Blockchain Papers

Prashansa Agrawal, Parwat Singh Anjana, Sathya Peri

The surge in the spread of misleading information, lies, propaganda, and false facts, frequently known as fake news, raised questions concerning social media's influence in today's fast-moving democratic society. The widespread and rapid dissemination of fake news cost us in many ways. For example, individual or societal costs by hampering elections integrity, significant economic losses by impacting stock markets, or increases the risk to national security. It is challenging to overcome the spreading of fake news problems in traditional centralized systems. However, Blockchain-- a distributed decentralized technology that ensures data provenance, authenticity, and traceability by providing a transparent, immutable, and verifiable transaction records can help in detecting and contending fake news. This paper proposes a novel hybrid model DeHiDe: Deep Learning-based Hybrid Model to Detect Fake News using Blockchain. The DeHiDe is a blockchain-based framework for legitimate news sharing by filtering out the fake news. It combines the benefit of blockchain with an intelligent deep learning model to reinforce robustness and accuracy in combating fake news's hurdle. It also compares the proposed method to existing state-of-the-art methods. The DeHiDe is expected to outperform state-of-the-art approaches in terms of services, features, and performance.

Harsh Desai, Mustafa Safa Özdayi, Murat Kantarcıoğlu

Federated Learning (FL) is a distributed, and decentralized machine learning protocol. By executing FL, a set of agents can jointly train a model without sharing their datasets with each other, or a third-party. This makes FL particularly suitable for settings where data privacy is desired. At the same time, concealing training data gives attackers an opportunity to inject backdoors into the trained model. It has been shown that an attacker can inject backdoors to the trained model during FL, and then can leverage the backdoor to make the model misclassify later. Several works tried to alleviate this threat by designing robust aggregation functions. However, given more sophisticated attacks are developed over time, which by-pass the existing defenses, we approach this problem from a complementary angle in this work. Particularly, we aim to discourage backdoor attacks by detecting, and punishing the attackers, possibly after the end of training phase. To this end, we develop a hybrid blockchain-based FL framework that uses smart contracts to automatically detect, and punish the attackers via monetary penalties. Our framework is general in the sense that, any aggregation function, and any attacker detection algorithm can be plugged into it. We conduct experiments to demonstrate that our framework preserves the communication-efficient nature of FL, and provide empirical results to illustrate that it can successfully penalize attackers by leveraging our novel attacker detection algorithm.

Qi Zhao

This paper presents a deep learning framework based on Long Short-term Memory Network(LSTM) that predicts price movement of cryptocurrencies from trade-by-trade data. The main focus of this study is on predicting short-term price changes in a fixed time horizon from a looking back period. By carefully designing features and detailed searching for best hyper-parameters, the model is trained to achieve high performance on nearly a year of trade-by-trade data. The optimal model delivers stable high performance(over 60% accuracy) on out-of-sample test periods. In a realistic trading simulation setting, the prediction made by the model could be easily monetized. Moreover, this study shows that the LSTM model could extract universal features from trade-by-trade data, as the learned parameters well maintain their high performance on other cryptocurrency instruments that were not included in training data. This study exceeds existing researches in term of the scale and precision of data used, as well as the high prediction accuracy achieved.

Dixon Vimalajeewa, Subhasis Thakur, John G. Breslin, D.P. Berry · 5 authors

The use of Internet of Things (IoT) with the Internet of Nano Things (IoNT) can further expand decision making systems (DMS) to improve reliability as it provides a new spectrum of more granular level data to make decisions. However, growing concerns such as data security, transparency and processing capability challenge their use in real-world applications. DMS integrated with Block Chain (BC) technology can contribute immensely to overcome such challenges. The use of IoNT and IoT along with BC for making DMS has not yet been investigated. This study proposes a BC-powered IoNT (BC-IoNT) system for sensing chemicals level in the context of farm management. This is a critical application for smart farming, which aims to improve sustainable farm practices through controlled delivery of chemicals. BC-IoNT system includes a novel machine learning model formed by using the Langmuir molecular binding model and the Bayesian theory, and is used as a smart contract for sensing the level of the chemicals. A credit model is used to quantify the traceability and credibility of farms to determine if they are compliant with the chemical standards. The accuracy of detecting the chemicals of the distributed BC-IoNT approach was >90% and the centralized approach was <80%. Also, the efficiency of sensing the level of chemicals depends on the sampling frequency and variability in chemical level among farms.

Chuheng Zhang, Yuanqi Li, Xi Chen, Yifei Jin · 6 authors

Modern machine learning models (such as deep neural networks and boosting decision tree models) have become increasingly popular in financial market prediction, due to their superior capacity to extract complex non-linear patterns. However, since financial datasets have very low signal-to-noise ratio and are non-stationary, complex models are often very prone to overfitting and suffer from instability issues. Moreover, as various machine learning and data mining tools become more widely used in quantitative trading, many trading firms have been producing an increasing number of features (aka factors). Therefore, how to automatically select effective features becomes an imminent problem. To address these issues, we propose DoubleEnsemble, an ensemble framework leveraging learning trajectory based sample reweighting and shuffling based feature selection. Specifically, we identify the key samples based on the training dynamics on each sample and elicit key features based on the ablation impact of each feature via shuffling. Our model is applicable to a wide range of base models, capable of extracting complex patterns, while mitigating the overfitting and instability issues for financial market prediction. We conduct extensive experiments, including price prediction for cryptocurrencies and stock trading, using both DNN and gradient boosting decision tree as base models. Our experiment results demonstrate that DoubleEnsemble achieves a superior performance compared with several baseline methods.

Yuzhou Chen, Yulia R. Gel, Konstantin Avrachenkov

Due to high utility in many applications, from social networks to blockchain to power grids, deep learning on non-Euclidean objects such as graphs and manifolds, coined Geometric Deep Learning (GDL), continues to gain an ever increasing interest. We propose a new Lévy Flights Graph Convolutional Networks (LFGCN) method for semi-supervised learning, which casts the Lévy Flights into random walks on graphs and, as a result, allows both to accurately account for the intrinsic graph topology and to substantially improve classification performance, especially for heterogeneous graphs. Furthermore, we propose a new preferential P-DropEdge method based on the Girvan-Newman argument. That is, in contrast to uniform removing of edges as in DropEdge, following the Girvan-Newman algorithm, we detect network periphery structures using information on edge betweenness and then remove edges according to their betweenness centrality. Our experimental results on semi-supervised node classification tasks demonstrate that the LFGCN coupled with P-DropEdge accelerates the training task, increases stability and further improves predictive accuracy of learned graph topology structure. Finally, in our case studies we bring the machinery of LFGCN and other deep networks tools to analysis of power grid networks - the area where the utility of GDL remains untapped.

Taehyun Kim, Hyomin Shin, Hyung Ju Hwang, Seungwon Jeong

Steemit is a blockchain-based social media platform, where authors can get author rewards in the form of cryptocurrencies called STEEM and SBD (Steem Blockchain Dollars) if their posts are upvoted. Interestingly, curators (or voters) can also get rewards by voting others' posts, which is called a curation reward. A reward is proportional to a curator's STEEM stakes. Throughout this process, Steemit hopes "good" content will be automatically discovered by users in a decentralized way, which is known as the Proof-of-Brain (PoB). However, there are many bot accounts programmed to post automatically and get rewards, which discourages real human users from creating good content. We call this type of bot a posting bot. While there are many papers that studied bots on traditional centralized social media platforms such as Facebook and Twitter, we are the first to study posting bots on a blockchain-based social media platform. Compared with the bot detection on the usual social media platforms, the features we created have an advantage that posting bots can be detected without limiting the number or length of posts. We can extract the features of posts by clustering distances between blog data or replies. These features are obtained from the Minimum Average Cluster from Clustering Distance between Frequent words and Articles (MAC-CDFA), which is not used in any of the previous social media research. Based on the enriched features, we enhanced the quality of classification tasks. Comparing the F1-scores, the features we created outperformed the features used for bot detection on Facebook and Twitter.

Xiao Li, Weili Wu

Bitcoin, as one of the most popular cryptocurrency, is recently attracting much attention of investors. Bitcoin price prediction task is consequently a rising academic topic for providing valuable insights and suggestions. Existing bitcoin prediction works mostly base on trivial feature engineering, that manually designs features or factors from multiple areas, including Bticoin Blockchain information, finance and social media sentiments. The feature engineering not only requires much human effort, but the effectiveness of the intuitively designed features can not be guaranteed. In this paper, we aim to mining the abundant patterns encoded in bitcoin transactions, and propose k-order transaction graph to reveal patterns under different scope. We propose the transaction graph based feature to automatically encode the patterns. A novel prediction method is proposed to accept the features and make price prediction, which can take advantage from particular patterns from different history period. The results of comparison experiments demonstrate that the proposed method outperforms the most recent state-of-art methods.

Yunlong Lu, Xiaohong Huang, Ke Zhang, Sabita Maharjan · 5 authors

Emerging technologies, such as digital twins and 6th generation (6G) mobile networks, have accelerated the realization of edge intelligence in industrial Internet of Things (IIoT). The integration of digital twin and 6G bridges the physical system with digital space and enables robust instant wireless connectivity. With increasing concerns on data privacy, federated learning has been regarded as a promising solution for deploying distributed data processing and learning in wireless networks. However, unreliable communication channels, limited resources, and lack of trust among users hinder the effective application of federated learning in IIoT. In this article, we introduce the digital twin wireless networks (DTWN) by incorporating digital twins into wireless networks, to migrate real-time data processing and computation to the edge plane. Then, we propose a blockchain empowered federated learning framework running in the DTWN for collaborative computing, which improves the reliability and security of the system and enhances data privacy. Moreover, to balance the learning accuracy and time cost of the proposed scheme, we formulate an optimization problem for edge association by jointly considering digital twin association, training data batch size, and bandwidth allocation. We exploit multiagent reinforcement learning to find an optimal solution to the problem. Numerical results on real-world dataset show that the proposed scheme yields improved efficiency and reduced cost compared to benchmark learning methods.

Shahar Azulay, Lior Raz, Amir Globerson, Tomer Koren · 5 authors

This work presents a new distributed Byzantine tolerant federated learning algorithm, HoldOut SGD, for Stochastic Gradient Descent (SGD) optimization. HoldOut SGD uses the well known machine learning technique of holdout estimation, in a distributed fashion, in order to select parameter updates that are likely to lead to models with low loss values. This makes it more effective at discarding Byzantine workers inputs than existing methods that eliminate outliers in the parameter-space of the learned model. HoldOut SGD first randomly selects a set of workers that use their private data in order to propose gradient updates. Next, a voting committee of workers is randomly selected, and each voter uses its private data as holdout data, in order to select the best proposals via a voting scheme. We propose two possible mechanisms for the coordination of workers in the distributed computation of HoldOut SGD. The first uses a truthful central server and corresponds to the typical setting of current federated learning. The second is fully distributed and requires no central server, paving the way to fully decentralized federated learning. The fully distributed version implements HoldOut SGD via ideas from the blockchain domain, and specifically the Algorand committee selection and consensus processes. We provide formal guarantees for the HoldOut SGD process in terms of its convergence to the optimal model, and its level of resilience to the fraction of Byzantine workers. Empirical evaluation shows that HoldOut SGD is Byzantine-resilient and efficiently converges to an effectual model for deep-learning tasks, as long as the total number of participating workers is large and the fraction of Byzantine workers is less than half (<1/3 for the fully distributed variant).

Yixiao Lan, Yuan Liu, Boyang Li

The progress of deep learning (DL), especially the recent development of automatic design of networks, has brought unprecedented performance gains at heavy computational cost. On the other hand, blockchain systems routinely perform a huge amount of computation that does not achieve practical purposes in order to build Proof-of-Work (PoW) consensus from decentralized participants. In this paper, we propose a new consensus mechanism, Proof of Learning (PoLe), which directs the computation spent for consensus toward optimization of neural networks (NN). In our mechanism, the training/testing data are released to the entire blockchain network (BCN) and the consensus nodes train NN models on the data, which serves as the proof of learning. When the consensus on the BCN considers a NN model to be valid, a new block is appended to the blockchain. We experimentally compare the PoLe protocol with Proof of Work (PoW) and show that PoLe can achieve a more stable block generation rate, which leads to more efficient transaction processing. We also introduce a novel cheating prevention mechanism, Secure Mapping Layer (SML), which can be straightforwardly implemented as a linear NN layer. Empirical evaluation shows that SML can detect cheating nodes at small cost to the predictive performance.

Wenqi Wei, Qi Zhang, Ling Liu

Bitcoin and its decentralized computing paradigm for digital currency trading are one of the most disruptive technology in the 21st century. This article presents a novel approach to developing a Bitcoin transaction forecast model, DLForecast, by leveraging deep neural networks for learning Bitcoin transaction network representations. DLForecast makes three original contributions. First, we explore three interesting properties between Bitcoin transaction accounts: topological connectivity pattern of Bitcoin accounts, transaction amount pattern, and transaction dynamics. Second, we construct a time-decaying reachability graph and a time-decaying transaction pattern graph, aiming at capturing different types of spatial-temporal Bitcoin transaction patterns. Third, we employ node embedding on both graphs and develop a Bitcoin transaction forecasting system between user accounts based on historical transactions with built-in time-decaying factor. To maintain an effective transaction forecasting performance, we leverage the multiplicative model update (MMU) ensemble to combine prediction models built on different transaction features extracted from each corresponding Bitcoin transaction graph. Evaluated on real-world Bitcoin transaction data, we show that our spatial-temporal forecasting model is efficient with fast runtime and effective with forecasting accuracy over 60 percent and improves the prediction performance by 50 percent when compared to forecasting model built on the static graph baseline.

Rachit Agarwal, Shikhar Barve, Sandeep K Shukla

Abstract Directed Graph based models of a blockchain that capture accounts as nodes and transactions as edges, evolve over time. This temporal nature of a blockchain model enables us to understand the behavior (malicious or benign) of the accounts. Predictive classification of accounts as malicious or benign could help users of the permissionless blockchain platforms to operate in a secure manner. Motivated by this, we introduce temporal features such as burst and attractiveness on top of several already used graph properties such as the node degree and clustering coefficient. Using identified features, we train various Machine Learning (ML) models and identify the algorithm that performs the best in detecting malicious accounts. We then study the behavior of the accounts over different temporal granularities of the dataset before assigning them malicious tags. For the Ethereum blockchain, we identify that for the entire dataset—the ExtraTreesClassifier performs the best among supervised ML algorithms. On the other hand, using cosine similarity on top of the results provided by unsupervised ML algorithms such as K-Means on the entire dataset, we were able to detect 554 more suspicious accounts. Further, using behavior change analysis for accounts, we identify 814 unique suspicious accounts across different temporal granularities.

Rajesh Kumar, Abdullah Aman Khan, Zhang, Sinmin, Jay Kumar · 10 authors

With the increase of COVID-19 cases worldwide, an effective way is required to diagnose COVID-19 patients. The primary problem in diagnosing COVID-19 patients is the shortage and reliability of testing kits, due to the quick spread of the virus, medical practitioners are facing difficulty in identifying the positive cases. The second real-world problem is to share the data among the hospitals globally while keeping in view the privacy concerns of the organizations. Building a collaborative model and preserving privacy are the major concerns for training a global deep learning model. This paper proposes a framework that collects a small amount of data from different sources (various hospitals) and trains a global deep learning model using blockchain-based federated learning. Blockchain technology authenticates the data and federated learning trains the model globally while preserving the privacy of the organization. First, we propose a data normalization technique that deals with the heterogeneity of data as the data is gathered from different hospitals having different kinds of Computed Tomography (CT) scanners. Secondly, we use Capsule Network-based segmentation and classification to detect COVID-19 patients. Thirdly, we design a method that can collaboratively train a global model using blockchain technology with federated learning while preserving privacy. Additionally, we collected real-life COVID-19 patients' data open to the research community. The proposed framework can utilize up-to-date data which improves the recognition of CT images. Finally, we conducted comprehensive experiments to validate the proposed method. Our results demonstrate better performance for detecting COVID-19 patients.

Vaikkunth Mugunthan, Ravi Rahman, Lalana Kagal

Federated learning enables the development of a machine learning model among collaborating agents without requiring them to share their underlying data. However, malicious agents who train on random data, or worse, on datasets with the result classes inverted, can weaken the combined model. BlockFLow is an accountable federated learning system that is fully decentralized and privacy-preserving. Its primary goal is to reward agents proportional to the quality of their contribution while protecting the privacy of the underlying datasets and being resilient to malicious adversaries. Specifically, BlockFLow incorporates differential privacy, introduces a novel auditing mechanism for model contribution, and uses Ethereum smart contracts to incentivize good behavior. Unlike existing auditing and accountability methods for federated learning systems, our system does not require a centralized test dataset, sharing of datasets between the agents, or one or more trusted auditors; it is fully decentralized and resilient up to a 50% collusion attack in a malicious trust model. When run on the public Ethereum blockchain, BlockFLow uses the results from the audit to reward parties with cryptocurrency based on the quality of their contribution. We evaluated BlockFLow on two datasets that offer classification tasks solvable via logistic regression models. Our results show that the resultant auditing scores reflect the quality of the honest agents' datasets. Moreover, the scores from dishonest agents are statistically lower than those from the honest agents. These results, along with the reasonable blockchain costs, demonstrate the effectiveness of BlockFLow as an accountable federated learning system.

Zainab Abohashima, Mohamed Elhosen, Essam H. Houssein, Waleed M. Mohamed

Due to the superiority and noteworthy progress of Quantum Computing (QC) in a lot of applications such as cryptography, chemistry, Big data, machine learning, optimization, Internet of Things (IoT), Blockchain, communication, and many more. Fully towards to combine classical machine learning (ML) with Quantum Information Processing (QIP) to build a new field in the quantum world is called Quantum Machine Learning (QML) to solve and improve problems that displayed in classical machine learning (e.g. time and energy consumption, kernel estimation). The aim of this paper presents and summarizes a comprehensive survey of the state-of-the-art advances in Quantum Machine Learning (QML). Especially, recent QML classification works. Also, we cover about 30 publications that are published lately in Quantum Machine Learning (QML). we propose a classification scheme in the quantum world and discuss encoding methods for mapping classical data to quantum data. Then, we provide quantum subroutines and some methods of Quantum Computing (QC) in improving performance and speed up of classical Machine Learning (ML). And also some of QML applications in various fields, challenges, and future vision will be presented.

S M Raju, Ali Mohammad Tarif

Bitcoin is the first digital decentralized cryptocurrency that has shown a significant increase in market capitalization in recent years. The objective of this paper is to determine the predictable price direction of Bitcoin in USD by machine learning techniques and sentiment analysis. Twitter and Reddit have attracted a great deal of attention from researchers to study public sentiment. We have applied sentiment analysis and supervised machine learning principles to the extracted tweets from Twitter and Reddit posts, and we analyze the correlation between bitcoin price movements and sentiments in tweets. We explored several algorithms of machine learning using supervised learning to develop a prediction model and provide informative analysis of future market prices. Due to the difficulty of evaluating the exact nature of a Time Series(ARIMA) model, it is often very difficult to produce appropriate forecasts. Then we continue to implement Recurrent Neural Networks (RNN) with long short-term memory cells (LSTM). Thus, we analyzed the time series model prediction of bitcoin prices with greater efficiency using long short-term memory (LSTM) techniques and compared the predictability of bitcoin price and sentiment analysis of bitcoin tweets to the standard method (ARIMA). The RMSE (Root-mean-square error) of LSTM are 198.448 (single feature) and 197.515 (multi-feature) whereas the ARIMA model RMSE is 209.263 which shows that LSTM with multi feature shows the more accurate result.

Yisroel Mirsky, Tomer Golomb, Yuval Elovici

Due to their rapid growth and deployment, the Internet of things (IoT) have become a central aspect of our daily lives. Unfortunately, IoT devices tend to have many vulnerabilities which can be exploited by an attacker. Unsupervised techniques, such as anomaly detection, can be used to secure these devices in a plug-and-protect manner. However, anomaly detection models must be trained for a long time in order to capture all benign behaviors. Furthermore, the anomaly detection model is vulnerable to adversarial attacks since, during the training phase, all observations are assumed to be benign. In this paper, we propose (1) a novel approach for anomaly detection and (2) a lightweight framework that utilizes the blockchain to ensemble an anomaly detection model in a distributed environment. Blockchain framework incrementally updates a trusted anomaly detection model via self-attestation and consensus among the IoT devices. We evaluate our method on a distributed IoT simulation platform, which consists of 48 Raspberry Pis. The simulation demonstrates how the approach can enhance the security of each device and the security of the network as a whole.

César Sabater, Aurélien Bellet, Jan Ramon

Learning from data owned by several parties, as in federated learning, raises challenges regarding the privacy guarantees provided to participants and the correctness of the computation in the presence of malicious parties. We tackle these challenges in the context of distributed averaging, an essential building block of federated learning algorithms. Our first contribution is a scalable protocol in which participants exchange correlated Gaussian noise along the edges of a network graph, complemented by independent noise added by each party. We analyze the differential privacy guarantees of our protocol and the impact of the graph topology under colluding malicious parties, showing that we can nearly match the utility of the trusted curator model even when each honest party communicates with only a logarithmic number of other parties chosen at random. This is in contrast with protocols in the local model of privacy (with lower utility) or based on secure aggregation (where all pairs of users need to exchange messages). Our second contribution enables users to prove the correctness of their computations without compromising the efficiency and privacy guarantees of the protocol. Our verification protocol relies on standard cryptographic primitives like commitment schemes and zero knowledge proofs.

Joana Lorenz, Maria Inês Silva, David Aparício, João Tiago Ascensão · 5 authors

Every year, criminals launder billions of dollars acquired from serious felonies (e.g., terrorism, drug smuggling, or human trafficking), harming countless people and economies. Cryptocurrencies, in particular, have developed as a haven for money laundering activity. Machine Learning can be used to detect these illicit patterns. However, labels are so scarce that traditional supervised algorithms are inapplicable. Here, we address money laundering detection assuming minimal access to labels. First, we show that existing state-of-the-art solutions using unsupervised anomaly detection methods are inadequate to detect the illicit patterns in a real Bitcoin transaction dataset. Then, we show that our proposed active learning solution is capable of matching the performance of a fully supervised baseline by using just 5% of the labels. This solution mimics a typical real-life situation in which a limited number of labels can be acquired through manual annotation by experts.

Francesco Zola, Jan L. Bruse, Xabier Etxeberria Barrio, Mikel Galar · 5 authors

In Bitcoin entity classification, results are strongly conditioned by the ground-truth dataset, especially when applying supervised machine learning approaches. However, these ground-truth datasets are frequently affected by significant class imbalance as generally they contain much more information regarding legal services (Exchange, Gambling), than regarding services that may be related to illicit activities (Mixer, Service). Class imbalance increases the complexity of applying machine learning techniques and reduces the quality of classification results, especially for underrepresented, but critical classes. In this paper, we propose to address this problem by using Generative Adversarial Networks (GANs) for Bitcoin data augmentation as GANs recently have shown promising results in the domain of image classification. However, there is no "one-fits-all" GAN solution that works for every scenario. In fact, setting GAN training parameters is non-trivial and heavily affects the quality of the generated synthetic data. We therefore evaluate how GAN parameters such as the optimization function, the size of the dataset and the chosen batch size affect GAN implementation for one underrepresented entity class (Mining Pool) and demonstrate how a "good" GAN configuration can be obtained that achieves high similarity between synthetically generated and real Bitcoin address data. To the best of our knowledge, this is the first study presenting GANs as a valid tool for generating synthetic address data for data augmentation in Bitcoin entity classification.

Yi Liu, Jialiang Peng, Jiawen Kang, Abdullah M. Iliyasu · 6 authors

Federated learning (FL) has recently been proposed as an emerging paradigm to build machine learning models using distributed training datasets that are locally stored and maintained on different devices in 5G networks while providing privacy preservation for participants. In FL, the central aggregator accumulates local updates uploaded by participants to update a global model. However, there are two critical security threats: poisoning and membership inference attacks. These attacks may be carried out by malicious or unreliable participants, resulting in the construction failure of global models or privacy leakage of FL models. Therefore, it is crucial for FL to develop security means of defense. In this article, we propose a blockchain-based secure FL framework to create smart contracts and prevent malicious or unreliable participants from being involved in FL. In doing so, the central aggregator recognizes malicious and unreliable participants by automatically executing smart contracts to defend against poisoning attacks. Further, we use local differential privacy techniques to prevent membership inference attacks. Numerical results suggest that the proposed framework can effectively deter poisoning and membership inference attacks, thereby improving the security of FL in 5G networks.

Massimo La Morgia, Alessandro Mei, Francesco Sassi, Julinda Stefa

In the last years, cryptocurrencies are increasingly popular. Even people who are not experts have started to invest in these securities and nowadays cryptocurrency exchanges process transactions for over 100 billion US dollars per month. However, many cryptocurrencies have low liquidity and therefore they are highly prone to market manipulation schemes. In this paper, we perform an in-depth analysis of pump and dump schemes organized by communities over the Internet. We observe how these communities are organized and how they carry out the fraud. Then, we report on two case studies related to pump and dump groups. Lastly, we introduce an approach to detect the fraud in real time that outperforms the current state of the art, so to help investors stay out of the market when a pump and dump scheme is in action.

Petrônio Cândido de Lima e Silva, Carlos Alberto Severiano, Marcos Antônio Alves, Rodrigo Silva · 6 authors

In this paper we introduce a Non-Stationary Fuzzy Time Series (NSFTS) method with time varying parameters adapted from the distribution of the data. In this approach, we employ Non-Stationary Fuzzy Sets, in which perturbation functions are used to adapt the membership function parameters in the knowledge base in response to statistical changes in the time series. The proposed method is capable of dynamically adapting its fuzzy sets to reflect the changes in the stochastic process based on the residual errors, without the need to retraining the model. This method can handle non-stationary and heteroskedastic data as well as scenarios with concept-drift. The proposed approach allows the model to be trained only once and remain useful long after while keeping reasonable accuracy. The flexibility of the method by means of computational experiments was tested with eight synthetic non-stationary time series data with several kinds of concept drifts, four real market indices (Dow Jones, NASDAQ, SP500 and TAIEX), three real FOREX pairs (EUR-USD, EUR-GBP, GBP-USD), and two real cryptocoins exchange rates (Bitcoin-USD and Ethereum-USD). As competitor models the Time Variant fuzzy time series and the Incremental Ensemble were used, these are two of the major approaches for handling non-stationary data sets. Non-parametric tests are employed to check the significance of the results. The proposed method shows resilience to concept drift, by adapting parameters of the model, while preserving the symbolic structure of the knowledge base.