We present an approach to verify off-chained information using Linked Data, Smart Contracts, and RDF graph hashes stored on a Distributed Ledger. We use the notion of a Linked Pedigree, i.e. a decentralised dataset for storing hyperlinked information, as modelling foundation. We evaluate our approach by comparing different ways to build the Smart Contract. We develop a cost model and show, based on our implementation, that for managing multiple Linked Pedigree instances, a single larger Smart Contract is superior to multiple smaller Smart Contracts for supply chains shorter than 50 participants.
Dominik Harz, Lewis Gudgeon, Arthur Gervais, William J. Knottenbelt
Financial deposits are fundamental to the security of cryptoeconomic protocols as they serve as insurance against potential misbehaviour of agents. However, protocol designers and their agents face a trade-off when choosing the deposit size. While substantial deposits might increase the protocol security, for example by minimising the impact of adversarial behaviour or risks of currency fluctuations, locked-up capital incurs opportunity costs. Moreover, some protocols require over-collateralization in anticipation of future events and malicious intentions of agents. We present Balance, an application-agnostic system that reduces over-collateralization without compromising protocol security. In Balance, malicious agents receive no additional utility for cheating once their deposits are reduced. At the same time, honest and rational agents increase their utilities for behaving honestly as their opportunity costs for the locked-up deposits are reduced. Balance is a round-based mechanism in which agents need to continuously perform desired actions. Rather than treating agents' incentives and behaviour as ancillary, we explicitly model agents' utility, proving the conditions for incentive compatibility. Balance improves social welfare given a distribution of honest, rational, and malicious agents. Further, we integrate Balance with a cross-chain interoperability protocol, XCLAIM, reducing deposits by 10% while maintaining the same utility for behaving honestly. Our implementation allows any number of agents to be maintained for at most 55,287 gas (ca. USD 0.07) to update all agents' scores, and at a cost of 54,948 gas (ca. USD 0.07) to update the assignment of all agents to layers.
Eva Raquel Porras Gonzalez, José María Martín Martín, José Manuel Guaita Martínez
The blockchain distributed ledger technology offers a secure, transparent, verifiable, democratic, decentralised, efficient, and tamper-resistant way to record and transfer data. Now much of the discussion revolves around the attributes that determine its many potential applications as this technology is expected to help transform sectors that are hampered by inefficiencies as well as facilitate the appearance of new business models based on distributed markets and technology. Given this technological revolution has already started, the core objectives of this article are to acquaint the reader with the technology and with the current and latent applications of this innovation while recognising its potential worldwide economic impact. To accomplish these goals we review the literature encompassing both academic and professional works that refer to the characteristics and properties of the blockchain, its many existent and plausible applications, and the reasons for its anticipated global economic repercussions.
Distributed ledger technology is one of the latest fintech innovations that could increase the efficiency of securities markets. The technology represents a new paradigm how the need of trusted third parties can be eliminated and how transaction cost can be lowered. The technology can be used as a platform for so-called smart contracts. The implementation of DLT and smart contracts is however not risk free, the technology is also at an early stage and it is still unsure whether it will overcome all hurdles. \n \nBefore the innovations can be utilized on a full scale, potential risk such as the uncertainty regarding the legal validity and enforcement of smart contracts needs to be eliminated, so that the technology can be implemented and used with a high level of predictability and trust. The research sets out to solve the research question from the view point of Finnish securities law, limiting the research to smart contracts in securities markets. General principles are deconstructed using international, European and Finnish sources to solve the legal problem. \n \nSmart contracts can be divided into blockchain smart contracts in crypto markets and smart contracts in securities markets, the research focuses on the latter. Smart contracts can also be divided into smart contract code and smart legal contracts. Smart contracts are defined in the research as agreements automatable by computer and enforceable by either legal enforcement of rights and obligations or by execution of code. Technology neutrality is set out as a central principle in regulating fintech. The research question is reframed as whether a contract concluded in code is valid and enforceable. By analysing electronic contracts, enforcement of code, the example of the vending machine and by teleologically interpreting the law, it is established that smart contracts concluded in code can be both legally valid and enforceable. \n \nValidity and enforceability from the perspective of securities law can also be seen as the execution of rights and the issuance of securities. Securities and securities markets also have special characteristics, such as being fungible, collective and anonymous. Securities markets are also already to a high degree automated, using electronic trading systems, where many securities exist only in electronic form, programming languages are also already used to express securities and their functions. Existing securities law, which is technology neutral, can therefore be applied on smart contracts in securities markets, without the need of any regulatory changes. The growing digitalisation and automation of securities markets raise however broader questions such as the elasticity of the law and its implications on the stability of the financial system.
N. Sai Sirisha, Tarasha Agarwal, Ranjeet Monde, Richa Yadav · 5 authors
The lack of transparency has made people lose trust in charities, making social funding stagnant. The donor is unaware of the legitimate utilization of his funds. Corruption adds to the distrust of the donor. This paper proposes a system called Charity-Chain that is a decentralised network built on the Ethereum blockchain. It helps social organisations to run projects transparently, using smart contract-based incentives to ensure their impact is independently verified and accessible to everyone. This makes it much easier for funders (philanthropic organisations, impact investors, small donors) to monitor their transactions and hence restore their trust in giving to such social organizations.
We study optimal smart contract design for monitoring an exchange of an item performed offline. There are two parties, a seller and a buyer. Exchange happens off-chain, but the status update takes place on-chain. The exchange can be verified but with a cost. To guarantee self-enforcement of the smart contract, both parties make a deposit, and the deposits must cover payments made in all possible final states. Both parties have an (opportunity) cost of making deposits. We discuss two classes of contract: In the first, the mechanism only interacts with the seller, while in the second, the mechanism can also interact with the buyer. In both cases, we derive optimal contracts specifying optimal deposits and verification policies. The gains from trade of the first contract are dominated by the second contract, on the whole domain of parameters. However, the first type of contract has the advantage of less communication and, therefore, more flexibility.
This chapter discusses risk in the context of blockchain technology and proposes a theory of programmable risk that can be implemented with Black Swan Smart Contracts. The theory’s foundations are developed from two perspectives: risk theorizing in philosophy, social science, and finance; and black swan financial theory (risk distributions are fat-tailed (Mandelbrotian), not normal (Gaussian)). Event distributions can be formulated as s-curves with convex, linear, and concave segments, such that a desired level of risk may be chosen (convexity equates to lower risk). A blockchain theory of user-selected programmable risk is proposed. Black Swan Smart Contracts instantiate s-curve event distributions such that risk might be more efficiently managed by selecting low-medium-high risk as a standard smart contract parameter. Potential applications of Black Swan Smart Contracts include Insurance as a Digital Service, eBay for Money, Information Markets, and Autonomous Risk Management as a Smart Network property.
We conduct a detailed analysis of investors in successful initial coin offerings (ICOs). The average ICO has 4700 contributors. The median participant contributes small amounts and many investors sell their tokens before the underlying product is developed. Large presale investors obtain tokens at a discount and flip part of their allocation shortly after the ICO. ICO contributors lack the protections traditionally afforded to investors in early-stage financing. Nevertheless, returns 9 months after the ICO are positive on average, driven mostly by an increase in the value of the Ethereum cryptocurrency.
Madeleine Maslin, Millicent Watt, Christopher Yong
This paper dissects the research methodologies implemented by the Research Team for the Smart Contracts Working Group (TC-307/IT-041 Blockchain and Distributed Ledger Technologies) in developing standards to inform best practice in the design and use of blockchain and distributed ledger technologies. In doing so, it explores the origins of blockchain standardisation and outlines the high-level methodology for conducting and delivering research in this rapidly evolving space.
The evolution of the energy production and distribution towards innovative decentralized models, dictates the introduction of emerging technologies to transform the conventional energy sector into smart
Abstract This chapter discusses cryptocurrencies in the context of a historical overview of the evolution of money, banking, and the payment system. The chapter is organized as follows. Section I introduces the topic. Section II addresses money, payment, and payment intermediation. Section III sets out the evolution of commercial banking to facilitate national and global networks for book-based payments. Section IV addresses both electronic banking as a form of payment intermediation and the availability to the public of central bank balances as a challenge to payment intermediation. Section V examines the challenge cryptocurrencies present to state-issued currency, payment intermediation, and the roles of banks in the payment systems. The conclusion points at an irony: even as a challenge to banking, cryptocurrencies emerged as an outgrowth of an enhancement to banking.