and equal-weighted (EW) index performances. The article delineates exhaustive criteria for token eligibility, intending to serve as a comprehensive guide for fellow researchers. The results indicate a consistent superior performance of CW indices over EW indices in terms of return and risk metrics, with a 30-constituent CW index outshining its counterparts with varied constituent numbers. The recommended CW30 index demonstrates substantial advantages in comparison to established benchmarks, including prominent indices like DeFi Pulse Index (DPI) and CRypto IndeX (CRIX). Additionally, the article explores the practicality of implementing the CW30 in Layer 2 networks of the Ethereum Ecosystem, advocating for the Arbitrum infrastructure as the optimal choice for the decentralized crypto index protocol herein referred to as the Ethereum Ecosystem Index (EEI). The study's insights aspire to enrich the DeFi ecosystem, offering a nuanced understanding of network selection and a strategic framework for implementation. This research significantly enhances the existing literature on index construction and performance within the Ethereum ecosystem. To our knowledge, it represents a pioneering comprehensive analysis of an index that accurately mirrors the Ethereum market, advancing our comprehension of its intricacies and wider ramifications. Moreover, this study stands as one of the initial thorough examinations of index construction methodologies within the nascent asset class of crypto. The insights gleaned provide a pragmatic approach to index construction and introduce an index poised to serve as a benchmark for index products. In illuminating the unique facets of the Ethereum ecosystem, this research makes a substantial contribution to the current discourse on crypto, offering valuable perspectives for investors, market stakeholders, and the ongoing exploration of digital assets.

Lioba Heimbach, Vabuk Pahari, Eric Schertenleib

The prevalence of maximal extractable value (MEV) in the Ethereum ecosystem has led to a characterization of the latter as a dark forest. Studies of MEV have thus far largely been restricted to purely on-chain MEV, i.e., sandwich attacks, cyclic arbitrage, and liquidations. In this work, we shed light on the prevalence of non-atomic arbitrage on decentralized exchanges (DEXes) on the Ethereum blockchain. Importantly, non-atomic arbitrage exploits price differences between DEXes on the Ethereum blockchain as well as exchanges outside the Ethereum blockchain (i.e., centralized exchanges or DEXes on other blockchains). Thus, non-atomic arbitrage is a type of MEV that involves actions on and off the Ethereum blockchain. In our study of non-atomic arbitrage, we uncover that more than a fourth of the volume on Ethereum's biggest five DEXes from the merge until 31 October 2023 can likely be attributed to this type of MEV. We further highlight that only eleven searchers are responsible for more than 80% of the identified non-atomic arbitrage volume sitting at a staggering $132 billion and draw a connection between the centralization of the block construction market and non-atomic arbitrage. Finally, we discuss the security implications of these high-value transactions that account for more than 10% of Ethereum's total block value and outline possible mitigations.

Thomas LI, Andrew Papanicolaou, Lorenzo Schönleber

No abstract is available for this record.

Deigo de Saldnha, Adam Trope, Omokolade Akinsomi, Daramola Olapade · 5 authors

The advancement in digital technologies such as cryptography, blockchain, artificial intelligence (AI), virtual and augmented realities has blurred the difference between reality and the digital world. Through the Metaverse, a 3D virtual environment that serves as a hub for all types of business, education, and leisure experiences; investment activities akin to those in real world are being carried out with the help of augmented and virtual reality services. People now invest in virtual real estate and other digital assets using Non-Fungible Token (NFT). It is however unclear how investors in developing economies such as South Africa view such an investment option. This paper examines the perception of investors in South Africa (SA) on investing in virtual real estate in the Metaverse. This study employs a mixed method approach involving questionnaire administration and interview. Questionnaire were administered on 20 selected investors in South Africa (SA). This was followed up by interview. The results were analysed using descriptive approach. The findings reveal that is a high awareness level (85%) among the selected SA investors on investment in virtual real estate, the willingness to invest in it is however lower (65%) and only 15% of the investors have investment in virtual real estate. The low entry rate of investment in virtual real estate in the Metaverse amidst a high level of willingness to invest shows that there are certain factors preventing investments in it. The study recommends that a robust governance should be put in place to allay the security concern and high volatility expressed by investors This paper is among the few studies that have considered investment in the Metaverse from a real estate perspective.

Ng, Tsz Yik, 吳梓翌

Adopting Blockchain Technology (BT) to enhance effectiveness and efficiency in different industries is an emerging field of study. Given the complexity and costliness of the property transaction process, as well as the unaffordable property prices in Hong Kong, there is a pressing need for innovative solutions to simplify the processes and enhance the accessibility to real estate investment. This research examines the potential application of BT in the Hong Kong real estate market and evaluates its capacity to revolutionize the sector, as well as the potential obstacles it might face. This research employed a multi-faceted research methodology, by commencing with a comprehensive literature review on different BT concepts such as tokenization, decentralization, smart contracts, Non-Fungible Tokens (NFTs), fractional ownership, and the current transaction processes in Hong Kong real estate market. Then, combined with the interviews with experts and case studies of the successful adoption of BT in the foreign real estate market to analyse the feasibility and potential impact of adopting BT on Hong Kong real estate transactions. The result of this research reveals that BT could have a significant impact on Hong Kong’s real estate market by enabling fractional ownership, creating an efficient one-stop online transaction platform, and innovating the NFT crowdfunding method. It could offer transformative benefits such as enhanced security, transparency, efficiency, and lower the threshold for real estate investment. However, the traditional transaction methods remain deeply entrenched in Hong Kong real estate market and the technological landscape of BT is still nascent. Implementing BT in Hong Kong real estate transactions would face several challenges including regulatory hurdles, high integration costs, and market resistance. The revolution is undoubtedly challenging and necessitates careful consideration and strategic planning.

Angelo Aspris, Jiří Švec

ABSTRACT Using comprehensive transaction level loan data for the MakerDAO protocol (2019–2023), this study investigates decentralized finance (DeFi) lending dynamics, focusing on the deter- minants of loan demand and the interplay between leverage, skill, and user performance. We document a counterintuitive positive relationship between the cost of borrowing and loan demand, consistent with yield seeking behavior. Moreover, blockchain- and protocol-specific frictions, such as gas fees shape borrowing activity. At the vault level, leverage universally reduces returns and amplifies liquidation risk, with unskilled users incurring significantly greater losses than skilled counterparts under extreme leverage. While skilled users mitigate moderate leverage risks through active management, excessive leverage erodes performance across all skill levels, with forced liquidations accounting for a significant proportion of this decline. The findings reveal critical trade-offs in DeFi permissionless architecture. While skilled participants exploit leverage strategically, systemic design features disproportionately penalize less sophisticated users.

Somar Al-Mohamad, Audil Rashid Khaki, Mohamed M. Sraieb

No abstract is available for this record.