Bitcoin Blockchain Research Articles

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Objective: creating the corporate governance structure and legal regulation mechanism of blockchain protocols.Methods: dialectical approach to cognition of social phenomena, allowing to analyze them in historical development and functioning in the context of the totality of objective and subjective factors, which predetermined the following research methods: formal-logical, comparative-legal, and sociological.Results: Blockchain technology was born out of a Cypherpunk vision for regulation without sacrificing privacy. This vision feeds a call by some in the blockchain technology ecosystem to view computer code as the only law applicable to blockchain protocols, transactions conducted on the protocols, and DAOs. The code of certain protocols, such as the Bitcoin blockchain and Ethereum, currently embody their Cypherpunk cultural origins, placing a premium on privacy and governance mechanisms that preserve privacy. But that code can change. In fact, laws enacted and enforced by governments may act as the stimuli for such change. Indeed, such stimuli, for better or worse, are already in play, with coders ceasing work for fear of legal repercussions. Adopting a contract-based governance system in which the rules and expectations are clearly defined empowers blockchain protocol communities to preserve as much of their cultures and visions as possible. Adopting these contracts also requires blockchain communities to engage in open, active, and thoughtful conversation about their collective culture and vision. Further, basing blockchain governance structures in contracts that loosely resemble corporate governance structures allows such communities to tap into centuries of scholarship and experimentation in a functionally equivalent governance arena. Scientific novelty: the work proves that the biggest cultural impact of (un)corporate crypto-governance may be on the culture of traditional corporations. Indeed, one significant lesson of a corporate governance model for off-chain governance may be a sharpened recognition that “code as law” is a subsystem of regulatory norms within the greater legal system. Viewed through systems analysis, the result is a two-way recognition of the interconnected roles of code and law in limiting behavior within the blockchain ecosystem. In other words, the code informs the law and its application to a blockchain ecosystem. Meanwhile, law informs behavior and activities undertaken through the code. The result is that the intersection of code and law can impact our understanding of how to apply the law in more traditional scenarios as well.Practical significance: the main provisions and conclusions of the article can be used in scientific, pedagogical and law enforcement activities when considering issues related to (un)corporate crypto-governance.

Blockchains: An Experiential Accounting Learning Activity

ABSTRACT Organizations such as the AACSB and the Pathways Commission (2012) recommend that accounting curricula include emerging technologies. Yet including emerging technologies represents a challenge for accounting educators due to the complexity and uncertainty associated with such technologies, as well as the rapid pace of technology change and innovation. This paper answers the call by the Pathways Commission (2012) for additional research that is focused on enhancing learning experiences to better reflect current and emerging technologies. Using an experiential learning approach (Butler, Church, and Spencer 2019), we create an interactive learning activity that is focused on bitcoin blockchains and intended to give accounting students a conceptual understanding of blockchain technology and its mechanisms, as well as its implications beyond bitcoins.

Do Connections Pay Off in the Bitcoin Market?

This paper identifies the bitcoin investor network and studies the relationship between connections and returns. Using transaction data from the bitcoin blockchain, we reach three conclusions. First, on average, annualized returns of connected addresses in the network are 20.75% above those of their unconnected peers. Second, returns also differ among those connected addresses. By dividing the connected addresses into ten deciles based on their centrality, we find that addresses in the two most-connected deciles earn higher returns than the other connected addresses. Third, eigenvector centrality is more related than degree centrality to higher returns, implying that quality of connections matters.

Bitcoin blockchain based information convert transmission

Bitcoin blockchain based information convert transmission

Blockchain Governance Challenges: Beyond Libertarianism

This essay considers the ideological context of blockchain technology. This technology is often celebrated for its potential for decentralization, distribution, privacy, and a lack of intermediaries and coordinators for transactions and general governance. Because of these features, blockchain technology, and, in particular, its most famous inauguration—the bitcoin blockchain—is frequently identified with libertarianism. In this essay, we argue that the ideological context of blockchain technology is much more complicated. In addition to unraveling a number of background ideologies and their role in this technology, we raise the ontological issue concerning the relationship of ideology to technology. These matters have implications for, among other things, the approach that should be taken to blockchain's governance, as well as how international lawyers may approach this “foreign”-seeming phenomenon that has its proponents from the European Central Bank to the United Nations (not, however, forgetting the private sector nor the digital underground).

Bitcoin’s energy consumption and social costs in relation to its capacity as a settlement layer

Bitcoin runs on energy. The decentralized network’s amount of energy consumption has resulted in multifaceted discussions about its efficiency and environmental impact. To put Bitcoin’s energy consumption into perspective, we propose to relate (a) the energy consumption in TWh and (b) resulting social costs in the form of carbon emissions to the Dollar value settled on the Bitcoin network. Both metrics allow to relate and quantify the capacity of Bitcoin as a settlement layer to the network’s energy consumption and resulting carbon emissions, or social costs. We find that in early 2021 Bitcoin (a) settles between $2,333 and $7,555 for each Dollar spent on energy and (b) that, on average, a Dollar settled on the Bitcoin blockchain causes in social costs between 0.007% and 0.01%, depending on the estimated energy consumption converted into the costs of carbon emissions. These results help to assess the efficiency, cost and sustainability of Bitcoin and may allow a comparison of Bitcoin with existing settlement base layers such as Fedwire or gold.

Механізми інтеграції блокчейнів між собою

This paper considers the need for blockchain integration and the problems that arise along the way. The idea of transporting bitcoins by destroying them on one blockchain and creating a corresponding value on another blockchain is considered. A brief description of such concepts as bitcoin transaction and bitcoin block is given. The Merkle Tree data structure, its internal organization, and its benefits are described in detail. The algorithm for constructing a “Merkle Tree” for a block of transactions and the principle of constructing and verifying a “Merkle Path” for a given transaction are presented. Describes what is behind the concept of "proof of work" (Proof of Work) from both a technical and economic point of view. For the first time, a detailed algorithm for transporting bitcoins from one blockchain to another was proposed, which is mostly based on the data structure of the "Merkle tree" and the idea of "proof of work". The four main stages of this algorithm are given and explained. The scheme of the transaction destroying one bitcoin is resulted, its locking script is considered. A real example illustrates the creation and verification proof of existence of a transaction based on the Merkle tree. Given the detailed scheme of the transaction on the auxiliary blockchain, with its basic elements, namely: a chain of block headers, proof of existence based on the Merkle tree, encoded transaction from bitcoin blockchain. The connections between these elements are given and the algorithm of formation of the above-mentioned transaction is considered. The algorithm of transaction validation on the auxiliary blockchain from the point of view of the smart contract is considered step by step. The disadvantages of the idea of integrating blockchains with each other are described.

Powered by Blockchain Technology, DeFi (Decentralized Finance) Strives to Increase Financial Inclusion of the Unbanked by Reshaping the World Financial System

The invention of the Internet has paved the way for a new world of opportunities in life, including finance. Even with the presence of this invention, the traditional financial system has failed to meet expectations set up by other technological advancements. In today’s world, almost everyone has access to the Internet, yet not all of them have bank accounts. According to a recent report from the World Bank Group, approximately 1.7 billion people worldwide still do not have any access to banks whatsoever. Although the Internet has helped transfer information from one part of the world to another within milliseconds, time and spending are still needed when it comes to financial assets. In the last few years, a growing trend toward decentralization in the financial system has been stimulated by blockchain and technological innovation. Satoshi and his unique invention, Bitcoin Blockchain, started to call for peer-to-peer transactions without intermediaries or centralization of any kind. Six years later, the invention of another blockchain, Ethereum, came into existence and has become the backbone of promising decentralized finance (DeFi). This paper provides an overview of blockchain technology, discussing the DeFi ecosystem and its possibilities regarding financially including the unbanked and improving the current financial system.

АЛГОРИТМ МАРКИРОВАНИЯ ВЕРШИН. СРАВНЕНИЕ АЛГОРИТМОВ ПОИСКА КОМПОНЕНТ СВЯЗНОСТИ В ГРАФЕ НА ПРИМЕРЕ ОБЪЕДИНЕНИЯ КОШЕЛЬКОВ В БАЗЕ БИТКОИН

The article is devoted to comparing the efficiency of algorithms for processing Bitcoin blockchain transaction database. The article describes the algorithm of vertex marking developed by the group. Based on the comparison of this and other algorithms, it is expected to identify the most effective algorithm for clustering addresses based on belonging to a single user. The Bitcoin database contains information about millions of financial transactions. Even though information about transactions is anonymous, there are methods for combining user addresses into wallets. In this article, we study algorithms of searching connectivity components, which are based on one of the methods of combining wallets based on the heuristic feature of the «total waste» of one user. The emphasis is placed on the practical aspects of implementation – hardware limitations in processing big data sets, as well as the choice of a solution for many graph connectivity components – the maximum connected set of graph vertices, in other words, a set of nonempty vertex sets and a set of vertex pairs.

Economic Modelling of the Bitcoin Mining Industry

We propose a homogenous setting for analyzing the production industry of Bitcoin. Miners are assumed to be well diversified and to form a continuum due to free entry. We introduce the notion of real hashrate which is the actual hashrate deflated by the rate of technological progress assumed to be constant, and we show that this is the right measure to consider in such an analysis. In equilibrium, the revenue per unit of real hashrate follows a mean reverting process even with an unbounded reward process. Using the bitcoin blockchain data, we show that our parsimonious model explains well variations in the real hashrate. We provide a quantitative analysis of the R&D investment of mining hardware manufacturers. We show that, in the long run, R&D expenses, as well as the blockchain security and the bitcoin energy consumption, is proportional to the total miners reward (i.e. the bitcoin price).

A Bayesian Regularized Neural Network for Analyzing Bitcoin Trends

Bitcoin is a decentralized digital currency without a central bank or single administrator sent from user to user on the peer-to-peer bitcoin blockchain network without intermediaries' need. In this Bitcoin trend analysis work, initial attributes are considered from five sectors based on financial, social, token, network, and that count to thirteen attributes. The thirteen attributes considered are price, volume, market cap, a mean dollar invested age, social volume, social dominance, development activity, transaction volume, token age consumed, token velocity, token circulation, market value to realized value, and realized cap. We apply the attribute selection and trend analysis mapped with potential seven attributes: Price, Volume, Market Cap, Social Dominance, Development Activity, Market Value to Realized Value & Realized Cap. We have conducted Nonlinear Autoregressive with External Input analysis considering seven attributes. The work employed three training algorithms to train a neural network as Levenberg-Marquard, Bayesian Regularization, and Scaled Conjugate Gradient algorithm. The Error histogram and regression plots results indicate that the Bayesian Regularized Neural Network is showing good performance and thus provides a better forecast.

A Tale of Two Layers: The Mutual Relationship between Bitcoin and Lightning Network

A major concern of the adoption and scalability of Blockchain technologies refers to their efficient use for payments. In this work, we analyze how Lightning Network (LN), which represents a relevant infrastructural novelty, is influenced by the market dynamics of its referring cryptocurrency, namely Bitcoin. In so doing, we focus on how the LN is efficient in performing transactions and we relate this feature to the market conditions of Bitcoin. By applying the Toda–Yamamoto variant of Granger-causality, we note that market conditions of Bitcoin do not significantly influence the topological configuration of the LN. Hence, although the LN represents a second layer on the Bitcoin blockchain, our findings suggest that its efficient functioning does not appear to be related to the simple market performance of its underlying cryptocurrency and, in particular, of its volatile market fluctuations. This result may therefore contribute to shed light on the practical usage of the LN as a blockchain technology to favor transactions.

Understanding the Blockchain Oracle Problem: A Call for Action

Scarce and niche in the literature just a few years ago, the blockchain topic is now the main subject in conference papers and books. However, the hype generated by the technology and its potential implications for real-world applications is flawed by many misconceptions about how it works and how it is implemented, creating faulty thinking or overly optimistic expectations. Too often, characteristics such as immutability, transparency, and censorship resistance, which mainly belong to the bitcoin blockchain, are sought in regular blockchains, whose potential is barely comparable. Furthermore, critical aspects such as oracles and their role in smart contracts receive few literature contributions, leaving results and theoretical implications highly questionable. This literature review of the latest papers in the field aims to give clarity to the blockchain oracle problem by discussing its effects in some of the most promising real-world applications. The analysis supports the view that the more trusted a system is, the less the oracle problem impacts.

Bitcoin Could Be the First Cryptocurrency to Reach a Market Capitalization of One Trillion Dollars

Bitcoin blockchain possesses immense potential for future opportunities, well beyond its current use in financial services underpinning cryptocurrencies, i.e. replacing traditional trusted third parties with trusted machines. Despite over a decade has passed since Nakamoto Satoshi launched Bitcoin in January 2009, it still continues to face barriers, challenges as well as a major regulatory hurdle in the U.S. and Europe. This paper looked into three hypothetical scenarios where the price of bitcoin surges over $50,000 (scenario 1), $100,000 (scenario 2), and $1,000,000 (scenario 3). Although new path-breaking technologies and inventions (i.e. Bitcoin) will continue to forge ahead unabated regardless of doubters, doomsayers, skeptics, pessimists, disbelievers, and short-sighted politicians (President Trump); however, these scenarios can only become a reality if the Trump administration and law makers stop constantly running headlong into backlash to cryptocurrencies (Bitcoin and Libra coin in particular). For future price growth of Bitcoin and altcoins, cryptocurrency markets need more people like Christine Lagarde, the former Managing Director of the IMF (currently, president of the European Central Bank), who urged central banks not to ignore “winds of change” and consider looking into the case of central bank digital currency.

Regulating Bitcoin and Block Chain Derivatives

Bitcoins are scarce digital commodities that enable parties to transmit messages over a network that serves as a universal public ledger. Bitcoins fall within the definition of “commodity” under the Commodity Exchange Act (CEA) such that derivatives contracts that reference bitcoins are subject to regulation by the Commodity Futures Trading Commission. Like other derivatives, Bitcoin derivatives would likely not be subject to the full scope of regulation under the CEA to the extent such derivatives involve physical delivery (as opposed to cash settlement) or are nonfungible and not independently traded. In addition, Bitcoin swaps are currently too illiquid to be subject to mandatory clearing. A growing number of firms are offering Bitcoin derivatives, most of which are for retail traders. In addition to traditional derivatives that reference bitcoins, the Bitcoin (block chain) protocol can potentially enable automated derivatives contracts that securely trade, clear, and settle without the use of trusted intermediaries. The CFTC should consider an exemption for block chain derivatives that meet its policy objectives as a result of the rules that the underlying code applies to the transactions.

Analysis of a Consensus Protocol for Extending Consistent Subchains on the Bitcoin Blockchain

Currently, an increasing number of third-party applications exploit the Bitcoin blockchain to store tamper-proof records of their executions, immutably. For this purpose, they leverage the few extra bytes available for encoding custom metadata in Bitcoin transactions. A sequence of records of the same application can thus be abstracted as a stand-alone subchain inside the Bitcoin blockchain. However, several existing approaches do not make any assumptions about the consistency of their subchains, either (i) neglecting the possibility that this sequence of messages can be altered, mainly due to unhandled concurrency, network malfunctions, application bugs, or malicious users, or (ii) giving weak guarantees about their security. To tackle this issue, in this paper, we propose an improved version of a consensus protocol formalized in our previous work, built on top of the Bitcoin protocol, to incentivize third-party nodes to consistently extend their subchains. Besides, we perform an extensive analysis of this protocol, both defining its properties and presenting some real-world attack scenarios, to show how its specific design choices and parameter configurations can be crucial to prevent malicious practices.

Unfolding identity of financial institutions in bitcoin blockchain by weekly pattern of network flows

In this study, we analyzed bitcoin blockchain data for the period between 2013 and 2018. We constructed daily networks and analyzed the network properties of the bitcoin users and bitcoin flow attributed as edge flow circulated between users to focus on weekdays and weekends activities. In the real world, businesses take time off, particularly on weekends. This is no different in the crypto-asset world, which, theoretically, is operable 24/7. We also performed a threshold analysis of the flow of bitcoin to identify the big wallets and to compare it with the identity of real-world crypto-exchange companies, in particular, their weekly patterns. Finally, we propose a methodology to identify the financial institution in the bitcoin blockchain on the basis of fulfilling some key criteria. The criteria are having high frequency, appearing persistently on daily big trades and showing a distinct weekly pattern of total average network flow.

Modeling and analysis of block arrival times in the Bitcoin blockchain

In the original Bitcoin paper and other research papers since, it is assumed that Bitcoin blocks are mined at the instants of a homogeneous Poisson process. Based on blockchain block arrival data and stochastic analysis of the block arrival process, we demonstrate that this is not the case. We present a framework for studying the block arrival process, including two refined mathematical models for block arrivals, determined by combining models for a period of constant difficulty and how the difficulty evolves over time.

Bitcoin Price Risk—A Durations Perspective

An important aspect of liquidity is price risk, i.e., the risk that a small transaction leads to a large price change. This usually happens in a thin market, when trading opportunities are scarce and the time between subsequent trades is long. We rely on an autoregressive conditional duration model to extract the probability of a substantial price event in a particular time interval and, thus, an intraday risk profile. Our findings show that price risk is highest at times when European and U.S. investors do not trade. In a second step, we relate daily aggregates to characteristics of the Bitcoin blockchain and investigate whether investors account for features like confirmation time or fees when timing their orders.

Discerning payment patterns in Bitcoin from ransomware attacks

PurposeThe purpose of this paper is to investigate available forensic data on the Bitcoin blockchain to identify typical transaction patterns of ransomware attacks. Specifically, the authors explore how distinct these patterns are and their potential value for intelligence exploitation in support of countering ransomware attacks.Design/methodology/approachThe authors created an analytic framework – the Ransomware–Bitcoin Intelligence–Forensic Continuum framework – to search for transaction patterns in the blockchain records from actual ransomware attacks. Data of a number of different ransomware Bitcoin addresses was extracted to populate the framework, via the WalletExplorer.com programming interface. This data was then assembled in a representation of the target network for pattern analysis on the input (cash-in) and output (cash-out) side of the ransomware seed addresses. Different graph algorithms were applied to these networks. The results were compared to a “control” network derived from a Bitcoin charity.FindingsThe findings show discernible patterns in the network relating to the input and output side of the ransomware graphs. However, these patterns are not easily distinguishable from those associated with the charity Bitcoin address on the input side. Nonetheless, the collection profile over time is more volatile than with the charity Bitcoin address. On the other hand, ransomware output patterns differ from those associated charity addresses, as the attacker cash-out tactics are quite different from the way charities mobilise their donations. We further argue that an application of graph machine learning provides a basis for future analysis and data refinement possibilities.Research limitations/implicationsLimitations are evident in the sample size of data taken on ransomware campaigns and the “control” subject. Further analysis of additional ransomware campaigns and “control” subjects over time would help refine and validate the preliminary observations in this paper. Future research will also benefit from the application of more powerful computing resources and analytics platforms that scale with the amount of data being collected.Originality/valueThis research contributes to the maturity of the field by analysing ransomware-Bitcoin behaviour using the Ransomware–Bitcoin Intelligence–Forensic Continuum. By combining several different techniques to discerning patterns of ransomware activity on the Bitcoin network, it provides insight into whether a ransomware attack is occurring and could be used to trigger alerts to seek additional evidence of attack, or could corroborate other information in the system.