Blockchain is probably the most disruptive and revolutionary technology since the advent of the World Wide Web in the 1990s. Blockchain became known, above all, as the technology behind the bitcoin cryptocurrency. However, its potential still remains largely unexploited and according to experts, opportunities are almost ‘endless’, both in financial and non-financial sectors. Challenges and opportunities in this field vary greatly from person to person depending notably if they are researchers, practitioners or regulators. After a short introduction in order to place the analysis in its context, this chapter will focus on three selected opportunities, namely blockchain as a new payment method (cryptocurrency), as a new method for funding innovation (ICO/TGE) and as a new organizational structure (DAO); it will then focus on three selected challenges, namely regulatory, environmental and governance. The author then questions in a forward-looking manner whether blockchain may be seen as a gateway from the third to the fourth industrial/digital revolution.
Cryptocurrencies, such as bitcoin, ether or many others, relying on a distributed blockchain system (based on Distributed Ledger Technology, DLT), constitute an important and ever-growing market. The circulation of bitcoin alone currently has an estimated value of USD 115 billion. By way of comparison, the cash in circulation in Switzerland – not to be confused with the monetary aggregates M1, M2 and M3 which are much larger – totals CHF 84.5 billion. EY Switzerland announced that from January 2017 its clients could pay for their audit and advisory services in bitcoin; the town of Zug made a similar announcement recently. Numerous legal questions are raised in relation to the protection of individuals who have acquired cryptocurrency wallets or store them online. The aim of this chapter is to determine the existing protection for cryptocurrency holders (in particular for bitcoin, but in principle the reasoning can be transposed to any type of cryptocurrency based on identical technology) if a key storage supplier goes bankrupt. First, the analysis will focus on the issue of whether a positive cryptocurrency balance constitutes a thing and whether the activity of keeping cryptocurrency wallets is subject to authorisation by the Swiss Financial Market Supervisory Authority (FINMA); the answer to this question will determine the scope of protection for the claimant in insolvency law.
Background: The use of bitcoin in South Africa is fairly new, but has increased as several online retailers now accept bitcoin as a means of payment. The South African Revenue Service has released a media statement regarding the normal tax treatment of cryptocurrencies (such as bitcoin), but policy regarding the value-added tax (VAT) treatment of cryptocurrencies is still pending.Aim: The objective of the study is to determine the output tax consequences for a South African VAT vendor who receives bitcoins in exchange for the supply of goods or services that are subject to VAT, and when the same South African VAT vendor exchanges the bitcoins for South African rand at a local exchange platform.Setting: This article examines existing literature in a South African VAT environment.Method: A non-empirical study based on existing literature is performed.Results: It is found that when interpreting the (current) VAT Act No. 89 of 1991, the receiving of bitcoin in exchange for the supply of goods or services, as well as the exchange of bitcoin for South African rand, is subject to output tax at the standard rate of 14%, which will lead to ‘double taxation’.Conclusion: It was shown through this study that the proposed treatment as explained in the previous section would impose ‘double taxation’.
Despite cryptocurrency is deemed as a core evolution to the field of financial technologies, its legal status remains debatable over the globe. While the Malaysian government has launched cryptocurrency regulations in 2019, it is expected cryptocurrency will still be around in the near future. However, there is a lack of cryptocurrency acceptance study in Malaysia context. The primary goal of this study is to propose a research model that combines cryptocurrency variables with the constructs embedded in the Unified Theory of Acceptance and Use of Technology2 (UTAUT2) to investigate the influencing factors of cryptocurrency acceptance in a developing country context.
Nathalie Brender, Marion Gauthier, Jean‐Henry Morin, Arbër Salihi
In today’s debate on the potential disruptive effects of blockchain, audit and control professions are rarely in the spotlight although applications such as smart contracts and distributed ledgers could significantly impact them. We conducted a study based on the grounded theory to understand how auditors in Switzerland anticipate the impacts of blockchain on their activities. Based on our findings, three hypotheses have emerged. First, the potential effect of blockchain on the profession is not fully anticipated. Second, the profession will go through a paradigm shift in two ways: become more IT oriented and forward looking. Finally, the profile of the auditors will change.
Past security incidents of smart contracts on the Ethereum blockchain has proved to be disastrous - incurring losses of upwards of a few hundred million USD to date. As the attacks occurred due to semantic errors in smart contracts itself, specialized security tools which employed traditional software techniques such as symbolic analysis proved to be valuable in the detection of such vulnerable contracts; however its coverage and efficiency is limited by factors such as the depth of its search which comes at a cost of execution time. Meanwhile, the adoption of smart contracts on Ethereum has increased 176-fold since December 2015 – if these tools fail to keep up with the growth of contracts, similar incidents on a greater scale might occur in the future. In this project, we aim to contribute to the security landscape of smart contracts by proposing an efficient smart contract vulnerability detection system. We explored the approach of machine learning to vulnerability detection in smart contracts and trained a long-short term memory (LSTM) model on approximately 1.7 million contracts obtained from Google's BigQuery dataset and achieved encouraging results. We observed a detection accuracy of 99.40%, with a recall score of 89.81% in detecting vulnerable smart contracts, accompanied with significantly better performance with the model taking less than a tenth of the time required to classify a contract compared to that of a prominent symbolic tool such as Maian. In addition, a web application was developed to demonstrate the efficiency of our approach in classifying smart contracts at scale.
This study examines whether the market efficiencies of major cryptocurrencies (e.g., Bitcoin, Ethereum, and Ripple) change over time based on the adaptive market hypothesis (AMH) of Lo (2004). In particular, we measure the degree of market efficiency using Ito et al.'s (2014, 2016, 2017) generalized least squares-based time-varying model. The empirical results show that (1) the degree of market efficiency varies with time in cryptocurrency markets, (2) the market efficiency level of Bitcoin is higher than that of the other markets over most periods, and (3) the market efficiency of cryptocurrencies has evolved. We conclude that the results support the AMH for the established cryptocurrency market.
Md. Nazmus Saadat, Syed Abdul Halim, Husna Osman, Rasheed Mohammad Nassr · 5 authors
<p class="Abstract"><span>Initially, blockchain is only used as a foundation of cryptocurrency, but today, we can see the rise of this new emerging technology are being implemented in many industries. In the future, most technologies around the world are expected to use blockchain as an efficient way to make online transactions. One of the areas that blockchain technologies can be applied is crowdfunding platforms. The most common problem with current crowdfunding scene in around the world including is that the campaigns are not regulated and some of the crowd-funding campaign turned out to be fraud. Besides, the completion of some projects also was significantly delayed. This project aims to solve these problems by applying Ethereum smart contracts to the crowdfunding site to that the contracts will be fully automatically executed, thus preventing frauds and ensuring that the projects can be delivered within duration given.</span></p>
Traditional payment systems have standards designed to keep transaction data secure, but blockchain systems are not in scope for such security standards. We compare the Payment Application Data Security Standard's (PA-DSS) applicability towards transaction-supported blockchain platforms to test the standard's applicability. By highlighting the differences in implementation on traditional and decentralized transaction platforms, we critique and adapt the standards to fit the decentralized model. In two case studies, we analyze the QTUM and Ethereum blockchain platforms' industry compliance, as their payment platforms support transactions equivalent to that of applications governed by the PA-DSS. We determine QTUM's and Ethereum's capabilities to properly ensure secure data handling with respect to current security standards. After adapting the PA-DSS and analyzing the QTUM and Ethereum platforms, we revise the new set of standards to create a set of best-practices for ensuring data security on both traditional and blockchain payment systems. We report the security gaps identified on each platform based on the final revision of the standards, presenting a conclusive perspective that neither platform is suitable for business adoption based on the PA-DSS standard's results. Finally, we discuss open research issues.
Alex Murray, Scott Kuban, Matthew Josefy, Jon E. Anderson
This paper explores blockchain technology’s potential to alter contracting both in the market and within organizations. We identify and discuss how blockchain reduces certain types of transaction costs while introducing additional costs that have not been present in traditional contracts. Blockchain technology also presents a new method to mitigate or avoid certain types of agency costs that stem from contracting with agents inside the firm. Through this theoretical discussion, our paper proposes several avenues for future research on how blockchain may alter contracting.
Bitcoin is one of the original cryptocurrencies. It was introduced by an anonymous author who goes by the pseudonym of Satoshi Nakamoto (Nakamoto, n.d.). His genius proposal was based on the premise of user anonymity and decentralization (Barber, Boyen, Shi, Uzun, 2012). Bitcoin started out as a payment system among a small group of enthused users and was then mass-adopted. Most users employ it for legal activities such as investments and purchases, while some use it for illegal activities, products, and services like gambling, money laundering, tax evasion, kidnap ransoms, drugs, and prostitution (Kristoufek, 2015). In regard to reasons for using Bitcoin, studies have shown that the majority of Bitcoin owners view it as an investment rather than a currency for purchases or other financial transactions (Henry, Huynh, & Nicholls, 2018; Glaser, Zimmermann, Haferkorn, Weber & Siering, 2014). The purpose of this study was to determine what attracts and motivates consumers to own Bitcoin cryptocurrency and to fill a gap in the academic literature. The findings indicate that there is a strong relationship between owning Bitcoin and a desire for financial profit. This study concludes that the main motivation is of course profit which was driven by both finances and innovative technology led Bitcoin users to mining and installing Bitcoin clients, and then investing and trading afterwards.
Eder J. Scheid, Bruno Rodrigues, Lisandro Zambenedetti Granville, Burkhard Stiller
Service Level Agreements (SLA) are documents that specify what Service Providers (SP) are delivering to customers. They contain information about the service, such as target performance level or monthly availability, and penalties for the violations of the SLA. The information about the penalties is essential because if the SP does not deliver what is defined, the customer must be compensated accordingly. However, the current compensation process is cumbersome and complex because of the amount of involved manual effort. To address this issue, it is proposed in this paper an approach based on blockchain and Smart Contracts (SC) to automate the compensation process while enabling dynamic payments during the SLA lifetime. The proposed approach was evaluated in an use case that simulates the management of a Quality of Service SLA between an SP and a customer. Based on the performed evaluation, parts of the SLA management process were successfully automated using a decentralized solution, and the payment of the compensation occurred without the intervention of a third party.
Blockchain has a great potential in distributed shared peer to peer ledger like spreadsheets that record any transaction. A copy of ledger is shared between all stakeholders. Blockchain plays an important role for secure decentralization and brings more transparency to the system. Traditionally, within the society, people have created trust through intermediaries. They use these third party entities because they trust that they will store and protect their goods and send the right amount when they request it, and to the right person. In Government sector, there is a critical need to have more transparency in transactions and so this system has been designed as an effective mechanism to avoid the corruption. Blockchain technology provides the transparency so that actors present in this use case can track the flow of any transaction. Any transaction pertaining to DBT (Direct Benefit Transfer) is recorded. Blockchain replaces the need for intermediaries by redirecting the trust to decentralized systems.
Focus on a concrete project, share the results, contain the risk. These are some of the precepts of Islamic finance. But they are also the cornerstones of crowdfunding. This is why this form of financing is cutting out its space. With an extra pillar: no interests. The resources are still limited, but the Muslim crowdfunding ecosystem is diversifying: from the most basic reward based on social lending, with an eye to the Fintech. FinTech refers to technofinance or financial technology, that is to say, the supply of services and financial products provided through the most modern technologies made available to ICT. The services provided by FinTech are essentially those of traditional finance: therefore, from simple transactions to payments, to brokering and risk management, typical and exclusive of this sector are the activities linked to electronic currencies such as for example, the Bitcoin.
Abstract Blockchain is a distributed ledger technology expected to have significant impacts on the accounting and auditing profession. This study, applicable and timely for both accounting and auditing scholars and practitioners, explores blockchain technology and its main implications for the accounting and auditing profession. The research question addressed in this study is: What are the major themes emerging from academic research and professional reports and websites debating blockchain technology in the accounting and auditing context? A literature review of academic literature and professional reports and websites is performed to identify a taxonomy of emerging themes. The study finds that the most discussed themes in scholarly works and professional sources are governance, transparency and trust issues in the blockchain ecosystem, blockchain‐enabled continuous audits, smart contract applications and the paradigmatic shift in accountants' and auditors' roles . Based on these four themes, practical implications for accountants and auditors on how to approach the blockchain development are provided. Moreover, this study offers suggestions for future research on accounting and auditing in the blockchain era.
Smart Contracts, which derive from Blockchain technology, are one of the most peremptory applications of this. However, as it is a very recent technology, investors' uncertainty and fear makes their development slowly and cautiously. There are, therefore, a number of questions and legal problems that arise. The paper identifies what revolution Blockchain adds to the contractual processes, exploring its potential and analysing the main legal difficulties it is facing. It seeks the analysis of the pros and cons of this new technology, specially the questions about enforcement, nature and form, consent and (in) flexibility. The purpose of this investigation is to recognize the nature of this technology and its impact on the Contract Law. And because of this, the impact and challenges that it brings to the Governance of a nation as well as on private companies and individuals. Therefore this study is based mostly in the review of already existing embryonic laws about Blockchain technology or similar, authors that wrote about Smart Contracts and also some recent news to show the social and economic impact in the world. In short, the subject that this paper presents is the beginning of a true technological, social and economic revolution that must be anticipated and prepared by the law and those who work with it.
Governments across the world are testing different uses of the blockchain for the delivery of their public services. Blockchain hashing-or the insertion of data in the blockchain (anchoring)-is one of the potential applications of the blockchain in this space. With this method, users can apply special scripts to add their data to blockchain transactions, ensuring both immutability and publicity. Blockchain hashing also secures the integrity of the original data stored on central governmental databases. The objective of this paper is to analyse the use of data hashing (anchoring) on the blockchain for public state-owned registries. This paper starts by analysing possible scenarios of hashing on the blockchain and assesses in which cases it may work and in which it is less likely to add value to a public administration. Second, the paper also compares this method with traditional digital signatures using PKI (Public Key Infrastructure) and discusses standardisation in each domain. Third, it also addresses issues related with concepts such as "distributed ledger technology" and "permissioned blockchains." Finally, it raises the question of whether blockchain hashing is an effective solution for electronic governance, and concludes that its value is controversial, even if it is improved by PKI and other security measures. In this regard, we claim that governments need to identify pain points in governance in the first place, and then consider the trade-offs of the blockchain as a potential solution versus other alternatives.
Searching the word cryptocurrency on Google Scholar returns over 18,000 results. But of those, only 282 contain the JEL code E42: monetary systems. Such rough exercise suggests that, while the phen...