April 2020 list
If you feel a paper should belong to another category, or that we missed a relevant paper just let us know. Participation is most welcome!
- Attacks and defenses
- Blockchain-noncrypto uses
- Internet of Things (IoT)
- Smart contracts
Attacks and defenses
Attacking with bitcoin: Using Bitcoin to Build Resilient Botnet Armies
Authors: Dimitri Kamenski, Arash Shaghaghi, Matthew Warren, S. Salil Kanhere
Abstract: We focus on the problem of botnet orchestration and discuss how attackers can leverage decentralised technologies to dynamically control botnets with the goal of having botnets that are resilient against hostile takeovers. We cover critical elements of the Bitcoin blockchain and its usage for `floating command and control servers’. We further discuss how blockchain-based botnets can be built and include a detailed discussion of our implementation. We also showcase how specific Bitcoin APIs can be used in order to write extraneous data to the blockchain. Finally, while in this paper, we use Bitcoin to build our resilient botnet proof of concept, the threat is not limited to Bitcoin blockchain and can be generalized.
Probing Channel Balances in the Lightning Network
Authors: Sergei Tikhomirov, Rene Pickhardt, Alex Biryukov, Mariusz Nowostawski
Abstract: As Lightning network payments are neither broadcasted nor publicly stored. Thus LN has been seen not only as scalability but also as privacy solution for Bitcoin. The protocol guarantees that only the latest channel state can be confirmed on channel closure. LN nodes gossip about channels available for routing and their total capacities. To issue a (multi-hop) payment, the sender creates a route based on its local knowledge of the graph. As local channel balances are not public, payments often fail due to insufficient balance at an intermediary hop. In that case, the payment is attempted along multiple routes until it succeeds. This constitutes a privacy-efficiency tradeoff: hidden balances improve privacy but hinder routing efficiency. In this work, we show that an attacker can easily discover channel balances using probing. This takes under a minute per channel and requires moderate capital commitment and no expenditures. We describe the algorithm and test our proof-of-concept implementation on Bitcoin’s testnet. We argue that LN’s balance between privacy and routing efficiency is suboptimal: channel balances are neither well protected nor utilized. We outline two ways for LN to evolve in respect to this issue. To emphasize privacy, we propose a modification of error handling that hides details of the erring channel from the sending node. This would break our probing technique but make routing failures more common, as the sender would not know which channel from the attempted route has failed. To improve efficiency, we propose a new API call that would let the sender query balances of channels that it is not a party of. We argue that combining these approaches can help LN take the best of both worlds: hide private data when feasible, and utilize public data for higher routing efficiency.
Data-Driven Model-Based Analysis of the Ethereum Verifier’s Dilemma
Authors: Maher Alharby, Castagna Roben Lunardi, Amjad Aldweesh, Aad Moorsel van
Abstract: In proof-of-work based blockchains such as Ethereum, verification of blocks is an integral part of establishing consensus across nodes. However, in Ethereum, miners do not receive a reward for verifying. This implies that miners face the Verifier’s Dilemma: use resources for verification, or use them for the more lucrative mining of new blocks? We provide an extensive analysis of the Verifier’s Dilemma, using a data-driven model-based approach that combines closed-form expressions, machine learning techniques and discrete-event simulation. We collect data from over 300,000 smart contracts and experimentally obtain their CPU execution times. Gaussian Mixture Models and Random Forest Regression transform the data into distributions and inputs suitable for the simulator. We show that, indeed, it is often economically rational not to verify. We consider two approaches to mitigate the implications of the Verifier’s Dilemma, namely parallelization and active insertion of invalid blocks, both will be shown to be effective.
EventWarden: A Decentralized Event-driven Proxy Service for Outsourcing Arbitrary Transactions in Ethereum-like Blockchains
Authors: Chao Li, Balaji Palanisamy
Abstract: Transactions represent a fundamental component in blockchains as they are the primary means for users to change the blockchain state. Current blockchain systems such as Bitcoin and Ethereum require users to constantly observe the state changes of interest or the events taking place in a blockchain and requires the user to explicitly release the required transactions to respond to the observed events in the blockchain. This paper proposes EventWarden, a decentralized event-driven proxy service for users to outsource transactions in Ethereum-like blockchains. EventWarden employs a novel combination of smart contracts and blockchain logs. EventWarden allows a user to create a proxy smart contract that specifies an interested event and also reserves an arbitrary transaction to release. Upon observing the occurrence of the prescribed event, anyone in the Blockchain network can call the proxy contract to earn the service fee reserved in the contract by proving to the contract that the event has been recorded into blockchain logs, which then automatically triggers the proxy contract to release the reserved transaction. We show that the reserved transaction can only get released from the proxy contract when the prescribed event has taken place. We also demonstrate that as long as a single member in the Blockchain network is incentivized by the service fee to call the proxy contract after the prescribed event has taken place, the reserved transaction is guaranteed to get released. We implement EventWarden over the Ethereum official test network. The results demonstrate that EventWarden is effective and is ready-to-use in practice.
On the Role of Hash-based Signatures in Quantum-Safe Internet of Things: Current Solutions and Future Directions
Authors: Sabah Suhail, Rasheed Hussain, Abid Khan, Seon Choong Hong
Abstract: The Internet of Things (IoT) is gaining ground as a pervasive presence around us by enabling miniaturized things with computation and communication capabilities to collect, process, analyze, and interpret information. Consequently, trustworthy data act as fuel for applications that rely on the data generated by these things, for critical decision-making processes, data debugging, risk assessment, forensic analysis, and performance tuning. Currently, secure and reliable data communication in IoT is based on public-key cryptosystems such as Elliptic Curve Cryptosystem (ECC). Nevertheless, reliance on the security of de-facto cryptographic primitives is at risk of being broken by the impending quantum computers. Therefore, the transition from classical primitives to quantum-safe primitives is indispensable to ensure the overall security of data en route. In this paper, we investigate applications of one of the post-quantum signatures called Hash-Based Signature (HBS) schemes for the security of IoT devices in the quantum era. We give a succinct overview of the evolution of HBS schemes with emphasis on their construction parameters and associated strengths and weaknesses. Then, we outline the striking features of HBS schemes and their significance for the IoT security in the quantum era. We investigate the optimal selection of HBS in the IoT networks with respect to their performance-constrained requirements, resource-constrained nature, and design optimization objectives. In addition to ongoing standardization efforts, we also highlight current and future research and deployment challenges along with possible solutions. Finally, we outline the essential measures and recommendations that must be adopted by the IoT ecosystem while preparing for the quantum world.
Decentralized Cross-Blockchain Asset Transfers
Authors: Marten Sigwart, Philipp Frauenthaler, Christof Spanring, Stefan Schulte
Abstract: Today, solutions for cross-blockchain asset transfers are either tailored for specific assets, require certain means of cross-blockchain communication, or neglect finality guarantees that prevent assets from getting lost in transit. In this paper, we present a cross-blockchain asset transfer protocol that supports arbitrary assets, is adaptable to different means of cross-blockchain communication, and adheres to requirements such as finality. The ability to freely transfer assets between blockchains may increase transaction throughput and provide developers with more flexibility by allowing them to design digital assets that leverage the capacities and capabilities of multiple blockchains.
A General Difficulty Control Algorithm for Proof-of-Work Based Blockchains
Authors: Shulai Zhang, Xiaoli Ma
Abstract: Designing an efficient difficulty control algorithm is an essential problem in Proof-of-Work (PoW) based blockchains because the network hash rate is randomly changing. This paper proposes a general difficulty control algorithm and provides insights for difficulty adjustment rules for PoW based blockchains. The proposed algorithm consists a two-layer neural network. It has low memory cost, meanwhile satisfying the fast-updating and low volatility requirements for difficulty adjustment. Real data from Ethereum are used in the simulations to prove that the proposed algorithm has better performance for the control of the block difficulty.
How to Securely Prune Bitcoin’s Blockchain
Authors: Roman Matzutt, Benedikt Kalde, Jan Pennekamp, Arthur Drichel, Martin Henze, Klaus Wehrle
Abstract: Bitcoin was the first successful decentralized cryptocurrency and remains the most popular of its kind to this day. Despite the benefits of its blockchain, Bitcoin still faces serious scalability issues, most importantly its ever-increasing blockchain size. While alternative designs introduced schemes to periodically create snapshots and thereafter prune older blocks, already-deployed systems such as Bitcoin are often considered incapable of adopting corresponding approaches. In this work, we revise this popular belief and present CoinPrune, a snapshot-based pruning scheme that is fully compatible with Bitcoin. CoinPrune can be deployed through an opt-in velvet fork, i.e., without impeding the established Bitcoin network. By requiring miners to publicly announce and jointly reaffirm recent snapshots on the blockchain, CoinPrune establishes trust into the snapshots’ correctness even in the presence of powerful adversaries. Our evaluation shows that CoinPrune reduces the storage requirements of Bitcoin already by two orders of magnitude today, with further relative savings as the blockchain grows. In our experiments, nodes only have to fetch and process 5 GiB instead of 230 GiB of data when joining the network, reducing the synchronization time on powerful devices from currently 5 h to 46 min, with even more savings for less powerful devices.
Utilizing Public Blockchains for the Sybil-Resistant Bootstrapping of Distributed Anonymity Services
Authors: Roman Matzutt, Jan Pennekamp, Erik Buchholz, Klaus Wehrle
Abstract: Distributed anonymity services, such as onion routing networks or cryptocurrency tumblers, promise privacy protection without trusted third parties. While the security of these services is often well-researched, security implications of their required bootstrapping processes are usually neglected: Users either jointly conduct the anonymization themselves, or they need to rely on a set of non-colluding privacy peers. However, the typically small number of privacy peers enable single adversaries to mimic distributed services. We thus present AnonBoot, a Sybil-resistant medium to securely bootstrap distributed anonymity services via public blockchains. AnonBoot enforces that peers periodically create a small proof of work to refresh their eligibility for providing secure anonymity services. A pseudo-random, locally replicable bootstrapping process using on-chain entropy then prevents biasing the election of eligible peers. Our evaluation using Bitcoin as AnonBoot’s underlying blockchain shows its feasibility to maintain a trustworthy repository of 1000 peers with only a small storage footprint while supporting arbitrarily large user bases on top of most blockchains.
The cost of Bitcoin mining has never really increased
Authors: Yo-Der Song, Tomaso Aste
Abstract: The Bitcoin network is burning a large amount of energy for mining. In this paper we estimate the lower bound for the global energy cost for a period of ten years from 2010 to 2020, taking into account changing oil costs, improvements in hashing technologies and hashing activity. Despite a ten-billion-fold increase in hashing activity and a ten-million-fold increase in total energy consumption, we find the mining cost relative to the volume of transactions has not increased nor decreased since 2010. This is consistent with the perspective that the proof of work must cost a sizable fraction of the value that can be transferred through the network in order to keep the Blockchain system secure from double spending attacks. We estimate that in the Bitcoin network this fraction is of the order of 1%.
Customer Data Sharing Platform: A Blockchain-Based Shopping Cart
Authors: Kumar Ajay Shrestha, Sandhya Joshi, Julita Vassileva
6G White paper: Research challenges for Trust, Security and Privacy
Authors: Mika Ylianttila, Raimo Kantola, Andrei Gurtov, Lozenzo Mucchi, Ian Oppermann, Zheng Yan, Hong Tri Nguyen, Fei Liu, Tharaka Hewa, Madhusanka Liyanage, Ahmad Ijaz, Juha Partala, Robert Abbas, Artur Hecker, Sara Jayousi, Alessio Martinelli, Stefano Caputo, Jonathan Bechtold, Ivan Morales, Andrei Stoica, Giuseppe Abreu, Shahriar Shahabuddin, Erdal Panayirci, Harald Haas, Tanesh Kumar, Ozan Basak Ozparlak, Juha Röning
Abstract: The roles of trust, security and privacy are somewhat interconnected, but different facets of next generation networks. The challenges in creating a trustworthy 6G are multidisciplinary spanning technology, regulation, techno-economics, politics and ethics. This white paper addresses their fundamental research challenges in three key areas. Trust: Under the current “open internet” regulation, the telco cloud can be used for trust services only equally for all users. 6G network must support embedded trust for increased level of information security in 6G. Trust modeling, trust policies and trust mechanisms need to be defined. 6G interlinks physical and digital worlds making safety dependent on information security. Therefore, we need trustworthy 6G. Security: In 6G era, the dependence of the economy and societies on IT and the networks will deepen. The role of IT and the networks in national security keeps rising – a continuation of what we see in 5G. The development towards cloud and edge native infrastructures is expected to continue in 6G networks, and we need holistic 6G network security architecture planning. Security automation opens new questions: machine learning can be used to make safer systems, but also more dangerous attacks. Physical layer security techniques can also represent efficient solutions for securing less investigated network segments as first line of defense. Privacy: There is currently no way to unambiguously determine when linked, deidentified datasets cross the threshold to become personally identifiable. Courts in different parts of the world are making decisions about whether privacy is being infringed, while companies are seeking new ways to exploit private data to create new business revenues. As solution alternatives, we may consider blockchain, distributed ledger technologies and differential privacy approaches.
Having our omic cake and eating it too: Evaluating User Response to using Blockchain Technology for Private & Secure Health Data Management and Sharing
Authors: L. Victoria Lemieux, Darra Hofman, Hoda Hamouda, Danielle Batista, Ravneet Kaur, Wen Pan, Ian Costanzo, Dean Regier, Samantha Pollard, Deirdre Weymann, Rob Fraser
Abstract: This paper reports on the development and evaluation of a prototype blockchain solution for private and secure individual omics health data management and sharing. This solution is one output of a multidisciplinary project investigating the social, data and technical issues surrounding application of blockchain technology in the context of personalized healthcare research. The project studies potential ethical, legal, social and cognitive constraints of self-sovereign healthcare data management and sharing, and whether such constraints can be addressed through careful user interface design of a blockchain solution.
Bit Commitment for Lottery and Auction on Quantum Blockchain
Authors: Xin Sun, Piotr Kulicki, Mirek Sopek
Abstract: This paper propose a protocol for lottery and a protocol for auction on quantum Blockchain. Our protocol of lottery satisfies randomness, unpredictability, unforgeability, verifiability, decentralization and unconditional security. Our protocol of auction satisfies bid privacy, posterior privacy, bids’ binding, decentralization and unconditional security. Except quantum Block-chain, the main technique involved in both protocols is quantum bit commitment. Since both quantum blockchain and quantum bit commitment can be realized by the current technology, our protocols are practically feasible.
Hybrid Blockchain-Enabled Secure Microservices Fabric for Decentralized Multi-Domain Avionics Systems
Authors: Ronghua Xu, Yu Chen, Erik Blasch, Alexander Aved, Genshe Chen, Dan Shen
Abstract: Advancement in artificial intelligence (AI) and machine learning (ML), dynamic data driven application systems (DDDAS), and hierarchical cloud-fog-edge computing paradigm provide opportunities for enhancing multi-domain systems performance. As one example that represents multi-domain scenario, a “fly-by-feel” system utilizes DDDAS framework to support autonomous operations and improve maneuverability, safety and fuel efficiency. The DDDAS “fly-by-feel” avionics system can enhance multi-domain coordination to support domain specific operations. However, conventional enabling technologies rely on a centralized manner for data aggregation, sharing and security policy enforcement, and it incurs critical issues related to bottleneck of performance, data provenance and consistency. Inspired by the containerized microservices and blockchain technology, this paper introduces BLEM, a hybrid BLockchain-Enabled secure Microservices fabric to support decentralized, secure and efficient data fusion and multi-domain operations for avionics systems. Leveraging the fine-granularity and loose-coupling features of the microservices architecture, multidomain operations and security functionalities are decoupled into multiple containerized microservices. A hybrid blockchain fabric based on two-level committee consensus protocols is proposed to enable decentralized security architecture and support immutability, auditability and traceability for data provenience in existing multi-domain avionics system. Our evaluation results show the feasibility of the proposed BLEM mechanism to support decentralized security service and guarantee immutability, auditability and traceability for data provenience across domain boundaries.
Short Paper: Design and Evaluation of Privacy-preserved Supply Chain System based on Public Blockchain
Authors: Takio Uesugi, Yoshinobu Shijo, Masayuki Murata
Abstract: Securing the traceability of products in the supply chain is an urgent issue. Recently, supply chain systems that use public blockchain (PBC) have been proposed. In these systems, PBC is used as a common database shared between supply chain parties to secure the integrity and reliability of distribution information such as ownership transfer records. Thus, these systems secure a high level of traceability in the supply chain. However, the distribution information, which can be private information, is made public since the information recorded in PBC can be read by anyone. In this paper, we propose a method for preserving privacy while securing traceability in a supply chain system using PBC. The proposed method preserves privacy by concealing the distribution information via encryption. In addition, the proposed method ensures distribution among legitimate supply chain parties while concealing their blockchain address by using a zero-knowledge proof to prove their authenticity. We implement the proposed method on Ethereum smart contracts and evaluate cost performance based on transaction fees. The results show that the fee per party is at most 2.6 USD.
Blockchain in Healthcare and Medicine: A Contemporary Research of Applications, Challenges, and Future Perspectives
Authors: Sami H. Ullah, S. Aslam, N. Anrjomand
Abstract: Blockchain technology is one of the most contemporary and disruptive technologies in the world. It has gained considerable attention in numerous applications such as financial services, cybersecurity applications, Internet of Things (IoT), network data management. Now its range of applications is beyond the financial services as the healthcare industry has also adopted blockchain technology in its various subdomains such as Electronic Health Records (EHR), medical supply chain management system, genomic market, neuroscience technology, clinical research, and pharmaceutical medicine. Blockchain is considered a secure and viable solution for storing and accessing patients medical records and the patients can diagnosed and treated with safe and secure data sharing. Blockchain technology will revolutionize the healthcare systems with personalized, authentic, and secure access to the clinical data of patients and that data can be used for further health improvements and clinical researches. In this paper, we conduct a contemporary research on existing applications and developments in healthcare industry with the use of blockchain technology. We also discuss some robust applications and various existing companies that are using blockchain solutions for securing their data along with some current challenges and future perspectives.
COVID-19 Blockchain Framework: Innovative Approach
Authors: Mohamed Torky, Ella Aboul Hassanien
Abstract: The world is currently witnessing dangerous shifts in the epidemic of emerging SARS-CoV-2, the causative agent of (COVID-19) coronavirus. The infection, and death numbers reported by World Health Organization (WHO) about this epidemic forecasts an increasing threats to the lives of people and the economics of countries. The greatest challenge that most governments are currently suffering from is the lack of a precise mechanism to detect unknown infected cases and predict the infection risk of COVID-19 virus. In response to mitigate this challenge, this study proposes a novel innovative approach for mitigating big challenges of (COVID-19) coronavirus propagation and contagion. This study propose a blockchain-based framework which investigate the possibility of utilizing peer-to peer, time stamping, and decentralized storage advantages of blockchain to build a new system for verifying and detecting the unknown infected cases of COVID-19 virus. Moreover, the proposed framework will enable the citizens to predict the infection risk of COVID-19 virus within conglomerates of people or within public places through a novel design of P2P-Mobile Application. The proposed approach is forecasted to produce an effective system able to support governments, health authorities, and citizens to take critical decision regarding the infection detection, infection prediction, and infection avoidance. The framework is currently being developed and implemented as a new system consists of four components, Infection Verifier Subsystem, Blockchain platform, P2P-Mobile Application, and Mass-Surveillance System. This four components work together for detecting the unknown infected cases and predicting and estimating the infection Risk of Corona Virus (COVID-19).
Do you need a blockchain in construction? Use case categories and decision framework for DLT design options
Authors: J. Jens Hunhevicz, M. Daniel Hall
Abstract: Blockchain and other forms of distributed ledger technology (DLT) provide an opportunity to integrate digital information, management, and contracts to increase trust and collaboration within the construction industry. DLT enables direct peer-to-peer transactions of value across a distributed network by providing an immutable and transparent record of these transactions. Furthermore, there is potential for business process optimization and automation on the transaction level, through the use of smart contracts, which are code protocols deployed on supported DLT systems. However, DLT research in the construction industry remains at a theoretical level; there have been few implementation case studies to date. One potential reason for this is a knowledge gap between use-case ideas and the DLT technical system implementation. This paper aims to reduce this gap by 1) reviewing and categorizing proposed DLT use cases in construction literature, 2) providing an overview of DLT and its design options, 3) proposing an integrated framework to match DLT design options with desired characteristics of a use case, and 4) analysing the use cases using the new framework. Together, the use case categories and proposed decision framework can guide future implementers toward more connected and structured thinking between the technological properties of DLT and use cases in construction.
Skewed non-Gaussian GARCH models for cryptocurrencies volatility modelling
Authors: Roy Cerqueti, Massimiliano Giacalone, Raffaele Mattera
Abstract: Recently, cryptocurrencies have attracted a growing interest from investors, practitioners and researchers. Nevertheless, few studies have focused on the predictability of them. In this paper we propose a new and comprehensive study about cryptocurrency market, evaluating the forecasting performance for three of the most important cryptocurrencies (Bitcoin, Ethereum and Litecoin) in terms of market capitalization. At this aim, we consider non-Gaussian GARCH volatility models, which form a class of stochastic recursive systems commonly adopted for financial predictions. Results show that the best specification and forecasting accuracy are achieved under the Skewed Generalized Error Distribution when Bitcoin/USD and Litecoin/USD exchange rates are considered, while the best performances are obtained for skewed Distribution in the case of Ethereum/USD exchange rate. The obtain findings state the effectiveness — in terms of prediction performance — of relaxing the normality assumption and considering skewed distributions.
From code to market: Network of developers and correlated returns of cryptocurrencies
Authors: Lorenzo Lucchini, Laura Alessandretti, Bruno Lepri, Angela Gallo, Andrea Baronchelli
Abstract: “Code is law” is the funding principle of cryptocurrencies. The security, transferability, availability and other properties of a crypto-asset are determined by the code through which it is created. If code is open source, as it happens for most cryptocurrencies, this principle would prevent manipulations and grant transparency to users and traders. However, this approach considers cryptocurrencies as isolated entities thus neglecting possible connections between them. Here, we show that 4% of developers contribute to the code of more than one cryptocurrency and that the market reflects these cross-asset dependencies. In particular, we reveal that the first coding event linking two cryptocurrencies through a common developer leads to the synchronisation of their returns in the following months. Our results identify a clear link between the collaborative development of cryptocurrencies and their market behaviour. More broadly, our work reveals a so-far overlooked systemic dimension for the transparency of code-based ecosystems and we anticipate it will be of interest to researchers, investors and regulators.
Extending Deep Reinforcement Learning Frameworks in Cryptocurrency Market Making
Authors: Jonathan Sadighian
Abstract: There has been a recent surge in interest in the application of artificial intelligence to automated trading. Reinforcement learning has been applied to single- and multi-instrument use cases, such as market making or portfolio management. This paper proposes a new approach to framing cryptocurrency market making as a reinforcement learning challenge by introducing an event-based environment wherein an event is defined as a change in price greater or less than a given threshold, as opposed to by tick or time-based events (e.g., every minute, hour, day, etc.). Two policy-based agents are trained to learn a market making trading strategy using eight days of training data and evaluate their performance using 30 days of testing data. Limit order book data recorded from Bitmex exchange is used to validate this approach, which demonstrates improved profit and stability compared to a time-based approach for both agents when using a simple multi-layer perceptron neural network for function approximation and seven different reward functions.
An extensive study of stylized facts displayed by Bitcoin returns
Authors: Sousa de M. N. F. Filho, N. J. Silva, A. M. Bertella, E. Brigatti
Abstract: In this paper, we explore some stylized facts in the Bitcoin market using the BTC-USD exchange rate time series of historical intraday data from 2013 to 2018. Despite Bitcoin presents some very peculiar idiosyncrasies, like the absence of macroeconomic fundamentals or connections with underlying asset or benchmark, a clear asymmetry between demand and supply and the presence of inefficiency in the form of very strong arbitrage opportunity, all these elements seem to be marginal in the definition of the structural statistical properties of this virtual financial asset, which result to be analogous to general individual stocks or indices. In contrast, we find some clear differences, compared to fiat money exchange rates time series, in the values of the linear autocorrelation and, more surprisingly, in the presence of the leverage effect. We also explore the dynamics of correlations, monitoring the shifts in the evolution of the Bitcoin market. This analysis is able to distinguish between two different regimes: a stochastic process with weaker memory signatures and closer to Gaussianity between the Mt. Gox incident and the late 2015, and a dynamics with relevant correlations and strong deviations from Gaussianity before and after this interval.
Deep Recurrent Modelling of Stationary Bitcoin Price Formation Using the Order Flow
Authors: Ye-Sheen Lim, Denise Gorse
Abstract: In this paper we propose a deep recurrent model based on the order flow for the stationary modelling of the high-frequency directional prices movements. The order flow is the microsecond stream of orders arriving at the exchange, driving the formation of prices seen on the price chart of a stock or currency. To test the stationarity of our proposed model we train our model on data before the 2017 Bitcoin bubble period and test our model during and after the bubble. We show that without any retraining, the proposed model is temporally stable even as Bitcoin trading shifts into an extremely volatile “bubble trouble” period. The significance of the result is shown by benchmarking against existing state-of-the-art models in the literature for modelling price formation using deep learning.
Grandpa, grandpa, tell me the one about Bitcoin being a safe haven: Evidence from the COVID-19 pandemics
Authors: Ladislav Kristoufek
Abstract: Bitcoin being a safe haven asset is one of the traditional stories in the cryptocurrency community. However, during its existence and relevant presence, i.e. approximately since 2013, there has been no severe situation on the financial markets globally to prove or disprove this story until the COVID-19 pandemics. We study the quantile correlations of Bitcoin and two benchmarks — S\&P500 and VIX — and we make comparison with gold as the traditional safe haven asset. The Bitcoin safe haven story is shown and discussed to be unsubstantiated and far-fetched, while gold comes out as a clear winner in this contest.
Time-varying volatility in Bitcoin market and information flow at minute-level frequency
Authors: Irena Barjašić, Nino Antulov-Fantulin
Abstract: In this paper, we analyze the time-series of minute price returns on the Bitcoin market through the statistical models of generalized autoregressive conditional heteroskedasticity (GARCH) family. Several mathematical models have been proposed in finance, to model the dynamics of price returns, each of them introducing a different perspective on the problem, but none without shortcomings. We combine an approach that uses historical values of returns and their volatilities – GARCH family of models, with a so-called “Mixture of Distribution Hypothesis”, which states that the dynamics of price returns are governed by the information flow about the market. Using time-series of Bitcoin-related tweets and volume of transactions as external information, we test for improvement in volatility prediction of several GARCH model variants on a minute level Bitcoin price time series. Statistical tests show that the simplest GARCH(1,1) reacts the best to the addition of external signal to model volatility process on out-of-sample data.
Internet of Things (IoT)
Blockchain in the Internet of Things: Architectures and Implementation
Authors: Oscar Delgado-Mohatar, Ruben Tolosana, Julian Fierrez, Aythami Morales
Abstract: The world is becoming more interconnected every day. With the high technological evolution and the increasing deployment of it in our society, scenarios based on the Internet of Things (IoT) can be considered a reality nowadays. However, and before some predictions become true (around 75 billion devices are expected to be interconnected in the next few years), many efforts must be carried out in terms of scalability and security. In this study we propose and evaluate a new approach based on the incorporation of Blockchain into current IoT scenarios. The main contributions of this study are as follows: i) an in-depth analysis of the different possibilities for the integration of Blockchain into IoT scenarios, focusing on the limited processing capabilities and storage space of most IoT devices, and the economic cost and performance of current Blockchain technologies; ii) a new method based on a novel module named BIoT Gateway that allows both unidirectional and bidirectional communications with IoT devices on real scenarios, allowing to exchange any kind of data; and iii) the proposed method has been fully implemented and validated on two different real-life IoT scenarios, extracting very interesting findings in terms of economic cost and execution time. The source code of our implementation is publicly available in the Ethereum testnet.
While Stability Lasts: A Stochastic Model of Stablecoins
Authors: Ariah Klages-Mundt, Andreea Minca
Abstract: The `Black Thursday’ crisis in cryptocurrency markets demonstrated deleveraging risks in over-collateralized lending and stablecoins. We develop a stochastic model of over-collateralized stablecoins that helps explain such crises. In our model, the stablecoin supply is decided by speculators who optimize the profitability of a leveraged position while incorporating the forward-looking cost of collateral liquidations, which involves the endogenous price of the stablecoin. We formally characterize stable and unstable domains for the stablecoin. We prove bounds on the probabilities of large deviations and quadratic variation in the stable domain and distinctly greater price variance in the unstable domain. The unstable domain can be triggered by large deviations, collapsed expectations, and liquidity problems from deleveraging. We formally characterize a deflationary deleveraging spiral as a submartingale that can cause such liquidity problems in a crisis. We also demonstrate `perfect’ stability results in idealized settings and discuss mechanisms which could bring realistic settings closer to the idealized stable settings.
Topological Properties of Multi-Party Blockchain Transactions
Authors: Dongfang Zhao
Abstract: The cross-blockchain transaction remains one of the most challenging problems in blockchains. The root cause of the challenge lies in the nondeterministic nature of blockchains: A transaction across multiple blockchains might be partially rolled back due to the potential forks in any of the participating blockchains—eventually, only one fork will survive in the competition among miners. While some effort has recently been made to developing hierarchically distributed commit protocols to make multi-party transactions progress, there is no systematic method to reason about the transaction results. This paper tackles this problem from a perspective of point-set topology. We construct multiple topology spaces for the transactions and blockchain forks, and show that these spaces are internally related through either homeomorphism or continuous functions. Combined together, these tools allow us to reason about the cross-blockchain transactions through the growing-fork topology, an intuitive representation of blockchains. As of writing, this paper is the first study on point-set topological properties of blockchains.
AuthSC: Mind the Gap between Web and Smart Contracts
Authors: Ulrich Gallersdörfer, Florian Matthes
Abstract: Although almost all information about Smart Contract addresses is shared via websites, emails, or other forms of digital communication, Blockchains and distributed ledger technology are unable to establish secure bindings between websites and corresponding Smart Contracts. For a user, it is impossible to differentiate whether a website links to a legitimate Smart Contract set up by owners of a business or to an illicit contract aiming to steal users’ funds. Surprisingly, current attempts to solve this issue mostly comprise of information redundancy, e.g., displaying contract addresses multiple times in varying forms of images and texts. These processes are burdensome, as the user is responsible for verifying the correctness of an address. More importantly, they do not address the core issue, as the contract itself does not contain information about its authenticity. To solve current issues for these applications and increase security, we propose a solution that facilitates publicly issued SSL/TLS-certificates of Fully-Qualified Domain Names (FQDN) to ensure the authenticity of Smart Contracts and their owners. Our approach combines on-chain identity assertion utilizing signatures from the respective certificate and off-chain authentication of the Smart Contract stored on the Blockchain. This approach allows to tackle the aforementioned issue and further enables applications such as the identification of consortia members in permissioned networks. The system is open and transparent, as the only requirement for usage is ownership of an SSL/TLS-certificate. To enable privacy-preserving authenticated Smart Contracts, we allow one-way and two-way binding between website and contract. Further, low creation and maintenance costs, a widely accepted public key infrastructure and user empowerment will drive potential adaption of Ethereum Authenticated Smart Contracts (AuthSC).
A Study of Blockchain Oracles
Authors: Abdeljalil Beniiche
Abstract: The limitation with smart contracts is that they cannot access external data which might be required to control the execution of business logic. Oracles can be used to provide external data to smart contracts. An oracle is an interface that delivers data from external data outside the blockchain to a smart contract. Oracle can deliver different types of data depending on the industry and requirements. In this paper, we will study and describe the widely used blockchain oracles. Then, we elaborate on his potential role, technical architecture, and design patterns. Then, we discuss the human oracle and its role to solving the truth problem by reaching a consensus about a certain inquiry and tasks.
SmartCoAuth: Smart-Contract privacy preservation mechanism on querying sensitive records in the cloud
Authors: Muhammed Siraj, Hj. Hafez Izuan Mohd. Ninggal, Izura Nur Udzir, Hafiz Daniel Muhammad Abdullah, Aziah Asmawi
Abstract: Sensitive records stored in the cloud such as healthcare records, private conversation and credit card information are targets of hackers and privacy abuse. Current information and record management systems have difficulties achieving privacy protection of such sensitive records in a secure, transparent, decentralized and trustless environment. The Blockchain technology is a nascent and a promising technology that facilitates data sharing and access in a secure, decentralized and trustless environment. The technology enables the use of smart contracts that can be leveraged to complement existing traditional systems to achieve security objectives that were never possible before. In this paper, we propose a framework based on Blockchain technology to enable privacy-preservation in a secured, decentralized, transparent and trustless environment. We name our framework SmartCoAuth. It is based on Ethereum Smart Contract functions as the secure, decentralized, transparent authentication and authorization mechanism in the framework. It also enables tamper-proof auditing of access to the protected records. We analysed how SmartCoAuth could be integrated into a cloud application to provide reliable privacy-preservation among stakeholders of healthcare records stored in the cloud. The proposed framework provides a satisfactory level of data utility and privacy preservation.
Multi-Class classification of vulnerabilities in Smart Contracts using AWD-LSTM, with pre-trained encoder inspired from natural language processing
Authors: K. Ajay Gogineni, S. Swayamjyoti, Devadatta Sahoo, K. Kisor Sahu, Raj kishore
Abstract: Vulnerability detection and safety of smart contracts are of paramount importance because of their immutable nature. Symbolic tools like OYENTE and MAIAN are typically used for vulnerability prediction in smart contracts. As these tools are computationally expensive, they are typically used to detect vulnerabilities until some predefined invocation depth. These tools require more search time as the invocation depth increases. Since the number of smart contracts is increasing exponentially, it is difficult to analyze the contracts using these traditional tools. Recently a machine learning technique called Long Short Term Memory (LSTM) has been used for binary classification, i.e., to predict whether a smart contract is vulnerable or not. This technique requires nearly constant search time as the invocation depth increases. In the present article, we have shown a multi-class classification, where we classify a smart contract in Suicidal, Prodigal, Greedy, or Normal categories. We used Average Stochastic Gradient Descent Weight-Dropped LSTM (AWD-LSTM), which is a variant of LSTM, to perform classification. We reduced the class imbalance (a large number of normal contracts as compared to other categories) by considering only the distinct opcode combination for normal contracts. We have achieved a weighted average Fbeta score of 90.0%. Hence, such techniques can be used to analyze a large number of smart contracts and help to improve the security of these contracts.