Blockchain Papers

Aggelos Kiayias, Nikos Leonardos, Yu Shen

No abstract is available for this record.

Jason Scharfman

No abstract is available for this record.

А.В. БОЙКОВА

Применение децентрализованных финансов привело к кардинальным изменениям в мировой экономике. В статье приведен анализ точек зрения национальных институтов несостоятельности (банкротства) по вопросу законности включения цифровой валюты в состав конкурсной массы должника. Приводятся различные точки зрения по вопросу является ли криптовалюта деньгами и может ли она использоваться при расчетах с кредиторами. The application of decentralized finance has led to fundamental changes in the world economy. The article analyzes the views of national insolvency (bankruptcy) institutions on the legality of including digital currency in the debtor's bankruptcy estate. Different points of view on the issue of whether cryptocurrency is money and whether it can be used in settlements with creditors are presented.

Gregory L. Chartier

This chapter considers how DLT could be used in connection with derivatives transactions and the English law and cross-border conflict-of-laws issues that may arise from such use. The chapter addresses more simple use cases for DLT, such as acting as a record keeping function in respect of payments under a transaction or in respect of transfers of collateral, and why conflict-of-laws issues are less likely to arise from such use. The chapter then looks at more complex use cases, in particular the potential use of tokens housed on a DLT system as collateral in respect of derivatives transactions. The chapter considers a number of different types of tokens, from tokens that are backed by a real-world asset to tokens that are native to the DLT system, and addresses the conflicts-of-laws issues that may arise from taking security over such tokens. The chapter also addresses how the law could be developed so as to provide greater legal certainty on these issues.

Abhinav Jain, Ehan Masud, Michelle Han, Rohan Dhillon · 8 authors

Due to the modern relevance of blockchain technology, smart contracts present both substantial risks and benefits. Vulnerabilities within them can trigger a cascade of consequences, resulting in significant losses. Many current papers primarily focus on classifying smart contracts for malicious intent, often relying on limited contract characteristics, such as bytecode or opcode. This paper proposes a novel, two-layered framework: 1) classifying and 2) directly repairing malicious contracts. Slither’s vulnerability report is combined with source code and passed through a pre-trained RandomForestClassifier (RFC) and Large Language Models (LLMs), classifying and repairing each suggested vulnerability. Experiments demonstrate the effectiveness of fine-tuned and prompt-engineered LLMs. The smart contract repair models, built from pre-trained GPT-3.5-Turbo and fine-tuned Llama-2-7B models, reduced the overall vulnerability count by 97.5% and 96.7% respectively. A manual inspection of repaired contracts shows that all retain functionality, indicating that the proposed method is appropriate for automatic batch classification and repair of vulnerabilities in smart contracts.

Jerry W. Markham

This chapter relates how the SEC characterized the creation and distribution of cryptocurrencies as being equivalent to an initial public offering (IPO) of stocks. The SEC has claimed jurisdiction over cryptocurrency offerings, which it calls “initial coin offerings” (ICOs), through the application of a 1946 Supreme Court decision that is popularly referred to as the Howey decision. That case established a multi-pronged test for identifying a form of SEC regulated “security” called an “investment contract.” This chapter shows how the application of the Howey test to cryptocurrencies is, at best, flawed and how its fails to address the unique market structure of cryptocurrencies. This chapter further shows why cryptocurrencies do not fall within other categories of SEC regulated securities such as “stocks” and “notes.” Finally, it examines the doubtful proprietary of the SEC’s effort to regulate the cryptocurrency market through enforcement actions, rather than through clarifying legislative authority.

Lončarević, Miloš

Internal Auditing (IA) as a profession has reshaped over decades in order to adapt to the constantly changing environment surrounding it. Internal auditors are ongoingly confronted with new technologies and need to be aware of complex digital risks, new fraud schemes, but also hot topics like Internet of Things, Artificial Intelligence and Blockchain. For blockchain a lot of the spotlight was historically on the investment and capitalization aspects of cryptocurrencies whereas the technology itself has evolved from a mere means of payment and value storage to more complex business constructs managed by self-enforcing smart contracts and oracles. In this dissertation the established and internationally recognized standards of internal auditing are applied to the context of newly popping up blockchain-based Decentralized Autonomous Organizations (DAOs) that operate on a series of smart contracts. The tokenized nature of ownership of these distributed ledgers as well as some law experts' assessments imply that they may have to be classified as public capital corporations and therefore be subjected to stricter rules and standards. Not only are internal audit functions highly recommended for large organizations but depending on the corporate laws of a country and the industry they are likely to be mandatory. While DAO-enthusiasts imply that the immutable nature of the blockchain, the recognized consensus mechanism, and strong preventive and automated controls will make internal auditing obsolete, this research sheds light on whether there are conceptual obstacles for IA in DAOs regarding compliance with internationally recognized internal auditing standards and therefore question the overall legality of this type of organization. After an initial analysis of professional and scientific publications as a basis, each IA standard is reviewed for obstacles, benefits, and challenges regarding the respective compliance in a DAO context utilizing an exploratory research method. Because it appears that there may be governance and operational collisions with regard to the strict standards of the Institute of Internal Auditors on the one hand and the conceptual unique setup of blockchain-based DAOs on the other, we evaluate the hypothesis by which standard compliance is impossible and therefore the legality of a DAO in itself may be in question. In addition, we analyze whether and how the use of a DAO can benefit and/or complicate the compliance with each internal auditing standard. This foundational research dissertation may offer guidance on what safeguards DAOs need to implement to comply with certain laws and standards but also addresses policy and standard makers with the assignment to update their rules and offer guidance for implementation. The dissertation may also offer guidance for the mandatory external and internal quality assessments (IIA Standards 1311 and 1312) of internal audit functions in DAOs. Overall, it presents additional insights to related professions like accountants, compliance officers, external auditors, anti-fraud professionals, IT auditors and others while offering a glimpse into what the role of an internal auditor of the future might realistically look like.

Laura Marchegiani

Since the beginning of this century, information technologies have been characterized by impressive advancements that have offered us powerful tools such as distributed ledger technologies, blockchain, machine learning algorithms and smart contracts. Corporate law has not been immune from this rapid evolution; in 2014, the news that an algorithm named “Vital” had been appointed to a board of directors of a Hong Kong-based venture capital firm caused a sensation in the business environment and among corporate law scholars. In fact, this algorithm did not assume the legal role of a board member; rather it operated as an advisor of the board of directors aimed at protecting the firm from risky (as well as overpriced) investments. A similar use of technology at the board level has been noticed as a starting point from which it is conceivable (and desirable) to develop unique tools to overcome humans’ cognitive biases and improve board monitoring function as well as boost businesses’ productivity. The crucial role of Corporation Technologies in reducing agency costs and promoting the disintermediation of organizational structures has been further emphasised in connection with the corporate social responsibility discourse. In fact, the economist Milton Friedman’s traditional assumption that ‘the only social responsibility’ of the corporation is ‘to increase its profit so long as it stays within the rules of the game’ has been vigorously re-discussed. In the Anglo-American corporate debate, as well as in the European debate, the sustainability of businesses is among the top item in the agendas of leading corporations and policy makers, increasingly so after the pandemic has exposed the vulnerability of economic structures to systemic risks. In view of the intersection between corporate governance and sustainability, the international debate has identified shareholders’ long-term interests as a point of convergence of private business models and social and environmental values. In other words, private companies are invited to assume a societal role and to design appropriate strategies for managing their impact on the environment and the society as a whole. The colours of 21st -century corporate law are blue for corporate technologies and green for environmental policies. The prospect of algorithmic governance in contemporary corporate law systems could be a desirable tool as long as it serves to promote the sustainable development of firms integrating management models inspired by IEL general principles but not compromising their competitiveness. <br>

Michele van Eck, Samantha Huneberg

Tradisionele geskrewe kontrakte word in natuurlike (of menslike) taalstrukture uitgedruk. Die gebruik van natuurlike taal het egter sy eie uitdagings. Eerstens is natuurlike taal wat in kontrakte gebruik word, deurspek met dubbelsinnigheid en tweedens word natuurlike taal in kontrakte dikwels die slagoffer van tegniese taal, wat dit moeilik maak vir ’n leek om die inhoud van die dokument te verstaan. Om hierdie rede is strenger wetgewende maatreëls ingestel, soos die 2017 Polishouerbeskermingsreëls en die Verbruikersbeskermingswet 68 van 2008. Digitale innovasie het die wyse van kontraktering verander, en baie kontrakte word nou elektronies gesluit, en met meer onlangse innovasies is sekere kontrakte nou gekodeerde rekenaarprogramme wat slimkontrakte genoem word. Sulke slimkontrakte kan die vorm aanneem van (i) ’n natuurlike taalkontrak met outomatiese kontraktuele prestasie, (ii) ’n hibriede kontrak, of (iii) ’n ten volle outomatiese en gekodeerde kontrak. Daarbenewens het die versekeringsbedryf unieke produkte ontwikkel wat digitale innovasie en tegnologiese ontwikkelings behels, soos parametriese- en mikroversekeringsmodelle. Hierin kan slimkontrakte konseptueel gebruik word om parametrieses en mikroversekeringsmodelle te ondersteun. Daar is egter min nagedink oor hoe dit kwesbare polishouers se vermoë kan beïnvloed om digitale kontrakteringstrukture te verstaan, soos die slimkontrakte wat op die onderliggende kode rus en die polishouer se digitale geletterdheid bevraagteken. Die outeurs bespreek die potensiële tekort wat die gebruik van tegnologieë, soos slimkontrakte, op kwesbare polishouers in die Suid-Afrikaanse versekeringsmark sou hê deur die aard van slimkontrakte en hul gebruik in parametriese versekering in ag te neem, en ontleed ook die bestaande Polishouerbeskermingsreëls (in vergelyking met die beskerming van polishouers in die Verenigde Koninkryk) om te bepaal of die bestaande beskerming voldoende sal wees om polishouers wat “slim” versekeringskontrakte sluit, te beskerm. Alhoewel daar voordele is aan die gebruik van slimkontrakte is daar tog verskeie faktore wat in ag geneem moet word, soos (i) die betroubaarheid van die databronne van die slimkontrak, (ii) die gebrek aan wetgewende beskerming van polishouers in die gebruik van gekodeerde taal wat in slimkontrakte gebruik word, (iii) die lae digitale geletterdheidsyfers en (iv) die vereiste om geoutomatiseerde transaksies in ’n natuurlike taaldokument te plaas as gevolg van artikel 20(d) van die Wet op Elektroniese Kommunikasie en Transaksies 25 van 2002. Die skrywers stel voor dat dit dalk nodig is vir die Suid-Afrikaanse wetgewer en die versekeringsbedryf om hierdie faktore in ag te neem en bykomende regulatoriese beheermaatreëls in te stel vir die gebruik van slimkontrakte in versekering, spesifiek om polishouers te beskerm met betrekking tot digitale geletterdheid wanneer ’n “slim” versekeringskontrak gesluit word.

Brian L. Brandwein

Non-Fungible Tokens (NFTs) have become a hot topic, especially during the COVID-19 pandemic. With this new wave of digital assets, comes decisions about how to govern their transfer from user to user. Between common law and the Uniform Commercial Code, depending on the type of NFT that is transferred, there is a sliding scale of when common law would govern and when UCC would govern each respective transaction. In this paper, NFTs are classified into seven distinct categories and the laws that govern their transactions are discussed with examples.

Oscar Borgogno

Decentralized Autonomous Organisations (DAOs) can be understood as collective organizations that are run through blockchain-based smart contracts, which allow token holders to participate directly in decision-making processes. By harnessing the key features of distributed ledger technology (DLT), they are increasingly posing tricky questions for policy makers, supervisors, and legal scholars. Even though DAOs are often claimed to be beyond the reach of national jurisdictions, it is clear that a broad array of legal issues need to be solved for DAOs to achieve scalability and widespread application, namely the lack of limitation of liability, governance concerns, and the definition of token-holders’ rights. Our paper delves into these concerns and argues that DAOs can benefit from the solutions provided by corporate law over the past decades in coping with management and moral hazard problems involving all complex organizations.

Jason Scharfman

No abstract is available for this record.

Brian Wu, Bridget Wu

Brian Kernighan, a computer scientist, wrote the first "Hello, World!" program in 1972 for the language B to be used internally at Bell Labs. Brian wrote a manual titled A Tutorial Introduction to the Language B to demonstrate how to use B's language. From there, this popular text spread quickly. It was used in a Bell Laboratories memo in 1974, as well as The C Programming Language in 1978. "Hello, World!" remains popular to this day. It became a standard for new programmers for their first program. This particular piece of code proves your code syntax, compiles, and executes to consistently produce the desired output. "Hello, World!" offers the code in more than 60 programming languages.

Raphael Auer

The emergence of so-called "decentralized finance" (DeFi) and a shadow financial system of cryptocurrency exchanges and stablecoin issuers raises the challenge of how to apply technology-neutral regulation so that similar risks are subject to the same rules. This paper makes the case for embedded supervision, i.e., a regulatory framework that provides for compliance in decentralized markets to be automatically monitored by reading the market's ledger. This reduces the need for firms to actively collect, verify and deliver data. The paper explores the conditions under which distributed ledger data may be used to monitor compliance. To this end, a decentralized market is modeled that replaces today's intermediary-based verification of legal data with blockchain-enabled credibility based on economic consensus. The key results set out the conditions under which the market's economic consensus would be strong enough to guarantee that transactions are economically final, so that supervisors can trust the distributed ledger's data. The paper concludes with a discussion of the legislative and operational requirements that would promote low-cost supervision and a level playing field for small and large firms.

Jasper L. Cummings

The author argues that commentary on the Second Circuit's 1989 Lessinger decision involving section 357(c) has not clearly identified the tax logic issues that are at stake in the case. He agrees that the controlling shareholder's obligation is not section 351 "property" and should not be accorded basis in the shareholder's hands. Instead, the obligation should be treated as a purchase money obligation that affords basis in the shareholder's stock unless it is properly viewed as contingent. In any event, proper structuring of section 351 exchanges of property subject to debt in excess of the property's basis for stock in order to reflect an actual retention of liability on that debt by the shareholder should prevent shareholder gain recognition under section 357(c).

Raphael Auer

No abstract is available for this record.

Amy J. Schmitz

Non-Fungible Tokens (NFTs) built in the blockchain are quietly revolutionizing ideas around digital assets despite their questionable status under current law. Furthermore, the smart contracts that control many NFTs are disrupting the way deals are done. At the same time, disputes regarding NFTs and smart contracts are inevitable, and parties will need means for dealing with these highly technical issues. This chapter tackles this challenge and proposes that parties turn to online dispute resolution (“ODR”) to efficiently and fairly resolve NFT and smart contract disputes. Furthermore, the chapter acknowledges the benefits and challenges of current means for addressing blockchain issues and proposes ideas for how designers could address those challenges and incorporate ODR to provide efficient and fair resolutions.

Michael D. Murray

No abstract is available for this record.

Mieszko Mazur, Efstathios Polyzos

This article provides an overview of the non-fungible tokens (NFTs) as an investment class. The first part focuses on the NFT infrastructure including the NFT primary and secondary markets, different types of NFT exchanges, NFT aggregators, NFT borrowing and landing, NFT staking, and finally NFT fundraising. The second part investigates the leading blue-chip NFT collections and their performance in the short- and long-term, both during the bull and bear markets. Analyzing close to two million NFT transactions, we find that profile picture (PFP) NFTs dominate the NFT market and yield exceptionally high returns both on the raw and market-adjusted basis. For example, NFTs from the collection Bored Ape Yacht Club (BAYC) deliver a buy-and-hold return of close to 2,000%. Furthermore, NFTs from other categories (art, gaming, metaverse) do not perform as well as PFPs, however, they outperform the cryptocurrency market by roughly 100%.

Dias, Renata Dalle Molle Araújo

A blockchain é conhecida como a tecnologia subjacente ao Bitcoin. No entanto, sua aplicação vai além das criptomoedas. Hoje, blockchain é usada para permitir a tokenização de todos os tipos de ativos no mercado de cripto-ativos, desde moedas de pagamento até tokens de utilidade e tokens de títulos. O impacto dessa tecnologia, além do desenvolvimento de smart contracts, tem sido especialmente relevante no setor financeiro, no qual diversos projetos-piloto estão sendo desenvolvidos para facilitar operações diversas por meio de distributed ledger technologies. O foco deste trabalho será o uso de blockchain em mercados financeiros secundários e os potenciais benefícios para processos de pós-negociação. A fim de fornecer uma melhor visualização da potencial adoção em larga escala de tecnologias DLT, o mercado europeu de títulos corporativos será usado como um exemplo do possível poder disruptivo da tecnologia blockchain por meio de títulos baseados em blockchain. Para tanto, serão analisadas funções e riscos relevantes relacionados aos security tokens, bem como os desafios para seu desenvolvimento e adoção, especificamente os desafios regulatórios. Em primeiro lugar, será abordada a qualificação de security tokens como instrumentos financeiros, bem como a forma como sua emissão, negociação e liquidação funcionam de forma diferente dos mercados tradicionais. Uma vez que essas questões sejam esclarecidas, será possível avaliar o quadro da legislação de valores mobiliários europeia aplicável, especificamente o Regime MiFID II / MIFIR, a Directiva relativa ao carácter definitivo da liquidação de valores mobiliários e o Regulamento das Centrais de Valores Mobiliários, e a sua adequação em relação aos referidos cripto-ativos. Adicionalmente, será discutida a adoção pela Comissão Europeia do Pacote de Financiamento Digital, com particular destaque para a proposta da Comissão de um Regulamento sobre um regime piloto para infraestruturas de mercado baseadas em distributed ledger technology e a relevância para o mercado europeu de obrigações corporativas, levando em consideração o mercado de títulos baseados em blockchain.

Tarek Kadour Aleinieh, Laura Zoboli

Abstract Legal standardization traditionally played an important role in contractual relations. With technological and commercial development and expansion of trade from the individual and collective levels to internationalization, it became necessary to create a set of standards to keep pace with this development and facilitate the contractual process. Although smart contracts are considered a leap in the contractual relationship, it cannot be overlooked that these contracts share many characteristics with traditional contracts. To gain a greater position in the global market, smart contracts also need to be well functioning and efficient. In this context, the article tackles the phenomenon of legal standardization and identifies the main weaknesses of smart contracts—to answer two crucial questions: how can these contracts be smarter, and how should we employ standardization to ensure their efficiency?

Andreas Rosegger

Goldfinger-Attacken zielen darauf ab, den Wert einer Ziel-Kryptowährung zum Absturz zu bringen, indem die Mehrheit der Stimmrechte im System genutzt wird das zu Grunde liegende Konsensprotokoll untergraben. In einem Proof-of-Stake-Kontext, in dem die Stimmkraft auf der Menge der gehaltenen Kryptowährung basiert, kann dies in Form eines Buy-out-Angriffs erreicht werden, bei dem eine Mehrheit der Zielwährung gekauft wird. In diesem Zusammenhang wurde der Race to the Door (RTTD)-Effekt beschrieben, der dazu führt, dass immer mehr Inhaber aus der Zielwährung aussteigen, bevor diese wertlos wird. Dieser Effekt senkt den Preis für weitere Stimmenanteile, wodurch der Angriff billiger wird, je weiter er fortschreitet. Diese Arbeit soll zeigen, dass ein Angriff im Stil von Race to the Door auch in einem Proof-of-Work (PoW)-Kontext technisch möglich ist, ohne eine Mehrheit der Stimmrechte (d. h. der Hash-Rate) zu erlangen. Zu diesem Zweck werden die technische Machbarkeit und die Kosten eines solchen Angriffs am Beispiel von Ethereum untersucht. Zunächst wird ein Systemmodell für RTTD-Angriffe auf PoW-basierte Kryptowährungen vorgestellt, um einen Überblick zu geben. Der Angriff wird dabei in die Phasen Vorbereitung, Rennen und Angriff unterteilt. Um die technische Machbarkeit zu demonstrieren, werden diese Phasen in Form von Smart Contracts auf Ethereum umgesetzt. Für die Angriffsphase werden drei Varianten vorgestellt, die jeweils einen unterschiedlichen Denial-of-Service-Angriff realisieren. Dazu werden In-Band-Zahlungen genutzt, um entweder das Auslösen zusätzlicher Transaktionen oder die Erzeugung leerer Blöcke durch Miner zu incentivieren. Um die Kosten der vorgeschlagenen Angriffsvarianten abzuschätzen, wird eine empirische Analyse durchgeführt, bei der Transaktionsdaten von historischen Überlastungsphasen der Ethereum-Blockchain untersucht werden. Anhand der Ergebnisse werden die Kosten der Angriffsvarianten geschätzt und verglichen. Die stündlichen Kosten für das Blockieren von Transaktionen durch das auslösen weiterer Transaktionen betragen etwa 870 Ether. Die Incentivierung von Minern, die ein Drittel der Blöcke leer lassen, kostet etwa 790 Ether pro Stunde. Die Arbeit zeigt, dass Race to the Door-Attacken auch im Kontext von PoW-basierten Kryptowährungen technisch durchführbar sind. Die Kosten des Angriffs hängen dabei von seiner Intensität und Dauer ab. Die Intensität kann in der Angriffsphase konfiguriert werden und die Dauer hängt von der für den Angriff verfügbaren Geldmenge ab.

Brydon T. Wang, Mark Burdon

There is an increasing commercial imperative to automate various <br/>components of the construction contract administration process, including <br/>technologies such as sensors, common data environments, machine learning <br/>frameworks and smart contracts. These technologies of automation augment <br/>the role of the superintendent that administers construction contracts and <br/>impact how the superintendent exercises discretion in relation to legal <br/>obligations captured in the construction contract. This article analyses the <br/>discretionary aspects of a superintendent’s legal obligations as articulated in <br/>Australian standard form construction contracts. It argues that the exercise of <br/>superintendent discretion in a fair and reasonable manner signals <br/>trustworthiness to the construction industry and positions the superintendent <br/>as a trusted intermediary on the construction contract. Consequently, the <br/>augmentation of the trusted role of a superintendent requires a deeper <br/>understanding of how automation of contract administration processes can <br/>support the signalling of trustworthiness. To do so, this article adopts a <br/>conceptual framework of trustworthiness to examine how the exercise of <br/>superintendent discretion signals trustworthiness in three ways: ability, integrity <br/>and benevolence. The article concludes that care must be taken when <br/>deploying technologies of automation in the contract administration process in <br/>order to ensure that superintendent discretion is exercised fairly, reasonably, <br/>and in good faith

Catherine Martin Christopher

Explores the implications of transactional scripts used in situations where there is less than total trust between the parties. In particular, this Article asks the question of how parties to these next generation transactional scripts can seek redress and remedies in the event that the transactional script does not perform according to the parties' intent. Until parties feel safe that any errors can be corrected, large-scale implementation of transactional scripts will be hobbled. Part II of this Article articulates why the term "transactional scripts" is preferable to "smart contracts" and describes the utility and potential of transactional scripts. Part III identifies several factors that hinder greater expansion of the use of transactional scripts. It goes on to identify uncertainty of enforcement as the most important barrier to transactional script innovation, finding that parties will be reluctant to entrust bigger and more complex transactions to transactional scripts until the parties are comfortable that an external mechanism is capable of correcting errors in the execution of the transaction. This lack of reliable enforcement mechanisms is a problem exacerbated by the characteristic of distributed ledger technology, which is to move only forward, preventing revisions or reversals of preexisting entries. Part IV explores and critiques possible mechanisms that may be able to provide error correction, including statutory law, private law, online dispute resolution, public/private regulatory partnership, and common law. Part V concludes the Article, noting that the expansion of transactional scripts' utility will be tethered to the security provided by available error-correction mechanisms. Only as contracting parties become assured that the integrity of their transactional intent will be effectuated will transactional scripts be adopted for use.