Blockchain Papers

Jonas Gehrlein, Grzegorz Miebs, Matteo Brunelli, Miłosz Kadziński

No abstract is available for this record.

Benedikt Franke, Qi Gao Fritz, André Stenzel

We investigate the potential and limits of privacy-preserving corporate blockchain applications for information provision. We provide a theoretical model in which heterogeneous firms choose between adopting a blockchain application or relying on traditional third-party intermediaries to inform the capital market. The blockchain’s ability to generate information depends on each firm’s data profile and all firms’ endogenous adoption decisions. We show that blockchain technology can improve the information environment and outperform traditional institutions with firms’ adoption decisions serving as a credible value signal and the application uncovering firm values by analyzing all participating firms’ data. However, we also characterize an adverse mixed-adoption equilibrium in which neither of the two channels realizes its full potential and information provision declines not only for individual firms, but also in aggregate. The equilibrium is a warning sign that has broad implications for policymakers’ regulatory effort and investors’ assessment of corporate blockchain applications. This paper was accepted by Suraj Srinivasan, accounting. Funding: B. Franke and Q. Gao Fritz gratefully acknowledge financial support from the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) Project-ID 403041268–TRR 266 Accounting for Transparency. A. Stenzel gratefully acknowledges financial support from the DFG through CRC TR 224 (Project C03) during prior employment at the University of Mannheim. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2023.4718 .

Jason Milionis, Ciamac C. Moallemi, Tim Roughgarden

In decentralized finance ("DeFi"), automated market makers (AMMs) enable traders to programmatically exchange one asset for another. Such trades are enabled by the assets deposited by liquidity providers (LPs). The goal of this paper is to characterize and interpret the optimal (i.e., profit-maximizing) strategy of a monopolist liquidity provider, as a function of that LP's beliefs about asset prices and trader behavior. We introduce a general framework for reasoning about AMMs based on a Bayesian-like belief inference framework, where LPs maintain an asset price estimate. In this model, the market maker (i.e., LP) chooses a demand curve that specifies the quantity of a risky asset to be held at each dollar price. Traders arrive sequentially and submit a price bid that can be interpreted as their estimate of the risky asset price; the AMM responds to this submitted bid with an allocation of the risky asset to the trader, a payment that the trader must pay, and a revised internal estimate for the true asset price. We define an incentive-compatible (IC) AMM as one in which a trader's optimal strategy is to submit its true estimate of the asset price, and characterize the IC AMMs as those with downward-sloping demand curves and payments defined by a formula familiar from Myerson's optimal auction theory. We generalize Myerson's virtual values, and characterize the profit-maximizing IC AMM. The optimal demand curve generally has a jump that can be interpreted as a "bid-ask spread," which we show is caused by a combination of adverse selection risk (dominant when the degree of information asymmetry is large) and monopoly pricing (dominant when asymmetry is small). This work opens up new research directions into the study of automated exchange mechanisms from the lens of optimal auction theory and iterative belief inference, using tools of theoretical computer science in a novel way.

Arianna Trozze, T. Davies, Bennett Kleinberg

Fraud across the decentralized finance (DeFi) ecosystem is growing, with victims losing billions to DeFi scams every year. However, there is a disconnect between the reported value of these scams and associated legal prosecutions. We use open-source investigative tools to (1) investigate potential frauds involving Ethereum tokens using on-chain data and token smart contract analysis, and (2) investigate the ways proceeds from these scams were subsequently laundered. The analysis enabled us to (1) uncover transaction-based evidence of several rug pull and pump-and-dump schemes, and (2) identify their perpetrators’ money laundering tactics and cash-out methods. The rug pulls were less sophisticated than anticipated, money laundering techniques were also rudimentary and many funds ended up at centralized exchanges. This study demonstrates how open-source investigative tools can extract transaction-based evidence that could be used in a court of law to prosecute DeFi frauds. Additionally, we investigate how these funds are subsequently laundered.

Jiahao He, Guangyuan Zhang, Jiheng Zhang, Rachel Q. Zhang

Problem definition: A blockchain payment system, such as Bitcoin or Ethereum, validates electronic transactions and stores them in a chain of blocks without a central authority. Miners with computing power compete for the rights to create blocks according to a preset protocol, referred to as hashing or mining, and, in return, earn fees paid by users who submit transactions. Because of security concerns caused by decentralization, a transaction is confirmed after a number of additional blocks are subsequently extended to the block containing it. This confirmation latency introduces an intricate interplay between miners and users. This paper provides approximate system equilibria and studies optimal designs of a blockchain. Methodology/results: The hashing process is essentially a single-server queue with batch services based on a fee-based priority discipline, and confirmation latency adds complexity to the equilibrium behavior and optimal design. We analyze how miners’ participation decisions interact with users’ participation and fee decisions and identify optimal designs when the goal is to maximize the throughput or social welfare. We validate our model and conduct numerical studies using data from Bitcoin. Managerial implications: By incorporating security issues, we uncover the interdependence of the decisions between users and miners and the driver for nonzero entrance fees in practice. We show that miners and users may end up in either a vicious or virtuous cycle, depending on the initial system state. By allowing the entrance fee to be a design parameter, we are able to establish that it is optimal to simply run a blockchain system at its full capacity and a block size as small as possible. Funding: This work was supported by the Hong Kong Research Grants Council [Grants 16200019, 16200617, 16200821, 16208120, and 16214121]. Supplemental Material: The e-companion is available at https://doi.org/10.1287/msom.2023.1197 .

Archit Jain, Nitin Gupta, M. Sreenu

Cognitive radio networks allow opportunistic spectrum access to the unlicensed users, which rely on effective spectrum sensing. Recently, cooperative sensing has been found to improve sensing reliability. However, sometimes the selfish users do not cooperate, and therefore, different incentive design mechanisms like contract theory have been proposed recently, where the cooperation is encouraged by offering appropriate reward to the sensing participants. However, still no secure structure exists for the reward distribution after a successful contract completion, and a user may also deny sensing even after accepting the contract. This work proposes the use of blockchain-based smart contracts, which are based upon a permissioned blockchain that helps in making the transactions private among the participants. Further, the efficiency of this approach is improved by introducing a reputation parameter for the users. This measures the trustworthiness of a particular user based upon the accuracy of their recent sensing results. Further, a money locking approach is proposed from which a penalty is deducted if the user denies or fails to submit a correct reading. Performance analysis of the proposed scheme is done to show the superiority of the scheme.

Rainer Feichtinger, Robin Fritsch, Yann Vonlanthen, Roger Wattenhofer

Decentralized autonomous organizations (DAOs) are a recent innovation in organizational structures, which are already widely used in the blockchain ecosystem. We empirically study the on-chain governance systems of 21 DAOs and open source the live dataset. The DAOs we study are of various size and activity, and govern a wide range of protocols and services, such as decentralized exchanges, lending protocols, infrastructure projects and common goods funding. Our analysis unveils a high concentration of voting rights, a significant hidden monetary costs of on-chain governance systems, as well as a remarkably high amount of pointless governance activity.

K Devendran, Vani Rajasekar, Vandana Sharma, Ahmed A. Elngar · 5 authors

Research shows that 68% of online purchases are influenced by the reviews of the products that are being sold. Online retailers know the importance of online reviews and how those reviews impact their business. Online review sites are widely used in the hotel sector and by online retailers. Because these evaluations account for such many sales, there is always the risk that they may be exploited or interfered with. The issue is that these systems are highly centralized, leaving them vulnerable to manipulation and control. In this paper, we discussed the possibility of a decentralized, unbiased review system and an abstract implementation of that system. This review system will be a collection of smart contracts which can be deployed on the Ethereum blockchain. The blockchain's decentralized characteristic might be used to establish an unbiased and fair review system that increases consumer connections and confidence. On Test Networks, we build and test smart contracts in this project. The architectural flow and system components are also provided. In conventional review systems, the user usually adds a new review, and this review is stored in a centralized database of the service provider. The service provider can edit the review, it can also be permanently deleted from the platform. Since reviews drive a major part of the sales, this control over the reviews system can affect users who might have found the deleted review to be useful. A blockchain is a continuously increasing collection of linked and encrypted documents known as blocks. When a blockchain is used, a digital item's ability to duplicate indefinitely is eliminated. Consumer review systems might benefit from blockchain's decentralized and tamper resistant features.

Corban Allenbrand

Conflicts between supply chain members emerge because individual strategic actions may not be jointly optimal. Efforts to forecast consumer demand represent a source of conflict. The coordination of forecasts requires a powerful incentive alignment approach. This work proposes a smart contract equipped consortium blockchain system that creates an incentive structure that makes coordination with respect to forecasts economically appealing. Distortions of demand information due to uncoordinated forecasting are captured by a bullwhip measure that factors both forecast error and variance. Cooperation under the system is shown to help minimize this bullwhip measure, thus generating new outcomes for the participants that allow for a higher reward. Under a fixed payout structure, the system achieves credibility of continued cooperation, thus promoting an optimally coordinated equilibrium between the retailer and supplier. Blockchain technology represents a novel information system and consensus formation mechanism that can intermediate the behavior of a supply chain network.

Shishu Ding, Hao Hu, Lei Dai, Wen Wang

Despite the well-documented benefits and encouraging policy environment for blockchain technology (BT), its extensive adoption in the construction industry is still unsolved. The interorganizational diffusion of BT is not explored in existing studies, requiring a comprehensive investigation for better government policymaking. Thus, from the technology diffusion perspective, this paper proposes an evolutionary game-based system dynamics (EG-SD) model to describe the complicated relationships between government and construction enterprises in the process of BT adoption. Through theoretical analysis, the main stakeholders, influencing factors, and diffusion channels in the process of BT adoption are identified. Further, a simulation collecting data from China’s construction industry is conducted to evaluate the diffusion performance under different scenarios. This study contributes to the body of knowledge by providing a quantitative perspective for understanding BT adoption behaviors among construction enterprises and revealing the diffusion mechanism of BT from a multilevel perspective. Also, this paper for the first time combines evolutionary game theory with system dynamics into explaining BT adoption, providing practical implications to both government and construction enterprises on policymaking and promoting BT adoption practices.

Nikolay Ivanov, Chenning Li, Qiben Yan, Zhiyuan Sun · 6 authors

The blockchain technology has been used for recording state transitions of smart contracts - decentralized applications that can be invoked through external transactions. Smart contracts gained popularity and accrued hundreds of billions of dollars in market capitalization in recent years. Unfortunately, like all other programs, smart contracts are prone to security vulnerabilities that have incurred multimillion-dollar damages over the past decade. As a result, many automated threat mitigation solutions have been proposed to counter the security issues of smart contracts. These threat mitigation solutions include various tools and methods that are challenging to compare. This survey develops a comprehensive classification taxonomy of smart contract threat mitigation solutions within five orthogonal dimensions: defense modality, core method, targeted contracts, input-output data mapping, and threat model. We classify 133 existing threat mitigation solutions using our taxonomy and confirm that the proposed five dimensions allow us to concisely and accurately describe any smart contract threat mitigation solution. In addition to learning what the threat mitigation solutions do, we also show how these solutions work by synthesizing their actual designs into a set of uniform workflows corresponding to the eight existing defense core methods. We further create an integrated coverage map for the known smart contract vulnerabilities by the existing threat mitigation solutions. Finally, we perform the evidence-based evolutionary analysis, in which we identify trends and future perspectives of threat mitigation in smart contracts and pinpoint major weaknesses of the existing methodologies. For the convenience of smart contract security developers, auditors, users, and researchers, we deploy a regularly updated comprehensive open-source online registry of threat mitigation solutions.

Tianyuan Hu, Bixin Li, Zhenyu Pan, Qián Chen

Smart contract security is one of the core issues in any application based on blockchain. There are many techniques focusing on smart contract security, however, due to the diversity of Solidity versions and limitations of detection time, it is difficult for them to comprehensively localize defects in different versions of smart contracts. In this article, we propose a static defect detection method based on the knowledge graph of the Solidity language and present a defect detection tool calledSoliDetector. First, we define the ontology layer of the knowledge graph and construct the instance layer in which syntactic and logical relationships are captured. Second, we introduce the defect pattern to describe each defect and design inference rules to infer complex relationships and judge whether a defect exists. Finally, we localize defects by executing SPARQL queries.SoliDetectorcan support the detection of 20 kinds of defects and the automatic SPARQL query generation. We conducted several experiments on multiple datasets.SoliDetectorobtains a highF-score(i.e., 92.97% on Dataset1 and 91.54% on the SmartBug dataset). To compareSoliDetectorwithSmartCheck,Slither, andMythril, we conducted experiments on a labeled benchmark Dataset3 and real-world contracts.SoliDetectorhas a highF-scoreof 94.04% and is faster than other tools with an average time of 0.37 s for each contract.

Juntao Chen, Junaid Farooq, Quanyan Zhu

The massive deployment of Internet of Things (IoT) devices, including sensors and actuators, is ushering in smart and connected communities of the future. The massive deployment of IoT devices, including sensors and actuators, is ushering in smart and connected communities of the future. The availability of real-time and high-quality sensor data is crucial for various IoT applications, particularly in healthcare, energy, transportation, etc. However, data collection may have to be outsourced to external service providers (SPs) due to cost considerations or lack of specialized equipment. Hence, the data market plays a critical role in such scenarios where SPs have different quality levels of available data, and IoT users have different application-specific data needs. The pairing between data available to the SP and users in the data market requires an effective mechanism design that considers the SPs’ profitability and the Quality-of-Service (QoS) needs of the users. We develop a generic framework to analyze and enable such interactions efficiently, leveraging tools from contract theory and mechanism design theory. It can enable and empower emerging data-sharing paradigms, such as Sensing-as-a-Service (SaaS). The contract design creates a pricing structure for on-demand sensing data for IoT users. By considering a continuum of user types, we capture a diverse range of application requirements and propose optimal pricing and allocation rules that ensure QoS provisioning and maximum profitability for the SP. Furthermore, we provide analytical solutions for fixed distributions of user types to analyze the developed approach. For comparison, we consider the benchmark case assuming complete information of the user types and obtain optimal contract solutions. Finally, a case study based on the example of a virtual reality application delivered using unmanned aerial vehicles (UAVs) is presented to demonstrate the efficacy of the proposed contract design framework.

Yoshiro Saito, John A. Rose

The Decentralized Autonomous Organization (DAO), a group organized by governance rules programmed on a blockchain, has recently been attracting attention as a novel organizational form. The effectiveness of a DAO’s decentralized governance mechanism and transparency, as secured by its code, has generally been discussed in contrast with traditional stock companies. However, the potential of a DAO for non-profits, which provide goods and services that profit-seeking organizations do not offer, has been less discussed. This paper presents a proof-of-concept implementation to demonstrate the advantages of utilizing a DAO governance framework for non-profits. To this end, this study developed a DAO governance framework incorporating a reputation-based decision-making system, a peer evaluation system, and a transparent, real-time accounting system for the Ethereum blockchain. Most current decentralized governance systems rely heavily on token-based voting using governance tokens with stock-like features. However, there is a need for a voting mechanism beyond token-based voting for non-profits, which do not have owners. Therefore, the developed application applies an existing reputation-based voting mechanism and integrates additional features, such as a membership system with mutual evaluation and a reputation NFT to visualize contributions. Several exemplar demonstrations were conducted to evaluate its key functionalities. This application enabled discussions across the boundary between technology and society in terms of the key aspects of non-profits: i) transparency of finance and governance, ii) participatory governance by diverse stakeholders, and iii) equity and inclusiveness of the consensus mechanism. The results indicated that blockchain technology compensates for a non-profit’s vulnerabilities, and illustrated that the proposed reputation-based governance mechanisms are well-motivated. However, the results also revealed that blockchain-based governance involves as many potential risks and limitations as it brings benefits. Lastly, by providing several possible solutions to these constraints as well as recommendations for future research, this paper contributes to the sustainable development of non-profits as one of the foundations of democratic governance.

Daehan Kim, Doojin Ryu, Robert I. Webb

No abstract is available for this record.

Sihan He

Nakamoto’s Bitcoin is the first decentralized digital cash system that utilizes a blockchain to manage transactions in its peer-to-peer network. The newer generation of blockchain systems, including Ethereum, extend their capabilities to support deployment of smart contracts within their peer-to-peer networks. However, smart contracts cannot acquire data from sources outside the blockchain since the blockchain network is isolated from the outside world. To obtain data from external sources, smart contracts must rely on Oracles, which are agents that bring data from the outside world to a blockchain network. However, guaranteeing that the oracle’s off-chain nodes are trustworthy remains a challenge. A centralized oracle that relies on a single off-chain node creates a single point of failure. Therefore, a decentralized mechanism is necessary. One possible design for a decentralized oracle is to use a game mechanism that utilizes the Schelling-point theory to identify the correct data point among various data points reported by the oracle’s off-chain nodes. In this paper, we introduce Spartan Price Oracle (SPO), a decentralized oracle designed to provide accurate price data. SPO utilizes the Schelling-point theory in its game mechanism to ensure the accuracy of the price data it provides. The mechanism design of SPO is based on SchellingCoin but with two significant improvements. Firstly, SPO uses Kernel Density Estimation to estimate the probability density function of data points that are reported by multiple off-chain nodes. This enables SPO to identify the accurate data by determining the mode of the probability density function. Secondly, SPO utilizes a redistributive economic incentive model that incorporates an appeal mechanism to increases the maximum reward for its off-chain nodes. This model has been proven to raises the budget required for compromising off-chain nodes and helps in preventing potential attacks on the oracle.

Authors unavailable

No abstract is available for this record.

Diana Hawashin, Khaled Salah, Raja Jayaraman, Ahmad Musamih

The authenticity, traceability, and management of expensive food products require trusted, secure, and transparent end-to-end data provenance and transactions. In today’s systems, transactions and data related to managing and tracing the origins and history of food products are typically stored in segregated data repositories, and controlled and managed by centralized entities, with no access or visibility to the public or key stakeholders. This increases the risk of data loss, alteration, and tampering. Further it erodes trust among all stakeholders, and weakens consumer sentiment and confidence in the expensive food market, and raises concerns about the verifiability and authenticity of expensive food products. To overcome this problem, this paper addresses the lack of traceability and authenticity problems in expensive food products utilizing blockchain technology and NFTs. NFTs are blockchain-based tokens that can be utilized to represent ownership of unique assets. We propose an NFT-based solution for expensive food products trading management, where the ownership of a food product is maintained by using digital certification, and the trading process is facilitated by smart contracts. We utilize composable NFTs for food products, where interrelated products, such as raw materials, packaged products, and Lots, are represented as top-down and bottom-up composable NFTs in the form of parent-child relationship. Composable NFTs embed extra utility within NFTs, especially when subsets of NFTs are needed. We integrate the InterPlanetary File System (IPFS) decentralized storage into our solution to avoid storing large files on the blockchain while maintaining their permanency and immutability. We present various diagrams to show the system elements and the interactions among them. We illustrate algorithms along with the solution implementation details. We evaluate our solution by conducting cost and security analyses. We make our smart contracts code publicly available on GitHub.

Peiyun Ran, Mingsheng Liu, Jianwu Zheng, Md Zakirul Alam Bhuiyan · 10 authors

No abstract is available for this record.

Surendra Tripathi, Tarun Kotagiri, P. Sanjeeva, Saurabh Aggarwal

Cryptocurrencies have been gaining popularity in India, but the lack of reliable and safe platforms for trading has been a significant concern. This research paper proposes a decentralized exchange (DEX) platform that enables Indian users to trade cryptocurrencies for Indian Rupees (INR). The system uses the Chainlink decentralized oracle network to convert INR to the equivalent ETH, the base currency for trading on the DEX platform. The proposed platform aims to provide secure and transparent trading to users, ensuring that transactions are executed instantly and at a fair market price. The paper outlines the technical details of the proposed DEX platform, including the integration with Chainlink oracles for price feeds and the development of smart contracts for trading. The platform utilizes the Ethereum blockchain and is built using Solidity, a programming language for smart contracts. Finally, the paper concludes with an evaluation of the proposed DEX platform, highlighting its potential benefits for Indian users and its potential impact on the broader cryptocurrency ecosystem in India. This research paper’s findings can guide the development of more secure and reliable DEX platforms in India and beyond.

Tibor Neugebauer, Yilong Xu

No abstract is available for this record.

Paulo Vieira, Helena Isabel Barroso Saraiva

No abstract is available for this record.

Wei-Meng Lee

In the previous chapter, you saw what a smart contract is, how it works, and how to create one. In this chapter, you will learn one good use case of a smart contract and at the same time learn some advanced techniques in Solidity.

Shirley Tang, Huifen Cai, Mengyao Xia, Abeba N. Turi

No abstract is available for this record.