The emergence of new technologies leads to the reconsideration of business processes identified with older technologies, but many advantages that they promise do not immediately appear. The transfer of the ledgers kept in paper form to the computer environment presents a challenge as a revolution in the field of payments. However, since this change takes place in the form of recording rather than recording the transaction, the processes underlying the transactions remain substantially the same.
The financial sector has grown ever more interested in crypto-currencies and the innovative Distributed Ledger Technology (DLT) that underpins them. For central banks, in their role as providers of currency and critical payments infrastructure, a key area of interest is whether DLTs could be used to enhance existing payment processes. This article gives a high-level explanation of how different DLTs can change payments processes. The answer depends on what form the distributed ledger takes. We identify four binary elements that determine the different properties of distributed ledgers and use case studies to evaluate how these elements can improve on, or fall short of, existing payments infrastructure. We find that Blockchain – the most well-known DLT that underpins Bitcoin – brings benefits in terms of the speed of cross-border settlement and improves security by removing the single point of failure, but has drawbacks in terms of slowing the speed and increasing the cost of smaller domestic transactions, and being energy intensive. Some central banks have experimented with other forms of DLTs that try to capture some of the benefits of Blockchain while minimising the costs, but so far these DLTs have tended to mimic existing payment processes and have not demonstrated many additional benefits.
The second meeting of ISO/TC 307 (International Organization for Standardization Technical Committee 307: blockchain and electronic distributed ledger technologies) was held in Tokyo in November 2017.This TC is working to develop international standards for blockchain technology.This article introduces the concept of blockchain technology-the fundamental technology used for bitcoin-as well as trends in the international standardization of electronic distributed ledger technologies and some applications of blockchain technology beyond cryptocurrency.
Francesco Parino, Mariano G. Beiró, Laëtitia Gauvin
As the first decentralized digital currency introduced in 2009 together with the blockchain, Bitcoin offers new opportunities both for developed and developing countries. Bitcoin peer-to-peer transactions are independent of the banking system, facilitating foreign exchanges with low transaction fees, such as remittances, and offering a high degree of anonymity. These opportunities together with other key factors led the Bitcoin to become extremely popular and caused its price to skyrocket during 2017 (Henry et al. in J Digit Bank 2(4):311–337, 2018 ). However, while the Bitcoin blockchain attracts a lot of attention, it remains difficult to investigate where this attention comes from, due to the pseudo-anonymity of the system, and consequently to appreciate its social impact. Here we make an attempt to characterize the adoption of the Bitcoin blockchain by country. In the first part of the work we show that information about the number of Bitcoin software client downloads, the IP addresses that act as relays for the transactions, and the Internet searches about Bitcoin provide together a coherent picture of the system evolution in different countries. Using these quantities as a proxy for user adoption, we identify several socio-economic indexes such as the GDP per capita, freedom of trade and the Internet penetration as key variables correlated with the degree of user adoption. In the second part of the work, we build a network of Bitcoin transactions between countries using the IP addresses of nodes relaying transactions and we develop an augmented version of the gravity model of trade in order to identify socio-economic factors linked to the flow of Bitcoin between countries. In a nutshell our study provides a new insight on Bitcoin adoption by country and on the potential socio-economic drivers of the international Bitcoin flow.
Francesco Parino, Mariano G. Beiró, Laëtitia Gauvin
As the first decentralized digital currency introduced in 2009 together with\nthe blockchain, Bitcoin offers new opportunities both for developed and\ndeveloping countries. Bitcoin peer-to-peer transactions are independent of the\nbanking system, thus facilitating foreign exchanges with low transaction fees\nsuch as remittances, with a high degree of anonymity. These opportunities\ntogether with other key factors led the Bitcoin to become extremely popular and\nmade its price skyrocket during 2017. However, while the Bitcoin blockchain\nattracts a lot of attention, it remains difficult to investigate where this\nattention comes from, due to the pseudo-anonymity of the system, and\nconsequently to appreciate its social impact. Here we make an attempt to\ncharacterize the adoption of the bitcoin blockchain by country. In the first\npart of the work we show that information about the number of Bitcoin software\nclient downloads, the IP addresses that act as relays for the transactions, and\nthe Internet searches about Bitcoin provide together a coherent picture of the\nsystem evolution in different countries. Using these quantities as a proxy for\nuser adoption, we identified several socio-economic indexes such as the GDP per\ncapita, freedom of trade and the Internet penetration as key variables\ncorrelated with the degree of user adoption. In the second part of the work, we\nbuild a network of Bitcoin transactions between countries using the IP\naddresses of nodes relaying transactions and we develop an augmented version of\nthe gravity model of trade in order to identify socio-economic factors linked\nto the flow of bitcoins between countries. In a nutshell our study provides a\nnew insight on the bitcoin adoption by country and on the potential\nsocio-economic drivers of the international bitcoin flow.\n
The Blockchain technology is a disruptive technology that is changing the societal environment at various levels particularly the financial systems creating a new cryto-economy. There is dominant optimistic and praising view of the potentialities of the decentralized public ledgers. However most of the changes and cutting-edge impact of Blockchain technology remains misunderstood or unknown. This paper aims to propose a more critical perspective of the Blockchain implications highlighting the limitations, the controversies and the drawbacks of public distributed ledgers. An illustration from the monetary system is presented to propose an example of socio-economic implication. By presenting a case regarding the central bank digital currency (CBDC) system, which is now being, introduced as a counter policy against the emergence of the private crypto-currency system. We elaborate what CBDC is trying to solve and yet at the same time what potential problems might arise from this system. We conclude that the introduction of the Blockchain technology should be valued and evaluated in a more thorough way.
Starting with BitTorrent and then Bitcoin, decentralized technologies have been on the rise over the last 15+ years, gaining significant momentum in the last 2+ years with the advent of platform ecosystems such as the Blockchain platform Ethereum. New projects have evolved from decentralized games to marketplaces to open funding models to decentralized autonomous organizations. The hype around cryptocurrency and the valuation of innovative projects drove the market cap of cryptocurrencies to over a trillion dollars at one point in 2017. These high valued technologies are now enabling something new: globally scaled, decentralized business models. Despite their valuation and the hype, these new business ecosystems are frail. This is not only because the underlying technology is rapidly evolving, but also because competitive markets see a profit opportunity in exponential cryptocurrency returns. This extracts value from these ecosystems, which could lead to their collapse, if unchecked. In this paper, we explore novel ways for decentralized economies to protect themselves from, and coexist with competitive markets at a global scale utilizing decentralized technologies such as Blockchain.
Cansu Şarkaya İçellioğlu, Merve Büşra Engin Öztürk
Güvenlik açısından kriptoloji (şifreleme) bilimini kullanan, dijital ve sanal bir para birimi anlamına gelen kriptopara, son yıllarda en çok tartışılan ekonomik kavramlardan biri olmuştur. Kriptopara, herhangi bir döviz kuruna ya değerli bir madene bağlı olmamakla birlikte, herhangi bir yasal otorite tarafından da kontrol edilememektedir. En başarılı kriptopara olarak değerlendirilen Bitcoin, ilk çıktığı yıldan bu yana çok yüksek bir oranda değerlenmesinden ötürü cazip bir yatırım aracı olarak görülmekte, ancak taşıdığı belirsizlik ve risklerden ötürü çeşitli endişeleri de beraberinde getirmektedir. Bu çalışmada Bitcoin’in özellikleri ve işleyişi ele alınarak, Bitcoin ile seçili döviz kurları arasındaki ilişki araştırılmaktadır. Araştırmada birim kök testleri uygulanmış, seriler arasındaki uzun dönemli ilişki Engel-Granger Eşbütünleşme testi ve Johansen Testi ile ve kısa dönemli ilişki Granger nedensellik testi ile sınanmıştır. Çalışmanın sonucunda Bitcoin ile Dolar, Euro, Sterlin, Yen ve Yuan arasında uzun ve kısa dönemli bir ilişkinin varlığına rastlanamamıştır.
This thesis explains the working of a previously undocumented blockchain application developed for the energy sector. The application enables distributed market coordination for small-scale decentralized energy systems. An Ethereum smart contract is employed as a core component of the application, facilitating a marketplace for transacting electrical energy. A design science research methodology was applied to the application in an attempt to further develop it. The problem of high fees in the energy marketplace was identified, resulting from the smart contract's inefficient use of Ethereum gas. Two particular sources of inefficiency were identified, and solutions for fixing these inefficiencies were designed and implemented. Savings in transaction fees were created by replacing a function of the smart contract with off blockchain communication, and by editing the fund withdrawal mechanism of the smart contract so that it requires users to create fewer blockchain transactions. As a result, the smart contract's gas consumption was reduced by up to 11% in a certain use case. The reduction in gas consumption was not sufficient to make the deployment and use of the application economically feasible on the canonical public Ethereum blockchain. A Plasma child chain or a dedicated Ethereum blockchain were suggested as potentially more feasible deployment environments for the application. It was noted that the application relies on centralized components, and it is debatable whether its current blockchain-based implementation is justifiable.
Roberto Tonelli, G. A. Pierro, Marco Ortu, Giuseppe Destefanis
Smart contracts (SC) are software programs that reside and run over a blockchain. The code can be written in different languages with the common purpose of implementing various kinds of transactions onto the hosting blockchain. They are ruled by the blockchain infrastructure with the intent to automatically implement the typical conditions of traditional contracts. Programs must satisfy context-dependent constraints which are quite different from traditional software code. In particular, since the bytecode is uploaded in the hosting blockchain, the size, computational resources, interaction between different parts of the program are all limited. This is true even if the specific programming languages implement more or less the same constructs as that of traditional languages: there is not the same freedom as in normal software development. The working hypothesis used in this article is that Smart Contract specific constraints should be captured by specific software metrics (that may differ from traditional software metrics). We tested this hypothesis on 85K Smart Contracts written in Solidity and uploaded on the Ethereum blockchain. We analyzed Smart Contracts from two repositories "Etherscan" and "Smart Corpus" and we computed the statistics of a set of software metrics related to Smart Contracts and compared them to the metrics extracted from more traditional software projects. Our results show that generally, Smart Contract metrics have more restricted ranges than the corresponding metrics in traditional software systems. Some of the stylized facts, like power law in the tail of the distribution of some metrics, are only approximate but the lines of code follow a log-normal distribution which reminds us of the same behaviour already found in traditional software systems.
The design of a successful distributed system for enabling payments and small transactions among Internet users has long been a major challenge in applied computer science. Bitcoin, the first cryptocurrency having reached world-wide popularity, suffers from sustainability problems such as inefficient energy expenditure for its network operation and from perverse incentives that foster speculative hoarding behavior. We propose a digital transfer system based on a variant of the Bitcoin ledger that is meant to support deterministic small payments with enforced proportional transaction fees: to achieve this property, we renounce the persistence of balances expected of a cryptocurrency, thus mitigating currency hoarding. We introduce at the same time a novel external incentive mechanism based on a verifiable third party with the goal of promoting long-term sustainability, adjusting the margins of profitability for contributors to the proof-of-work scheme without stifling the transaction rate.
We design a distributed platform with blockchain as a system service for supporting transaction execution in insurance processes. The insurance industry is heavily dependent on multiple processes between transacting parties for initiating, maintaining and closing diverse kind of policies. Transaction processing time, payment settlement time and security protection of the process execution are major concerns. Blockchain technology, originally conceived as an immutable distributed ledger for detecting double spending of cryptocurrencies, is now increasingly used in different FinTech systems to address productivity and security requirements. The application of blockchain in FinTech processing requires a deep understanding of the underlying business processes. It supports automated interactions between the blockchain and existing transaction systems through the notion of smart contracts. In this paper, we focus on the design of an efficient approach for processing insurance related transactions based on a blockchain-enabled platform. An experimental prototype is developed on Hyperledger fabric, an open source permissioned blockchain design framework. We discuss the main design requirements, corresponding design propositions, and encode various insurance processes as smart contracts. Extensive experiments were conducted to analyze performance of our framework and security of the proposed design.
Purpose The purpose of this paper is to alert international business (IB) and international entrepreneurship (IE) researchers of a new phenomenon and novel research opportunities arising as a result of digital innovations brought about by the new, decentralized internet popularly known as “blockchain”. The paper contains a general overview of the blockchain technology and maps connections with the IB/IE literature, focusing on explaining accelerated internationalization of firms that are born global on blockchain. Design/methodology/approach The paper is a viewpoint based on the author’s ongoing research on blockchain and fintech and reflections on the born global literature. The paper has benefited from the author’s insights through her involvement in the global blockchain community as an investor and advisor. Findings The author argues for establishing a theoretical link between the born global literature and the literature on the economics of information goods and platform economics to explain the pace of international growth in the context of blockchain start-ups. Research limitations/implications The author urges IB/IE researchers to pay attention to research opportunities in the blockchain area, especially those related to explaining rapid internationalization of digital start-ups and a new organizational form for organizing cross-border activities known as decentralized autonomous organization. Originality/value Three factors are shown to contribute to a rapid internationalization of blockchain start-ups: network effects, solving the chicken-and-egg problem and building an ecosystem around the evolving technology.
This paper provides a description of the blockchain that underpins the Bitcoins. This paper provides a new mechanism to reinforce the credibility of online transactions based on blockchain technology. It then becomes possible to explore the future of the blockchain technology in other online electronic markets of goods and services. We assert that the blockchain technology, still linked with the BT, could become in the near future the keystone of many electronic markets and could considerably increase online transactions. A cryptocurrency regime based on sidechain is modelled and a public blockchain controlled by a central is proposed.
Widersprüchliche Meinungen und Beurteilungen der Blockchain Technologie und ihrer Kryptowährungen werden momentan medial stark diskutiert. Die Komplexität des Konzepts und die weite Bandbreite an Themen die es begleiten, erschweren ein Urteil über sein Potential und seine Risiken. Da bereits Zeitungen, wie die New York Times oder die Financial Times regelmäßig über Kryptowährungen berichten und sowohl die Marktkapitalisierung als auch das Handelsvolumen eine erwähnenswerte Größe erreicht haben, ist die Leitfrage, ob Kryptowährungen eine neue Anlageklasse bilden, gerechtfertigt. Um diese Frage zu beantworten, sammelt diese Arbeit vorangegangene Studien, die Eigenschaften beschreiben, die Risiko und Rendite betreffen, und Kryptowährungen mit bereits etablierten Anlageklassen vergleichen und in Beziehung setzen. Gemäß dieser Analyse, können digitale Währungen durchaus als Anlageklasse betrachtet werden. Um das Bild zu vervollständigen, beleuchtet diese Arbeit auch Gegenargumente, wie das ernstzunehmende Problem von Marktmanipulation und fehlender Regulierung. Diese Belange müssen in naher Zukunft noch besser geklärt werden, doch die Blockchain Technologie und Kryptowährungen werden eine wesentliche Rolle in Finanzmärkten spielen.
Cybersecurity has become a priority for organizations and governments due to the expeditious growth of information systems and networks in daily businesses. In this thesis, I first examine how security could be improved in a business environment. In the first study, I explore the regulatory options in improving the social welfare from a security service market. I identify two major sources of deficiency in such a market: incentive misalignment and information asymmetry. Based on a stylish analytical model, I propose that self-regulation is sufficient to solve the problem of misaligned incentive given the availability of audit trail, and government intervention with taxation is required to tackle the issue of information asymmetry. In the second study, I investigate the effect of a national security measure in the context of China and Australia. The difference-in-difference econometric model shows that implementing the national filter scheme weaken security, and further analysis suggests that the use of circumvention tools from users contributed most to this result. Besides policy analyses in cybersecurity, in the third study, I inspect the economics characteristics in cryptocurrency – a system empowered by cybersecurity in design for value transfer. Extending from the Mussa-Rosen model of choice on product quality, I find that the overwhelming transaction cost of cryptocurrency is caused by network congestion due to the capacity constraint. The empirical analysis with Bitcoin further supports this finding. These results offer important economics insight for firms, lawmakers and developers in designing security policies and solutions.
SELECTED ASPECTS OF BITCOIN AND ITS IMPLICATIONS FROM THE STANDPOINT OF THE LAW AND ECONOMICS Abstract Bitcoin is one of the best-known examples of a decentralized convertible cryptocurrency based on blockchain technology. The diploma thesis deals with the main aspects of bitcoin and bitcoin payment networks in complex economic analysis based on the use of standard economic apparatus. The economic analysis is backed by a thorough and relevant legal research. The main goal of the diploma thesis is complex economic and legal analysis of bitcoin. In economic analysis, the emphasis is put on the use of supply-demand analysis, which outlines the basic factors affecting supply and demand for bitcoins. Based on a clear delineation of these factors, the thesis is able to analyse specific aspects of bitcoin. Diploma thesis analyzes the impacts of decentralized setting, as well as risks associated with anonymity of users, crime in connection with bitcoin, time delays in transaction verification, technical and energetic demands on mining, high transaction costs and internet connection needs. Each of these aspects is compared to existing payment institutions or systems. The thesis also examines the legal regulation of bitcoin. Due to the absence of a complex legal regulation, the diploma thesis tries to apply the...