Since its advent in 2009, Bitcoin, a cryptography-enabled peer-to-peer digital payment system, has been gaining increasing attention from both academia and industry. An effort designed to overcome a cluster of bottlenecks inherent in existing centralized financial systems, Bitcoin has always been championed by the crypto community as an example of the spirit of decentralization. While the decentralized nature of Bitcoin's Proof-of-Work consensus algorithm has often been discussed in great detail, no systematic study has so far been conducted to quantitatively measure the degree of decentralization of Bitcoin from an asset perspective -- How decentralized is Bitcoin as a financial asset? We present in this paper the first systematic investigation of the degree of decentralization for Bitcoin based on its entire transaction history. We proposed both static and dynamic analysis of Bitcoin transaction network with quantifiable decentralization measures developed based on network analysis and market efficiency study. Case studies are also conducted to demonstrate the effectiveness of our proposed metrics.
This paper describes blockchain enabled Auction House and e-marketplace. Traditional Auction house and e-marketplaces charges commission from users as well as have control over users They can block any merchant on their own wish without permission of merchant. Currently present auction houses charges large commissions. In this paper we’re proposing a platform using blockchain where seller can enlist product without ¬involvement of any third party. Our platform provides choices to seller to enlist product in different ways for selling like Direct Sell, Open Auction and Blind Auction. Different buyers can buy different products by different selling options. After comparison of cost using blockchain with online auction marketplace such as eBay it is observed that selling using blockchain decentralized app is cheaper than online options. Each transaction is verified through the blockchain and is recorded to the decentralized ledger. No trusted third parties. The transactions on the blockchain are trackable and irreversible thus buyers and the seller cannot breach the contract. This is the application which remedies all the drawbacks mentioned above.
Alexander Braun, Niklas Haeusle, Stephan Karpischek
The rise of blockchain technology and other technological accelerators enables a fully automated decentralized autonomous risk transfer. In this chapter, we explain the functionality and operating principles of this new method of risk transfer. We provide an overview of the corresponding institutional arrangement and its challenges. We identify two main challenges, namely ensuring the quality of the product and gaining a critical network size. A feasible solution for these problems is the usage of system-specific tokens, which are used as a form of digital collateralization. In a short case study, we scrutinize how these theoretical concepts can be translated into practice and show the potential of the idea. While flight delay risk is already handled through decentralized autonomous risk transfer, the biggest benefits can be realized by decentralizing crop and hurricane insurance, including a seamless transfer of the risk to capital markets.
In this computer world, digital transformation is a thoughtful and unavoidable one. The impact of this digital transformation is reflected both in government and private sectors. Amongst these, financial and business sectors must face a lot of challenges to undergo this transformation. In financial sector, transaction between two parties has become a part of their life. A transaction normally happens with the help of few centralized authorities. In the centralized system, all the transaction needs to be verified and signed by a centralized authority. But there are many issues exist in executing this methodology. Among them two important issues concerned with financial sector are, large storage space required for processing and cost of committing a transaction. Blockchain, a blooming technology has overcome this drawback by changing the execution model. Blockchain makes use of distributed ledger and crypto currencies, thus converting the centralized processing into a distributed processing system. Here, all the ledgers needed for the transaction are maintained as distributed database. Block chain also minimizes the process by executing all the rules with the help of software. The software that acts as the execution unit of the blockchain is known as smart contract. Smart contracts facilitate the implementation of user-defined operations of uninformed complexity which are not probably plain cryptocurrency protocols. It facilitates user to realize the constraints, instructions, and policies of the domain applications. To explore the feature of the smart contracts, it should be properly designed and coded. Smart contracts work in the application layer of the blockchain. All the rules for the applications can be realized using smart contract. Data for the verification can also be obtained from external sources. i.e., usually, the data for the contract execution is supplied through the transactions. But it can also be obtained from external sources. Each smart contract in the blockchain is assigned a unique address of size 20 bytes. To run a contract, the transaction must be sent to the contract&s;s address. The smart contract performs the necessary operation and when all the protocols are satisfied, the smart contract by itself executes the transaction. This transaction will be run by different miners whose output will be validated and the block of the miner who wins it will be added to the chain. Smart contracts run on Ethereum virtual machine and solidity is the programming language used for writing smart contracts. Ethereum smart contracts need gas to run. When the required gas is not found, then the requested transactions cannot be executed. In this chapter, the detailed explanation of the smart contract along with its architecture is discussed. Also, designing of the smart contract using the programming language solidity is discussed.
A DAO is a blockchain-based system that enables people to coordinate and govern themselves mediated by a set of self-executing rules deployed on a public blockchain, and whose governance is decentralised (i.e., independent from central control).
We propose a new way to share licensed spectrum bandwidth capacity in mobile\nnetworks between operators, service providers and consumers using\nblockchain-based smart contracts. We discuss the foundational building blocks\nin the contract as well as various extensions to support more advanced features\nsuch as bulk purchases, future reservations, and various auction mechanisms.\nFurthermore, we demonstrate how the system can be implemented with an\nopen-source, permissioned Enterprise blockchain, Hyperledger Sawtooth. We show\nthat our smart contract implementation can improve blockchain transaction\nperformance, by approximately four orders of magnitude compared to serial\ntransactions and one order of magnitude compared to parallell transactions,\nusing PKI-driven bulk purchases of mobile access grants, paving the way for\nfully automated, efficient, and fine-grained roaming agreements.\n
Chi‐Chun Chou, Nen-Chen Richard Hwang, Gary P. Schneider, Tawei Wang · 6 authors
ABSTRACT This study explores how to use smart contract technology to implement accounting principles for public use. To illustrate its feasibility, this study develops a design model of decentralized accounting contracts (DACs) and uses revenue recognition to demonstrate how to apply the proposed model. Considering various scenarios of revenue recognition, this study adopts Solidity to program smart contracts for five use cases: (1) regular sale, (2) installment sale, (3) gift card sale, (4) a contracted sale with multiple performance obligations, and (5) a contracted sale with variable considerations over the contract price. The results show that smart contracts can be created to fully address complex revenue recognition scenarios according to the Generally Accepted Accounting Principles (GAAPs). In conclusion, we discuss the implications of the study for business organizations, regulatory agencies, and the accounting profession. JEL Classifications: M40.
The tick rule is one of the most popular trade classification algorithms used when an order initiator in market data is not signed. Using 11.9 million trades of Bitcoin/USD on Bitstamp, this article tests the accuracy of the tick rule in the Bitcoin market. Evidence indicates that the overall success rate of the tick rule is 76.87%. It is also shown that the tick rule is inclined to fail in discerning trade intentions when there is a long period of time between trades. Furthermore, order imbalances computed using the tick rule lack sufficient accuracy in the Bitcoin market.
Distributed Ledger Technology can benefit the severe and chronic issues in the planning and execution of complex projects. However, while the general potential is recognized, there is little rigorous discussion of the pathway to benefits or detailed description of architectures to realize them. Here, we start by discussing the severity and causes of the problem. We then present an architecture designed to ameliorate them. Project networks are temporally constrained DAGs; new value is created at project milestones corresponding to the DAG vertices. Building on these characteristics, we describe an architecture for collaborative planning and execution with smart contracts at milestones and tokens backed by project created assets.
Matheus V. X. Ferreira, Daniel J. Moroz, David C. Parkes, Mitchell Stern
In recent years, prominent blockchain systems such as Bitcoin and Ethereum have experienced explosive growth in transaction volume, leading to frequent surges in demand for limited block space and causing transaction fees to fluctuate by orders of magnitude. Existing systems sell space using first-price auctions; however, users find it difficult to estimate how much they need to bid in order to get their transactions accepted onto the chain. If they bid too low, their transactions can have long confirmation times. If they bid too high, they pay larger fees than necessary. In light of these issues, new transaction fee mechanisms have been proposed, most notably EIP-1559, aiming to provide better usability. EIP-1559 is a history-dependent mechanism that relies on block utilization to adjust a base fee. We propose an alternative design -- a {\em dynamic posted-price mechanism} -- which uses not only block utilization but also observable bids from past blocks to compute a posted price for subsequent blocks. We show its potential to reduce price volatility by providing examples for which the prices of EIP-1559 are unstable while the prices of the proposed mechanism are stable. More generally, whenever the demand for the blockchain stabilizes, we ask if our mechanism is able to converge to a stable state. Our main result provides sufficient conditions in a probabilistic setting for which the proposed mechanism is approximately welfare optimal and the prices are stable. Our main technical contribution towards establishing stability is an iterative algorithm that, given oracle access to a Lipschitz continuous and strictly concave function $f$, converges to a fixed point of $f$.
Jiahua Xu, Krzysztof Paruch, Simon Cousaert, Yebo Feng
As an integral part of the decentralized finance (DeFi) ecosystem, decentralized exchanges (DEXs) with automated market maker (AMM) protocols have gained massive traction with the recently revived interest in blockchain and distributed ledger technology (DLT) in general. Instead of matching the buy and sell sides, automated market makers (AMMs) employ a peer-to-pool method and determine asset price algorithmically through a so-called conservation function. To facilitate the improvement and development of automated market maker (AMM)-based decentralized exchanges (DEXs), we create the first systematization of knowledge in this area. We first establish a general automated market maker (AMM) framework describing the economics and formalizing the system's state-space representation. We then employ our framework to systematically compare the top automated market maker (AMM) protocols' mechanics, illustrating their conservation functions, as well as slippage and divergence loss functions. We further discuss security and privacy concerns, how they are enabled by automated market maker (AMM)-based decentralized exchanges (DEXs)' inherent properties, and explore mitigating solutions. Finally, we conduct a comprehensive literature review on related work covering both decentralized finance (DeFi) and conventional market microstructure.
As the most popular blockchain that supports smart contracts, there are already more than 296 thousand kinds of cryptocurrencies built on Ethereum. However, not all cryptocurrencies can be controlled by users. For example, some money is permanently locked in wallets' accounts due to attacks. In this paper, we conduct the first systematic investigation on locked cryptocurrencies in Ethereum. In particular, we define three categories of accounts with locked cryptocurrencies and develop a novel tool named Clue to discover them. Results show that there are more than 216 million dollars value of cryptocurrencies locked in Ethereum. We also analyze the reasons (i.e., attacks/behaviors) why cryptocurrencies are locked. Because the locked cryptocurrencies can never be controlled by users, avoid interacting with the accounts discovered by Clue and repeating the same mistakes again can help users to save money.
Smart contracts are set of instructions which are stored on a blockchain. These instructions will be executed automatically without middle-man interaction. Smart contracts in the blockchain allows the transactions and contracts to be executed across undesignated nodes without an interaction of central system or external enforcement. The transactions are transparent, traceable and irreversible. In blockchain all the data stored are secure and immutable. So blockchain would be the suitable environment for smart contracts. Smart contract data is encrypted and placed in a distributed ledger, which means the information stored in the blocks cannot be deleted or modified. There are many blockchain platforms supporting smart contracts. This paper explores the information about various smart contract platforms and its features.
In recent years, the digital economy has experienced a growing number of transactions. Traditional dispute resolution methods such as court and international arbitration are ineffective for handling a large volume of small value claims across national borders. Decentralized justice is a new approach to online dispute resolution that combines blockchain, crowdsourcing and game theory in order to produce resolution systems which are radically more efficient than existing methods. This article offers a review of the decentralized justice industry and of the key players participating in it. It presents a number of key dimensions of the industry and reviews the mechanism design choices made by these different platforms. Finally, it discusses a growth hypothesis for the industry and how it may grow in the future.
The current electricity networks were not initially designed for the high integration of variable generation technologies. They suffer significant losses due to the combustion of fossil fuels, the long-distance transmission, and distribution of the power to the network. Recently, \emph{prosumers}, both consumers and producers, emerge with the increasing affordability to invest in domestic solar systems. Prosumers may trade within their communities to better manage their demand and supply as well as providing social and economic benefits. In this paper, we explore the use of Blockchain technologies and auction mechanisms to facilitate autonomous peer-to-peer energy trading within microgrids. We design two frameworks that utilize the smart contract functionality in Ethereum and employ the continuous double auction and uniform-price double-sided auction mechanisms, respectively. We validate our design by conducting A/B tests to compare the performance of different frameworks on a real-world dataset. The key characteristics of the two frameworks and several cost analyses are presented for comparison. Our results demonstrate that a P2P trading platform that integrates the blockchain technologies and agent-based systems is promising to complement the current centralized energy grid. We also identify a number of limitations, alternative solutions, and directions for future work.
Abstract Smart contracts have been proposed as a means of revolutionizing transacting between human actors and contributing to blockchain platforms substituting for many current institutions. However, the technical nature of blockchain platforms and smart contracts requires levels of certainty and foresight sufficient for contracts to be complete. We examine the technical and economic characteristics of blockchains and smart contracts to identify sources of uncertainty that may pose challenges to the ability of these technologies to displace existing institutional arrangements, in particular, the courts and other arbitration arrangements. Despite the development of alternative automated blockchain institutions such as the Kleros dispute resolution system, the case for smart contracts and blockchain applications to supplant real-world institutions remains weak. Inherent incompleteness due to limits to information availability, human cognition, and communication means that traditional contract governance institutions will continue to complement blockchain smart contract governance arrangements. The more complex and unique the transaction, the higher the value at risk, the harder to anticipate and precisely specify contingencies and measure and observe outcomes. Furthermore, the longer the time frame between agreement and execution, the less likely it is that smart contracting will be more efficient than traditional contracting.
Kontinuiranim razvojem informatičkih tehnologija i interneta intenzivirao se rad na postojećim idejama digitalnog novca. Kao rezultat toga, računalni program Bitcoin protokola je pušten u javnost 9. siječnja 2009. godine čime se kreira infrastruktura za prvu kriptovalutu s licencom otvorenog programskog koda koji je slobodan za javnost. To znači da svatko tko ima interes može replicirati postojeći protokol, kreirati novu kriptovalutu i pustiti u javnost. Ovo posljednje je omogućilo stvaranju niza novih kriptovaluta s različitim svojstvima i širenju njihove upotrebe prvo u platnom prometu, a zatim i u kontekstu njihovog trgovanja na novom sekundarnom tržištu. Cilj ovog rada je formalno identificirati i opisati mogućnost konstrukcije portfelja kreiranih prema različitim optimizacijskim ciljevima, a čije sastavnice predstavljaju kriptovalute kao nova vrsta utržive imovine. Prva skupina portfelja je formirana i modelirana kroz vrijednost bitcoin kriptovalute, a druga skupina kroz dolarsku novčanu jedinicu. U tu svrhu je provedeno pet različitih optimizacijskih strategija, te su i prezentirani rezultati strategije s jednakim udjelima u portfelju. Inicijalne sastavnice portfelja su definirane prema razvoju programskog koda i veličini zajednice. Rezultati portfelja izraženog kroz jedinice bitcoin kriptovalute sugeriraju da dinamika povijesnih prinosa kriptovaluta pruža mogućnost modeliranja portfelja u bitcoin valuti. Takvi rezultati su opravdani s obzirom da je dinamika prinosa optimizacijske strategije ostvarila kumulativni prinos viši od kumulativnog prinosa najuspješnije sastavnice portfelja. S druge strane, rezultati portfelja izraženog u dolarskoj vrijednosti nisu ostvarili kumulativni prinos viši od kumulativnog prinosa odabranog standarda usporedbe, pa se zaključuje da primijenjeni fundamentalni indikatori ne predstavljaju dobar pokazatelj za inicijalan odabir sastavnica portfelja.
Liyi Zhou, Kaihua Qin, Antoine Cully, Benjamin Livshits · 5 authors
Decentralized Finance (DeFi) is a blockchain-asset-enabled finance ecosystem with millions of daily USD transaction volume, billions of locked up USD, as well as a plethora of newly emerging protocols (for lending, staking, and exchanges). Because all transactions, user balances, and total value locked in DeFi are publicly readable, a natural question that arises is: how can we automatically craft profitable transactions across the intertwined DeFi platforms?In this paper, we investigate two methods that allow us to automatically create profitable DeFi trades, one well-suited to arbitrage and the other applicable to more complicated settings. We first adopt the Bellman-Ford-Moore algorithm with DeFiPoser-ARB and then create logical DeFi protocol models for a theorem prover in DeFiPoser-SMT. While DeFiPoser-ARB focuses on DeFi transactions that form a cycle and performs very well for arbitrage, DeFiPoser-SMT can detect more complicated profitable transactions. We estimate that DeFiPoser-ARB and DeFiPoser-SMT can generate an average weekly revenue of 191.48 ETH (76,592 USD) and 72.44 ETH (28,976 USD) respectively, with the highest transaction revenue being 81.31 ETH (32,524 USD) and 22.40 ETH (8,960 USD) respectively. We further show that DeFiPoser-SMT finds the known economic bZx attack from February 2020, which yields 0.48M USD. Our forensic investigations show that this opportunity existed for 69 days and could have yielded more revenue if exploited one day earlier. Our evaluation spans 150 days, given 96 DeFi protocol actions, and 25 assets.Looking beyond the financial gains mentioned above, forks deteriorate the blockchain consensus security, as they increase the risks of double-spending and selfish mining. We explore the implications of DeFiPoser-ARB and DeFiPoser-SMT on blockchain consensus. Specifically, we show that the trades identified by our tools exceed the Ethereum block reward by up to 874×. Given optimal adversarial strategies provided by a Markov Decision Process (MDP), we quantify the value threshold at which a profitable transaction qualifies as Miner Extractable Value (MEV) and would incentivize MEV-aware miners to fork the blockchain. For instance, we find that on Ethereum, a miner with a hash rate of 10% would fork the blockchain if an MEV opportunity exceeds 4× the block reward.
The Ethereum blockchain enables executing and recording smart contracts. The smart contracts can facilitate, verify, and implement the negotiation between multiple parties, also guaranteeing transactions without a traditional legal entity. Many tools supporting the smart contracts development in different areas are flourishing because in Ethereum blockchain valuable assets are often involved. Some of the tools help the developer to find security vulnerabilities via static and/or dynamic analysis or to reduce the Gas fees consumption. Despite the plethora of such tools, there is no tool supporting smart contracts evaluation and analysis via a graphical representation for expert developers.The paper embraces this way to facilitate the developers’ analysis activity, by proposing a graphical representation model to visualize smart contract source code. The paper makes available a tool via a web interface, which accepts the smart contract address as an input and produces a graphical representation of the smart contract as an output. The graphical representation can help developers to better understand the structure of smart contracts and share it with other developers. Moreover, some metrics, such as the relations among smart contracts, are easier to be understood via "spatial" than "tabular" representation. Indeed, representing smart contracts’ metrics via visual representation facilitates the developers, who are used to analyse the source code by directly inspecting it or using other tools that provide the metrics in a table format. Finally, the paper provides detailed data regarding a smart contract to the developers and proposes a graphical representation of the smart contracts without obscuration of details, also highlighting areas of the code that are possibly too big in size and/or too complex via a diagram displaying their connections.
Industrial Internet of Things (IIoT) is a distributed network of smart sensors, edge gateways, cloud-based applications (e.g. SaaS), which enables precise data monitoring and control of complex industrial process over arbitrary distances. Blockchain technology allows us to have a distributed peer-to-peer network where members can interact with each with a trust-free condition. Smart contract, residing on blockchain technology, is defined in digital form, including agreements on which contract participants can execute these commitments [1]. Several researches have already studied the combination of IoT and Blockchain (especially smart contract) technology, however mainly focused in the framework level [2][3]. This paper will make an experimental study of how smart contract can improve the business operation efficiency together Industrial IoT solution, and further bring new business models to maximize the revenue.
Participation in permissionless blockchains results in competition over system resources, which needs to be controlled with fees. Ethereum's current fee mechanism is implemented via a first-price auction that results in unpredictable fees as well as other inefficiencies. EIP-1559 is a recent, improved proposal that introduces a number of innovative features such as a dynamically adaptive base fee that is burned, instead of being paid to the miners. Despite intense interest in understanding its properties, several basic questions such as whether and under what conditions does this protocol self-stabilize have remained elusive thus far. We perform a thorough analysis of the resulting fee market dynamic mechanism via a combination of tools from game theory and dynamical systems. We start by providing bounds on the step-size of the base fee update rule that suffice for global convergence to equilibrium via Lyapunov arguments. In the negative direction, we show that for larger step-sizes instability and even formally chaotic behavior are possible under a wide range of settings. We complement these qualitative results with quantitative bounds on the resulting range of base fees. We conclude our analysis with a thorough experimental case study that corroborates our theoretical findings.