Christian Badertscher, Ueli Maurer, Daniel Tschudi, Vassilis Zikas
Abstract Bitcoin is one of the most prominent examples of a distributed cryptographic protocol that is extensively used in reality. Nonetheless, existing security proofs are property-based, and as such they do not support composition. In this work, we put forth a universally composable treatment of the Bitcoin protocol. We specify the goal that Bitcoin aims to achieve as an instance of a parameterizable ledger functionality and present a UC abstraction of the Bitcoin blockchain protocol. Our ideal functionality is weaker than the first proposed candidate by Kiayias, Zhou, and Zikas [EUROCRYPT’16], but unlike the latter suggestion, which is arguably not implementable by the UC Bitcoin protocol, we prove that the one proposed here is securely UC-realized by the protocol assuming access to a global clock, to model time-based executions, a random oracle, to model hash functions, and an idealized network, to model message dissemination. We further show how known property-based approaches can be cast as special instances of our treatment and how their underlying assumptions can be cast in UC as part of the setup functionalities and without restricting the environment or the adversary.
Abstract Bitcoin provides its users with transaction-processing services which are similar to those of traditional payment systems. This article models the novel economic structure implied by Bitcoin’s innovative decentralized design, which allows the payment system to be reliably operated by unrelated parties called miners. We find that this decentralized design protects users from monopoly pricing. Competition among service providers within the platform and free entry imply no entity can profitably affect the level of fees paid by users. Instead, a market for transaction-processing determines the fees users pay to gain priority and avoid transaction-processing delays. The article (i) derives closed-form formulas of the fees and waiting times and studies their properties, (ii) compares pricing under the Bitcoin Payment System to that under a traditional payment system operated by a profit-maximizing firm, and (iii) suggests protocol design modifications to enhance the platform’s efficiency. The Appendix describes and explains the main attributes of Bitcoin and the underlying blockchain technology.
Jan 1, 2017·Proceedings of the ... Annual Hawaii International Conference on System Sciences/Proceedings of the Annual Hawaii International Conference on System Sciences
Blockchain is an emerging technology that is perceived as groundbreaking. However, blockchain presents incumbent organizations with significant challenges. How should they respond to the advent of this innovative technology, and how can they build the capabilities that are necessary to successfully engage with blockchain? In this case study, we analyze how an incumbent bank deals with the radical innovation of blockchain. We find that blockchain as an innovation is unique, because its transaction cost-lowering nature requires cooperation not only on an intra-organizational, but also on an inter-organizational level to fully leverage the technology. We develop a framework illustrating how the process of discovering, incubating, and accelerating with blockchain can look like. Our research is one of the first case studies in the area; shedding light on the organizational challenges of incumbents as they engage with blockchain. The paper provides a blueprint for business executives in their endeavor of embracing blockchain technology.
Jan 1, 2017·Proceedings of the ... Annual Hawaii International Conference on System Sciences/Proceedings of the Annual Hawaii International Conference on System Sciences
Juho Lindman, Virpi Kristiina Tuunainen, Matti Rossi
Blockchain technologies offer new open source-based opportunities for developing new types of digital platforms and services. While research on the topic is emerging, it has this far been predominantly focused to technical and legal issues. To broaden our understanding of blockchain technology based services and platforms, we build on earlier literature on payments and payment platforms and propose a research agenda divided into three focal areas of 1) organizational issues; 2) issues related to the competitive environment; and 3) technology design issues. We discuss several salient themes within each of these areas, and derive a set of research question for each theme, highlighting the need to address both risks and opportunities for users, as well as different types of stakeholder organizations. With this research agenda, we contribute to the discussion on future avenues for Information Systems research on blockchain technology based platforms and services.
Jan 1, 2017·Proceedings of the ... Annual Hawaii International Conference on System Sciences/Proceedings of the Annual Hawaii International Conference on System Sciences
Technological innovation and consequential decentralisation are driving forces in the ongoing evolution and increasing openness of digital infrastructures and services. One of the most discussed and allegedly disruptive innovations is the distributed database technology referred to as blockchain. Although it is still in its technological infancy, experimental adoption and customization seem to be in full progress in various potential fields of application ranging from decentralized grids for computation and storage to global financial services. However, the technology and its path of development still entail a lot of common unknowns for practitioners and researchers alike. Especially regarding the question how the technology could amend or be incorporated into the existing landscape of digital services, processes and infrastructures. Hence, in this article we develop an ontology that (1) clearly delineates common terminology, core concepts and components, their relationships as well as innovative features of blockchain technology. It further (2) connects these insights with implications for relevant types of digital market models. Our framework is of high theoretical and practical value as it provides researchers and practitioners a common basis for communication and means for guided analysis of blockchain applicability.
Blockchain technology provides decentralized consensus and potentially enlarges the contracting space through smart contracts. Meanwhile, generating decentralized consensus entails distributing information that necessarily alters the informational environment. We analyze how decentralization relates to consensus quality and how the quintessential features of blockchain remold the landscape of competition. Smart contracts can mitigate informational asymmetry and improve welfare and consumer surplus through enhanced entry and competition, yet distributing information during consensus generation may encourage greater collusion. In general, blockchains sustain market equilibria with a wider range of economic outcomes. We further discuss the implications for antitrust policies targeted at blockchain applications. Received May 31, 2017; editorial decision May 29, 2018 by Editor Itay Goldstein.
Niranjan Sivakumar, Maxime Crépel, Dominique Boullier
Payments architectures are on the verge of a great bifurcation that must be documented in order to be debated. One one hand, actors like Google and Apple are moving towards becoming quasi-banks while they disseminate payment systems over smartphones. At the same time, the blockchain is a distributed ledger that introduces a radical new model of a trusted third-party for payments. The detailed history of credit card systems helps understand why the game of security has always been triggered by a delegation process of risk to third parties and by a cat-and-mouse game of security and fraud. Technologies were designed to solve these issues but have always been closely related to innovations in institutional assemblages. Payments systems shape our social life and the trust that we put in these architectures require an interdisciplinary examination that includes both technical and political concerns.
Harald Gjermundrød, Konstantinos Chalkias, Ioanna Dionysiou
The blockchain technology has emerged as a disruptive technology in recent years. The open and transparent nature of the distributed ledger, as supported by the blockchain technology, is an appealing factor to push this technology in applications with strong accountability and audit requirements such as cryptocurrency systems (i.e. Bitcoin) and ecommerce (i.e OpenBazaar). In order to guarantee the integrity of the distributed ledger, a set of miner nodes is in place that uses computing power to prove the authenticity of the ledger, in exchange for a small compensation fee. In this paper, alternative reward schemes for the miners are presented.
Like how VoIP (Voice over Internet Protocol) disrupted cross‐border telephony, Bitcoin will bring huge savings and improved service in cross‐border payments and will therefore create the MoIP (Money over Internet Protocol) (Pantera Capital). Anhand einiger typischer Gradmesser der Netzwerkökonomie soll in der Folge aufgezeigt werden, welche massive Entwicklung das von Satoshi Nakamoto vorgeschlagene neue kryptografische Transaktionssystem innerhalb einer Zeitspanne von gut sechs Jahren genommen hat.
…the more it is adopted by a mass of users, the more it is secured (Counterparty). Inwieweit, ob und welche Kryptowährung schlussendlich langfristig weltweit akzeptiert wird, ist Thema zahlreicher und vielfältiger Diskussionen. Innerhalb der verschiedenen Kryptowährungen hat das Bitcoin‐System eindeutig einen massiven Vorsprung. Vorstellbar ist jedoch auch analog des Konzepts des freien Wettbewerbs unter den Währungen vom österreichischen Ökonomen Friedrich August von Hayek ein Nebeneinander verschiedenster Kryptowährungen. Jeder dieser Kryptowährungen könnte ein Wert durch eine Gruppe von Menschen, die sich dafür entscheiden, dieser Währung zu vertrauen, beigemessen werden. Diese Gruppe kann durch gemeinsame demografische, geografische oder ethische Interessen definiert werden. Damit Kryptowährungen jedoch von der breiten Öffentlichkeit genutzt werden, bedarf es noch Vor allem aber braucht es Akzeptanz und Nutzung der Kryptowährungen in der breiten Öffentlichkeit und hier liefert die Gratis‐Bitcoin‐Ökosphäre, bestehend aus Hunderten Faucet‐Webseiten, einen großen Beitrag.
Talent hits a target others cannot hit, Genius hits a target others cannot see (Arthur Schopenhauer). Bereits 2013 begannen sich neue Kryptowährungsunternehmen zu formieren, die sich von der Wild‐West‐Mentalität der Mt. Gox und der Silk Road abgrenzen wollten. Die entstehenden Kryptowährungsdienstleister – großteils finanziert von US Venture Capital-Gebern – unterwerfen sich teils freiwillig den Know Your Customer (KYC) Bestimmungen der Finanzaufsichtsbehören. Gleichzeitig entstanden Kryptowährungsstartups, deren Gründer die Meinung vertraten, dass eine Kooperation mit den Finanzinstituten bzw. den Fiatwährungen statt Konfrontation wirtschaftlich sinnvoller wäre und damit begannen, neue Kryptotransaktionssysteme mit dieser Zielrichtung zu entwickeln (beispielsweise Ripple Lab vgl. auch Abschn. 14.2.). Zeitgleich – auch hier spielten die Interessen der investierten Venture-Capital-Geber eine wichtige Rolle – begannen Startups intensiv am Einsatz des Bitcoin‐Transaktionssystems für alternative Zwecke zu arbeiten. Dabei wird unterschieden in:
Rainer Schmidt, Michael Möhring, Daniel Glück, Ralf Haerting · 6 authors
Bitcoin is the most successful approach for establishing a currency outside of state supervision and government institutions. Besides, Bitcoin is very controversial discussed. Therefore, a further investigation of different aspects of the benefit of using Bitcoin should be realized in order to identify some core aspects of the digital currency Bitcoin. In this context, the study described in the following achievements is done. It shows that there exist key aspects, like dissemination as well as safety, which are important impact factors on users' benefit of using a digital currency like Bitcoin. In addition, it also gives implications for a further development of the topic and aspects for future research.
ABSTRACT The payments landscape is changing. Checks and cash are declining and being;replaced by electronic instruments; a range of new players are taking aim at the role;and position of banks; and new technologies such as Bitcoin/Distributed Ledger are;even challenging the nature of money itself. An often-heard argument is "a payment;is a payment", implying that a new player with a superior technology or customer;proposition, if successful, would be able to ultimately replace all existing payment;instruments/systems. This paper argues that the current payments landscape consists;of segments with inherently different characteristics that require different approaches.;Most dynamics occur within such segments, rather than across them.
The consensus in the finance sector seems to be that the shared ledger technology behind Bitcoin, the ‘blockchain’, will disrupt the sector,1 although many commentators are not at all clear how (or, indeed, why). The blockchain is, however, only one kind of shared ledger and the Bitcoin blockchain works in a very specific way. This may not be the best way to organise shared ledgers for disruptive innovation in financial services. So what is? And why would financial services organisations want to exploit shared ledger technology? This paper sets out a simple shared ledger taxonomy and layered architecture designed to facilitate communication between technologists, businesses and regulators in the financial services world, and explains why the various forms of shared ledgers might be attractive to financial services organisations, borrowing the phrase ‘ambient accountability’ from architecture to suggest a new way to organise a financial sector.
Virtual currencies and distributed ledger technology are today ‘hype’ issues in payment developments. However, a considerable number of elements in these development proposals seem to be repackaging old solutions. This paper analyses distributed ledger technology and virtual currencies based on a general framework for funds transfer systems. The main conclusions are that distributed ledger technology can provide increased efficiency and security in ledgers, which today are already distributed, like those custodian systems used for book-entry shares and bonds. However, virtual currencies constructed as non-redeemable and non-interest-bearing bearer bonds will probably have major difficulties in finding long-term market demand. One interesting observation is also made concerning the possibility for the markets to move towards a unit of account (currency) based on a basket of real assets instead of fiat currencies.
This paper provides insights into practical issues in the deployment of public and private distributed ledger technologies in banking and payment systems and conceptualises a framework for the evaluation of existing solutions and the design of new solutions in terms of practical utility and feasibility. The research approach entails the analytical examination of open questions solved by the decentralised concept of Bitcoin as well as explicit and implicit assumptions made by its underlying blockchain technology. The paper then proceeds to shed light on limitations arising from these assumptions when considering the practical implementation of industry-strength applications in the payments industry as well as in banking in general. Based on this discussion and decades of practical experience in processing billions of transactions in compliance with regulatory and legislative requirements, we identify seven classes of open issues: (1) efficiency concerning production costs and scalability; (2) speed of transaction confirmation; (3) finality or compliance to principles of accounting; (4) link to the ‘real’ world exemplified by settlement in central bank money; (5) resilience and governance model; (6) roll-out in a network industry; and (7) the issue of ‘smart contracts’. The paper thus contributes to theory and practice by providing a framework for the evaluation of existing technologies and for the design of new distributed ledger technologies in terms of its practical utility and feasibility.
This paper analyses the heterogeneity of household consumer preferences for electricity service contracts in a smart grid context. Platform pricing strategies that could incentivise consumers to participate in a two-sided electricity platform market are discussed. The research is based on original data from a discrete choice experiment on electricity service contracts that was conducted with 1,892 electricity consumers in Great Britain in 2015. We estimate a flexible mixed logit model in willingness to pay space and exploit the results in posterior analysis. The findings suggest that while consumers are willing to pay for technical support services, they are likely to demand significant compensation to share their usage and personally identifying data and to participate in automated demand response programs involving remote monitoring and control of electricity usage. Cross-subsidisation of consumers combining appropriate participation payments with sharing of bill savings could incentivise participation of the number of consumers required to provide the optimal level of demand response. We also examine the preference heterogeneity to suggest how, by targeting customers with specific characteristics, smart electricity service providers could significantly reduce their customer acquisition costs.
Current regulation of decentralized ledger technology leaves industry actors in confusion, facing high risk, and confronting significant disincentives to innovate. This Article argues that an endogenous regulatory approach offers an avenue for alleviating these obstacles while still providing sufficient tools for government oversight. In particular, this Article proposes regulation that is endogenous at two levels: first, in that it is created through an iterative, cooperative process involving both regulators and industry actors, and second, that it is implemented as regulation-through-code, that is, regulation written into the code itself. In so doing, this Article also investigates whether successful implementation of such an approach could disrupt the dichotomous choice between ex ante and ex post regulation in the financial and other spheres. This Article first examines the current regulatory landscape facing decentralized ledger technologies, including payments applications such as bitcoin. This Article then discusses ways in which these regulatory approaches have failed to keep pace with the technology and, as a result, are impeding innovation in a variety of sectors. This Article next outlines criteria for improving the regulatory landscape applicable to decentralized ledger technologies, evaluating alternative models of regulation in light of the criteria, and concluding that most such proposals continue to leave a regulatory lacunae. Drawing on theories of endogenous economic regulation, endogenous development, comparative law’s functional method and financial regulation, this Article attempts to fill the gap by proposing that decentralized technologies, including decentralized payment systems such as bitcoin, are robust enough to support a theory of endogenous, technology-assisted regulation.
This Note will undertake to analyze bitcoin under the Uniform Commercial Code (UCC) and the Internal Revenue Code (IRC)—two important sources of commercial law—to see whether any existing asset categories adequately protect bitcoin’s commercial viability. This Note will demonstrate that although commercial law dictates that bitcoin should—nay must—be regulated as a currency in order to sustain its existence, the very definition of currency seems to preclude that from happening. Therefore, this Note will recommend that we experiment with a new type of asset that receives currency-like treatment, specifically designed for cryptocurrencies, under which bitcoin can be categorized in order to preserve its commercial feasibility and to give legal regulatory clarity.
Studies have demonstrated that news reporting (as information) is critical to the adoption and pricing of Bitcoin. This early stage work represents the first look into how this information is being used as part of the speculation decision making process and how this might be compatible with a trust model. The outputs of this work will build a trust model for Bitcoin speculators’ use of news reporting as an information<br/>source. The work will further demonstrate if, and how, this trust model might be usurped by something as simple as a confirmation bias thus confirming a more psychological approach to speculative behaviours than that portrayed in a rational economics approach
Die vorliegende Bachelorarbeit gibt einen Uberblick uber die Funktionsweise und Auswirkungen der Blockchain-Technologie auf den Wertpapierhandel. Dabei werden zunachst die essentiellen, technischen Grundlagen der Kryptografie und Dezentralisierung am Beispiel der fuhrenden Kryptowahrung Bitcoin untersucht. Danach werden die gewonnenen Erkenntnisse mit einer SWOT-Analyse auf den Wertpapierhandelsprozess angewandt und es wird die Implementierung eines Distributed Ledgers auf Chancen und Risiken fur die Finanzmarkte hin evaluiert. Als Essenz der Literaturauswertung ist festzustellen, dass die Starken der DLT nur nach Einigung auf einen technischen Marktstandard voll abgeschopft werden konnen. Die Basis der Bachelorarbeit sind aktuelle Studien und Arbeitspapiere von Regulierungsbehorden, Beratungsunternehmen und Finanzdienstleistern aus Europa und den USA zur Auswirkung der Distributed Ledger Technology auf den Wertpapierhandel sowie die Fachbucher und Arbeitspapiere von Narayanan (2016) und Nakamoto (2008) zur Funktionsweise der Blockchain-Technologie. Durch die Verknupfung von Informationstechnologie und Finanzwirtschaft erhofft sich der Autor einen interdisziplinaren Erkenntnisgewinn uber aktuelle Entwicklungen auf den Finanzmarkten.