Crypto-coins (also known as cryptocurrencies) are tradable digital assets. Notable examples include Bitcoin, Ether and Litecoin. Ownerships of cryptocoins are registered on distributed ledgers (i.e., blockchains). Secure encryption techniques guarantee the security of the transactions (transfers of coins across owners), registered into the ledger. Cryptocoins are exchanged for specific trading prices. While history has shown the extreme volatility of such trading prices across all different sets of crypto-assets, it remains unclear what and if there are tight relations between the trading prices of different cryptocoins. Major coin exchanges (i.e., Coinbase) provide trend correlation indicators to coin owners, suggesting possible acquisitions or sells. However, these correlations remain largely unvalidated. In this paper, we shed lights on the trend correlations across a large variety of cryptocoins, by investigating their coin-price correlation trends over a period of two years. Our experimental results suggest strong correlation patterns between main coins (Ethereum, Bitcoin) and alt-coins. We believe our study can support forecasting techniques for time-series modeling in the context of crypto-coins. We release our dataset and code to reproduce our analysis to the research community.
The objective of this paper is to assess the performances of dimensionality reduction techniques to establish a link between cryptocurrencies. We have focused our analysis on the two most traded cryptocurrencies: Bitcoin and Ethereum. To perform our analysis, we took log returns and added some covariates to build our data set. We first introduced the pearson correlation coefficient in order to have a preliminary assessment of the link between Bitcoin and Ethereum. We then reduced the dimension of our data set using canonical correlation analysis and principal component analysis. After performing an analysis of the links between Bitcoin and Ethereum with both statistical techniques, we measured their performance on forecasting Ethereum returns with Bitcoin s features.
Jun-Hao Chen, Yi-Jen Wang, Yun-Cheng Tsai, Samuel Yen-Chi Chen
The importance of deep learning data privacy has gained significant attention in recent years. It is probably to suffer data breaches when applying deep learning to cryptocurrency that lacks supervision of financial regulatory agencies. However, there is little relative research in the financial area to our best knowledge. We apply two representative deep learning privacy-privacy frameworks proposed by Google to financial trading data. We designed the experiments with several different parameters suggested from the original studies. In addition, we refer the degree of privacy to Google and Apple companies to estimate the results more reasonably. The results show that DP-SGD performs better than the PATE framework in financial trading data. The tradeoff between privacy and accuracy is low in DP-SGD. The degree of privacy also is in line with the actual case. Therefore, we can obtain a strong privacy guarantee with precision to avoid potential financial loss.
The rapid expansion of data worldwide invites the need for more distributed solutions in order to apply machine learning on a much wider scale. The resultant distributed learning systems can have various degrees of centralization. In this work, we demonstrate our solution FLoBC for building a generic decentralized federated learning system using the blockchain technology, accommodating any machine learning model that is compatible with gradient descent optimization. We present our system design comprising the two decentralized actors: trainer and validator, alongside our methodology for ensuring reliable and efficient operation of said system. Finally, we utilize FLoBC as an experimental sandbox to compare and contrast the effects of trainer-to-validator ratio, reward-penalty policy, and model synchronization schemes on the overall system performance, ultimately showing by example that a decentralized federated learning system is indeed a feasible alternative to more centralized architectures.
Digital arts have gained an unprecedented level of popularity with the emergence of non-fungible tokens (NFTs). NFTs are cryptographic assets that are stored on blockchain networks and represent a digital certificate of ownership that cannot be forged. NFTs can be incorporated into a smart contract which allows the owner to benefit from a future sale percentage. While digital art producers can benefit immensely with NFTs, their production is time consuming. Therefore, this paper explores the possibility of using generative adversarial networks (GANs) for automatic generation of digital arts. GANs are deep learning architectures that are widely and effectively used for synthesis of audio, images, and video contents. However, their application to NFT arts have been limited. In this paper, a GAN-based architecture is implemented and evaluated for novel NFT-style digital arts generation. Results from the qualitative case study indicate that the generated artworks are comparable to the real samples in terms of being interesting and inspiring and they were judged to be more innovative than real samples.
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Generative Adversarial Networks and Image Synthesis
Motivated by the heterogeneous nature of devices participating in large-scale Federated Learning (FL) optimization, we focus on an asynchronous server-less FL solution empowered by blockchain technology. In contrast to mostly adopted FL approaches, which assume synchronous operation, we advocate an asynchronous method whereby model aggregation is done as clients submit their local updates. The asynchronous setting fits well with the federated optimization idea in practical large-scale settings with heterogeneous clients. Thus, it potentially leads to higher efficiency in terms of communication overhead and idle periods. To evaluate the learning completion delay of BC-enabled FL, we provide an analytical model based on batch service queue theory. Furthermore, we provide simulation results to assess the performance of both synchronous and asynchronous mechanisms. Important aspects involved in the BC-enabled FL optimization, such as the network size, link capacity, or user requirements, are put together and analyzed. As our results show, the synchronous setting leads to higher prediction accuracy than the asynchronous case. Nevertheless, asynchronous federated optimization provides much lower latency in many cases, thus becoming an appealing solution for FL when dealing with large datasets, tough timing constraints (e.g., near-real-time applications), or highly varying training data.
As Machine Learning (ML) models are becoming increasingly complex, one of the central challenges is their deployment at scale, such that companies and organizations can create value through Artificial Intelligence (AI). An emerging paradigm in ML is a federated approach where the learning model is delivered to a group of heterogeneous agents partially, allowing agents to train the model locally with their own data. However, the problem of valuation of models, as well the questions of incentives for collaborative training and trading of data/models, have received limited treatment in the literature. In this paper, a new ecosystem of ML model trading over a trusted Blockchain-based network is proposed. The buyer can acquire the model of interest from the ML market, and interested sellers spend local computations on their data to enhance that model's quality. In doing so, the proportional relation between the local data and the quality of trained models is considered, and the valuations of seller's data in training the models are estimated through the distributed Data Shapley Value (DSV). At the same time, the trustworthiness of the entire trading process is provided by the distributed Ledger Technology (DLT). Extensive experimental evaluation of the proposed approach shows a competitive run-time performance, with a 15\% drop in the cost of execution, and fairness in terms of incentives for the participants.
Abstract Decentralized Finance (DeFi) is a system of financial products and services built and delivered through smart contracts on various blockchains. In recent years, DeFi has gained popularity and market capitalization. However, it has also been connected to crime, particularly various types of securities violations. The lack of Know Your Customer requirements in DeFi poses challenges for governments trying to mitigate potential offenses. This study aims to determine whether this problem is suited to a machine learning approach, namely, whether we can identify DeFi projects potentially engaging in securities violations based on their tokens’ smart contract code. We adapted prior works on detecting specific types of securities violations across Ethereum by building classifiers based on features extracted from DeFi projects’ tokens’ smart contract code (specifically, opcode-based features). Our final model was a random forest model that achieved an 80% F-1 score against a baseline of 50%. Notably, we further explored the code-based features that are the most important to our model’s performance in more detail by analyzing tokens’ Solidity code and conducting cosine similarity analyses. We found that one element of the code that our opcode-based features can capture is the implementation of the SafeMath library, although this does not account for the entirety of our features. Another contribution of our study is a new dataset, comprising (a) a verified ground truth dataset for tokens involved in securities violations and (b) a set of legitimate tokens from a reputable DeFi aggregator. This paper further discusses the potential use of a model like ours by prosecutors in enforcement efforts and connects it to a wider legal context.
Federated learning (FL) is a distributed machine learning (ML) technique that enables collaborative training in which devices perform learning using a local dataset while preserving their privacy. This technique ensures privacy, communication efficiency, and resource conservation. Despite these advantages, FL still suffers from several challenges related to reliability (i.e., unreliable participating devices in training), tractability (i.e., a large number of trained models), and anonymity. To address these issues, we propose a secure and trustworthy blockchain framework (SRB-FL) tailored to FL, which uses blockchain features to enable collaborative model training in a fully distributed and trustworthy manner. In particular, we design a secure FL based on the blockchain sharding that ensures data reliability, scalability, and trustworthiness. In addition, we introduce an incentive mechanism to improve the reliability of FL devices using subjective multi-weight logic. The results show that our proposed SRB- FL framework is efficient and scalable, making it a promising and suitable solution for federated learning.
Deepesh Chaudhari, Rachit Agarwal, Sandeep K. Shukla
The temporal aspect of blockchain transactions enables us to study the address's behavior and detect if it is involved in any illicit activity. However, due to the concept of change addresses (used to thwart replay attacks), temporal aspects are not directly applicable in the Bitcoin blockchain. Several pre-processing steps should be performed before such temporal aspects are utilized. We are motivated to study the Bitcoin transaction network and use the temporal features such as burst, attractiveness, and inter-event time along with several graph-based properties such as the degree of node and clustering coefficient to validate the applicability of already existing approaches known for other cryptocurrency blockchains on the Bitcoin blockchain. We generate the temporal and non-temporal feature set and train the Machine Learning (ML) algorithm over different temporal granularities to validate the state-of-the-art methods. We study the behavior of the addresses over different time granularities of the dataset. We identify that after applying change-address clustering, in Bitcoin, existing temporal features can be extracted and ML approaches can be applied. A comparative analysis of results show that the behavior of addresses in Ethereum and Bitcoin is similar with respect to in-degree, out-degree and inter-event time. Further, we identify 3 suspects that showed malicious behavior across different temporal granularities. These suspects are not marked as malicious in Bitcoin.
Yassine Himeur, Aya Sayed, Abdullah Alsalemi, Faycal Bensaali · 9 authors
Recommender systems have been widely used in different application domains including energy-preservation, e-commerce, healthcare, social media, etc. Such applications require the analysis and mining of massive amounts of various types of user data, including demographics, preferences, social interactions, etc. in order to develop accurate and precise recommender systems. Such datasets often include sensitive information, yet most recommender systems are focusing on the models’ accuracy and ignore issues related to security and the users’ privacy. Despite the efforts to overcome these problems using different risk reduction techniques, none of them has been completely successful in ensuring cryptographic security and protection of the users’ private information. To bridge this gap, the blockchain technology is presented as a promising strategy to promote security and privacy preservation in recommender systems, not only because of its security and privacy salient features, but also due to its resilience, adaptability, fault tolerance and trust characteristics. This paper presents a holistic review of blockchain-based recommender systems covering challenges, open issues and solutions. Accordingly, a well-designed taxonomy is introduced to describe the security and privacy challenges, overview existing frameworks and discuss their applications and benefits when using blockchain before indicating opportunities for future research.
Xiao-Yang Liu, Hongyang Yang, Jiechao Gao, Christina Dan Wang
Deep reinforcement learning (DRL) has been envisioned to have a competitive edge in quantitative finance. However, there is a steep development curve for quantitative traders to obtain an agent that automatically positions to win in the market, namely \textit{to decide where to trade, at what price} and \textit{what quantity}, due to the error-prone programming and arduous debugging. In this paper, we present the first open-source framework \textit{FinRL} as a full pipeline to help quantitative traders overcome the steep learning curve. FinRL is featured with simplicity, applicability and extensibility under the key principles, \textit{full-stack framework, customization, reproducibility} and \textit{hands-on tutoring}. Embodied as a three-layer architecture with modular structures, FinRL implements fine-tuned state-of-the-art DRL algorithms and common reward functions, while alleviating the debugging workloads. Thus, we help users pipeline the strategy design at a high turnover rate. At multiple levels of time granularity, FinRL simulates various markets as training environments using historical data and live trading APIs. Being highly extensible, FinRL reserves a set of user-import interfaces and incorporates trading constraints such as market friction, market liquidity and investor's risk-aversion. Moreover, serving as practitioners' stepping stones, typical trading tasks are provided as step-by-step tutorials, e.g., stock trading, portfolio allocation, cryptocurrency trading, etc.
Jossekin Beilharz, Bjarne Pfitzner, Robert Schmid, Paul Geppert · 6 authors
Federated learning allows a group of distributed clients to train a common machine learning model on private data. The exchange of model updates is managed either by a central entity or in a decentralized way, e.g. by a blockchain. However, the strong generalization across all clients makes these approaches unsuited for non-independent and identically distributed (non-IID) data. We propose a unified approach to decentralization and personalization in federated learning that is based on a directed acyclic graph (DAG) of model updates. Instead of training a single global model, clients specialize on their local data while using the model updates from other clients dependent on the similarity of their respective data. This specialization implicitly emerges from the DAG-based communication and selection of model updates. Thus, we enable the evolution of specialized models, which focus on a subset of the data and therefore cover non-IID data better than federated learning in a centralized or blockchain-based setup. To the best of our knowledge, the proposed solution is the first to unite personalization and poisoning robustness in fully decentralized federated learning. Our evaluation shows that the specialization of models emerges directly from the DAG-based communication of model updates on three different datasets. Furthermore, we show stable model accuracy and less variance across clients when compared to federated averaging.
Bitcoin is firmly becoming a mainstream asset in our global society. Its highly volatile nature has traders and speculators flooding into the market to take advantage of its significant price swings in the hope of making money. This work brings an algorithmic trading approach to the Bitcoin market to exploit the variability in its price on a day-to-day basis through the classification of its direction. Building on previous work, in this paper, we utilise both features internal to the Bitcoin network and external features to inform the prediction of various machine learning models. As an empirical test of our models, we evaluate them using a real-world trading strategy on completely unseen data collected throughout the first quarter of 2021. Using only a binary predictor, at the end of our three-month trading period, our models showed an average profit of 86\%, matching the results of the more traditional buy-and-hold strategy. However, after incorporating a risk tolerance score into our trading strategy by utilising the model's prediction confidence scores, our models were 12.5\% more profitable than the simple buy-and-hold strategy. These results indicate the credible potential that machine learning models have in extracting profit from the Bitcoin market and act as a front-runner for further research into real-world Bitcoin trading.
Pratha Khandelwal, Philip Nadler, Rossella Arcucci, William Knottenbelt · 5 authors
The nature of available economic data has changed fundamentally in the last decade due to the economy's digitisation. With the prevalence of often black box data-driven machine learning methods, there is a necessity to develop interpretable machine learning methods that can conduct econometric inference, helping policymakers leverage the new nature of economic data. We therefore present a novel Variational Bayesian Inference approach to incorporate a time-varying parameter auto-regressive model which is scalable for big data. Our model is applied to a large blockchain dataset containing prices, transactions of individual actors, analyzing transactional flows and price movements on a very granular level. The model is extendable to any dataset which can be modelled as a dynamical system. We further improve the simple state-space modelling by introducing non-linearities in the forward model with the help of machine learning architectures.
M. Eren Akbiyik, Mert Erkul, Killian Kaempf, Vaiva Vasiliauskaitė · 5 authors
Understanding the variations in trading price (volatility), and its response to exogenous information, is a well-researched topic in finance. In this study, we focus on finding stable and accurate volatility predictors for a relatively new asset class of cryptocurrencies, in particular Bitcoin, using deep learning representations of public social media data obtained from Twitter. For our experiments, we extracted semantic information and user statistics from over 30 million Bitcoin-related tweets, in conjunction with 15-minute frequency price data over a horizon of 144 days. Using this data, we built several deep learning architectures that utilized different combinations of the gathered information. For each model, we conducted ablation studies to assess the influence of different components and feature sets over the prediction accuracy. We found statistical evidences for the hypotheses that: (i) temporal convolutional networks perform significantly better than both classical autoregressive models and other deep learning-based architectures in the literature, and (ii) tweet author meta-information, even detached from the tweet itself, is a better predictor of volatility than the semantic content and tweet volume statistics. We demonstrate how different information sets gathered from social media can be utilized in different architectures and how they affect the prediction results. As an additional contribution, we make our dataset public for future research.
MohammadAmin Fazli, Ali Owfi, Mohammad Reza Taesiri
Non Fungible Tokens (NFTs) have gained a solid foothold within the crypto community, and substantial amounts of money have been allocated to their trades. In this paper, we studied one of the most prominent marketplaces dedicated to NFT auctions and trades, Foundation. We analyzed the activities on Foundation and identified several intriguing underlying dynamics that occur on this platform. Moreover, We performed social network analysis on a graph that we had created based on transferred NFTs on Foundation, and then described the characteristics of this graph. Lastly, We built a neural network-based similarity model for retrieving and clustering similar NFTs. We also showed that for most NFTs, their performances in auctions were comparable with the auction performance of other NFTs in their cluster.
Bo Sun, Russell Lee, Mohammad Hajiesmaili, Adam Wierman · 5 authors
This paper leverages machine-learned predictions to design competitive algorithms for online conversion problems with the goal of improving the competitive ratio when predictions are accurate (i.e., consistency), while also guaranteeing a worst-case competitive ratio regardless of the prediction quality (i.e., robustness). We unify the algorithmic design of both integral and fractional conversion problems, which are also known as the 1-max-search and one-way trading problems, into a class of online threshold-based algorithms (OTA). By incorporating predictions into design of OTA, we achieve the Pareto-optimal trade-off of consistency and robustness, i.e., no online algorithm can achieve a better consistency guarantee given for a robustness guarantee. We demonstrate the performance of OTA using numerical experiments on Bitcoin conversion.
Siddhartha R. Dalal, Zihe Wang, Siddhanth Sabharwal
Due to the pseudo-anonymity of the Bitcoin network, users can hide behind their bitcoin addresses that can be generated in unlimited quantity, on the fly, without any formal links between them. Thus, it is being used for payment transfer by the actors involved in ransomware and other illegal activities. The other activity we consider is related to gambling since gambling is often used for transferring illegal funds. The question addressed here is that given temporally limited graphs of Bitcoin transactions, to what extent can one identify common patterns associated with these fraudulent activities and apply them to find other ransomware actors. The problem is rather complex, given that thousands of addresses can belong to the same actor without any obvious links between them and any common pattern of behavior. The main contribution of this paper is to introduce and apply new algorithms for local clustering and supervised graph machine learning for identifying malicious actors. We show that very local subgraphs of the known such actors are sufficient to differentiate between ransomware, random and gambling actors with 85% prediction accuracy on the test data set.
A smart Ponzi scheme is a new form of economic crime that uses Ethereum smart contract account and cryptocurrency to implement Ponzi scheme. The smart Ponzi scheme has harmed the interests of many investors, but researches on smart Ponzi scheme detection is still very limited. The existing smart Ponzi scheme detection methods have the problems of requiring many human resources in feature engineering and poor model portability. To solve these problems, we propose a data-driven smart Ponzi scheme detection system in this paper. The system uses dynamic graph embedding technology to automatically learn the representation of an account based on multi-source and multi-modal data related to account transactions. Compared with traditional methods, the proposed system requires very limited human-computer interaction. To the best of our knowledge, this is the first work to implement smart Ponzi scheme detection through dynamic graph embedding. Experimental results show that this method is significantly better than the existing smart Ponzi scheme detection methods.
Sin Kit Lo, Yue Liu, Qinghua Lu, Chen Wang · 7 authors
Federated learning is an emerging privacy-preserving AI technique where clients (i.e., organisations or devices) train models locally and formulate a global model based on the local model updates without transferring local data externally. However, federated learning systems struggle to achieve trustworthiness and embody responsible AI principles. In particular, federated learning systems face accountability and fairness challenges due to multi-stakeholder involvement and heterogeneity in client data distribution. To enhance the accountability and fairness of federated learning systems, we present a blockchain-based trustworthy federated learning architecture. We first design a smart contract-based data-model provenance registry to enable accountability. Additionally, we propose a weighted fair data sampler algorithm to enhance fairness in training data. We evaluate the proposed approach using a COVID-19 X-ray detection use case. The evaluation results show that the approach is feasible to enable accountability and improve fairness. The proposed algorithm can achieve better performance than the default federated learning setting in terms of the model's generalisation and accuracy.
Mohammad Salimibeni, Zohreh Hajiakhondi-Meybodi, Arash Mohammadi, Yingxu Wang
Recently, as a consequence of the COVID-19 pandemic, dependence on Contact Tracing (CT) models has significantly increased to prevent spread of this highly contagious virus and be prepared for the potential future ones. Since the spreading probability of the novel coronavirus in indoor environments is much higher than that of the outdoors, there is an urgent and unmet quest to develop/design efficient, autonomous, trustworthy, and secure indoor CT solutions. Despite such an urgency, this field is still in its infancy. The paper addresses this gap and proposes the Trustworthy Blockchain-enabled system for Indoor Contact Tracing (TB-ICT) framework. The TB-ICT framework is proposed to protect privacy and integrity of the underlying CT data from unauthorized access. More specifically, it is a fully distributed and innovative blockchain platform exploiting the proposed dynamic Proof of Work (dPoW) credit-based consensus algorithm coupled with Randomized Hash Window (W-Hash) and dynamic Proof of Credit (dPoC) mechanisms to differentiate between honest and dishonest nodes. The TB-ICT not only provides a decentralization in data replication but also quantifies the node's behavior based on its underlying credit-based mechanism. For achieving high localization performance, we capitalize on availability of Internet of Things (IoT) indoor localization infrastructures, and develop a data driven localization model based on Bluetooth Low Energy (BLE) sensor measurements. The simulation results show that the proposed TB-ICT prevents the COVID-19 from spreading by implementation of a highly accurate contact tracing model while improving the users' privacy and security.
Federated Deep Learning (FDL) is helping to realize distributed machine learning in the Internet of Vehicles (IoV). However, FDL's global model needs multiple clients to upload learning model parameters, thus still existing unavoidable communication overhead and data privacy risks. The recently proposed Swarm Learning (SL) provides a decentralized machine-learning approach uniting edge computing and blockchain-based coordination without the need for a central coordinator. This paper proposes a Swarm-Federated Deep Learning framework in the IoV system (IoV-SFDL) that integrates SL into the FDL framework. The IoV-SFDL organizes vehicles to generate local SL models with adjacent vehicles based on the blockchain empowered SL, then aggregates the global FDL model among different SL groups with a proposed credibility weights prediction algorithm. Extensive experimental results demonstrate that compared with the baseline frameworks, the proposed IoV-SFDL framework achieves a 16.72% reduction in edge-to-global communication overhead while improving about 5.02% in model performance with the same training iterations.
Price movement forecasting, aimed at predicting financial asset trends based on current market information, has achieved promising advancements through machine learning (ML) methods. Most existing ML methods, however, struggle with the extremely low signal-to-noise ratio and stochastic nature of financial data, often mistaking noises for real trading signals without careful selection of potentially profitable samples. To address this issue, we propose LARA, a novel price movement forecasting framework with two main components: Locality-Aware Attention (LA-Attention) and Iterative Refinement Labeling (RA-Labeling). (1) LA-Attention, enhanced by metric learning techniques, automatically extracts the potentially profitable samples through masked attention scheme and task-specific distance metrics. (2) RA-Labeling further iteratively refines the noisy labels of potentially profitable samples, and combines the learned predictors robust to the unseen and noisy samples. In a set of experiments on three real-world financial markets: stocks, cryptocurrencies, and ETFs, LARA significantly outperforms several machine learning based methods on the Qlib quantitative investment platform. Extensive ablation studies confirm LARA's superior ability in capturing more reliable trading opportunities.