Clack is Joint Field Chief Editor for the research journal Frontiers in Blockchain. Recent publications from Frontiers in Blockchain are given below:
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Arbitrage in automated market makers
Arbitrage in automated market makers
One of the most interesting applications of blockchain is given by the automated market makers (AMMs). In the paper, we discuss how arbitrage activity between the AMMs and the other exchange nodes can affect the volumes of assets in liquidity pools of constant function AMMs. In particular, we argue that arbitrage superimposes to the constant function in determining the liquidity volumes within the same AMM and across different AMMs. Yet, despite representing an additional condition in the model, equilibrium arbitrage is typically not unique because it may depend on several elements, such as the amount of liquidity in the system and the number of exchange nodes. Hence, the paper discusses how the constant function and arbitrage jointly determine the relationship across the assets’ liquidity volume in the pool but not a unique value for such volumes unless further constraints are introduced. Therefore, a platform interested in predicting the pool’s liquidity volumes may face indeterminacy as to which equilibrium would prevail. Though arbitrage has been discussed in related literature, equilibrium indeterminacy does not seem to have been pointed out. -
Protocol for unifying cross-chain liquidity on polkadot
Protocol for unifying cross-chain liquidity on polkadot
Liquidity is critical for a healthy and thriving blockchain ecosystem, enabling value exchange between participants. However, achieving unified liquidity across heterogeneous blockchain platforms remains challenging due to disparities in architecture, virtual machines, and asset management logic. These disparities force assets to be wrapped into other formats to ensure compatibility with underlying systems, thus fragmenting liquidity into multiple pools. This paper proposes LiquiSpell, a novel protocol that aims to unify liquidity across multiple parachains within the Polkadot ecosystem. By leveraging the cross-chain message passing (XCMP), LiquiSpell introduces the concept of a universal transaction that can be constructed to be compatible with any parachain, regardless of its underlying architecture or asset management pallet. This approach overcomes the obstacles posed by the diverse nature of parachains, enabling seamless asset sharing and enhancing cross-chain interoperability. The proposed solution mitigates liquidity fragmentation within the Polkadot ecosystem. It presents a framework that can be extended to other multichain environments outside Polkadot. Ultimately, LiquiSpell aims to foster a thriving ecosystem by facilitating the introduction of new assets and increasing overall liquidity, thereby driving innovation and adoption within the decentralized finance (DeFi) landscape. -
Exploring bitcoin cross-blockchain interoperability: estimation through Hurst exponent
Exploring bitcoin cross-blockchain interoperability: estimation through Hurst exponent
This study aims to investigate the interoperability of the Bitcoin blockchain by comparing the US dollar prices of five cryptocurrencies derived from the Bitcoin price with their corresponding market prices. The deviation rate between the derived price and the market price, referred to as the arbitrage return rate, is examined with respect to its adherence to the efficient market hypothesis and martingale theory principles, specifically regarding mean-reversion and serial independence. Hurst exponents are estimated using R/S and DFA methods, and their dynamics are analyzed using a sliding window technique. Our findings demonstrate that the Bitcoin blockchain effectively facilitates transactions among the five cryptocurrencies, though evidence suggests a potential structural change in Bitcoin blockchain interoperability following April 2023. -
Self-sovereign identity on the blockchain: contextual analysis and quantification of SSI principles implementation
Self-sovereign identity on the blockchain: contextual analysis and quantification of SSI principles implementation
Self-sovereign identity (SSI) embodies the fundamental human right to own and control a digital identity that grants access to public, social, and financial services. The absence of a dedicated digital identity layer in the development of the Internet has rendered SSI a significant challenge in contemporary society. Blockchain technology emerges as a promising solution by enabling the creation of decentralized and automatically verifiable identities. This study contextualizes SSI and analyzes how blockchain technology facilitates the autonomous management of digital identities. It explores nine prominent frameworks in this field—Sovrin, uPort, Jolocom, ShoCard, Litentry, Civic, KILT, Idena, and ION—highlighting their features, functionalities, and compliance with digital identity principles. The research concludes by identifying the challenges and opportunities in implementing these systems for digital identity management, thus contributing to the advancement of this emerging field. - Corrigendum: Decentralized justice: state of the art, recurring criticisms and next-generation research topics
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The second extended model of consumer trust in cryptocurrency payments, CRYPTOTRUST 2
The second extended model of consumer trust in cryptocurrency payments, CRYPTOTRUST 2
Cryptocurrencies’ popularity is growing despite short-term fluctuations. Peer-reviewed research into trust in cryptocurrency payments started in 2014. While the model created then, is based on proven theories from psychology and supported by empirical research, a-lot has changed in the past 10 years. This research finds that the original model is still valid, but it is extended to capture the current situation better. A quantitative methodology is used to validate the updated model proposed. The results from the quantitative survey show that (1) personal innovativeness in technology and (2) finance, influence (3) disposition to trust. Disposition to trust influences six variables from the specific context of the payment. Three variables related to the cryptocurrency itself are (4) stability in the value, (5) transaction fees, and (6) reputation. Institutional trust is influenced by (7) regulation, and (8) payment intermediaries. The last contextual factor is (9) trust in the retailer. The six variables from the context influence (10) trust in the payment which, finally, influences (11) the likelihood of making the cryptocurrency payment. -
Modeling and analysis of crypto-backed over-collateralized stable derivatives in DeFi
Modeling and analysis of crypto-backed over-collateralized stable derivatives in DeFi
In decentralized finance (DeFi), stablecoins like DAI are designed to offer a stable value amidst the fluctuating nature of cryptocurrencies. We examine the class of crypto-backed stable derivatives, focusing on mechanisms for price stabilization and exemplified by the well-known stablecoin DAI from MakerDAO. For simplicity, we consider a single-collateral setting. We introduce a belief parameter to the simulation model of DAI in a previous work (DAISIM), reflecting market sentiments about the value and stability of DAI, and show that it better matches the expected behavior when this parameter is set within a particular range of values. Our methods include comparing simulated data with real-world data, focusing on monthly correlations between ETH and DAI prices and scatter plots illustrating the relationship of their price trends over time. We also propose a simple mathematical model of DAI price to explain its stability and dependency on ETH price. Finally, we analyze possible risk factors associated with these stable derivatives to provide valuable insights for stakeholders in the DeFi ecosystem. -
Decentralized science (DeSci): definition, shared values, and guiding principles
Decentralized science (DeSci): definition, shared values, and guiding principles
Rapid advancements in Distributed Ledger Technology (DLT), including blockchain, are foundational to a new era of digital innovation. This innovation has catalyzed the emergence of “Decentralized Science (DeSci),” a new concept and movement that aims to address the challenges of modern science. Given the novelty of the field of DeSci, this study aims to provide a comprehensive definition of the term and explore and conceptualize the shared values and guiding principles inherent to DeSci. To achieve these objectives, an exploratory literature review was conducted to identify and synthesize the scholarly and secondary literature. The search and selection process included six databases (PubMed, Google Scholar, Web of Science, IEEE Xplore, arXiv, and Social Science Research Network), focusing on the last 15 years (2008 to 2023). Owing to the novelty of DeSci, the literature review was supplemented by an anonymous online-based expert survey using a combination of single-choice and open-ended questions. The experts were selected based on predefined inclusion criteria related to their activities in the DeSci field. Seven studies were selected for evaluation from the scholarly literature, and additional 24 sources of information were included in the analysis. In the expert survey, 39 valid datasets were collected and analyzed. The synthesis of the exploratory literature review and expert survey results led to a comprehensive definition of “Decentralized Science” (DeSci) reflecting recurring themes. As no publications explicitly discussed or addressed the values or principles of DeSci in the literature review, a set of shared values and guiding principles was defined based on the expert survey results. This study proposes a comprehensive definition of DeSci and a set of shared values and guiding principles, highlighting the importance of future research in this area. -
Blockchain for local communities: an exploratory review of token economy aspects
Blockchain for local communities: an exploratory review of token economy aspects
Blockchain for local communities are blockchain-based applications that support the participation of people in the social and economic life of their local community. These applications leverage tokenization to enable socio-economic processes involving transactions of values where community members take part actively and intentionally. In this field, mechanisms that regulate the functioning of blockchains need to be redirected towards collaborative and social purposes that often differ from the logics on which mainstream cryptocurrencies are based. In order to redesign these mechanisms, sound examination of their system of tokenization and of dynamics of their token economy is required. This paper provides an exploratory review of token economy elements found within cases of blockchain for local community economies, which is an under-explored domain in the relevant literature. The analysis considers 9 projects for systems that incentivize or reward participation, or implement community currency schemes. The dimensions analyzed encompass the type of goals and communities, the blockchains adopted, and token economy design aspects such as: token types, their distribution and incentive mechanisms, the associated platform/wallet functionalities, and the project governance models. We have observed a variety of combinations of these elements being used to facilitate new forms of value circulation. However, there is a tension between the aspiration to introduce transformative systems and the need to ensure the stability of the economic framework. The highly experimental nature of these initiatives requires continuous monitoring of their emergence and development. -
DAO voting mechanism resistant to whale and collusion problems
DAO voting mechanism resistant to whale and collusion problems
With the widespread adoption of blockchain technology, a novel organizational structure known as Decentralized Autonomous Organizations (DAOs) has attracted considerable attention. DAOs facilitate decision-making through member voting, realizing the governance in a decentralized manner. However, DAOs face unique challenges compared to traditional organization. This paper focuses on two key challenges of governance within DAOs: the whale problem and collusion issue. The whale problem is characterized by the concentration of power among specific members, while for the collusion problem, voting results are distorted by fraudulent collaboration. In terms of voting, we consider Quadratic Voting, a voting system expected to deter the concentration of voting power among a subset of participants, analyzing its resistance to the collusion problem. We show with numerical examples that in comparison to Linear Voting, Quadratic Voting lacks resistance to collusion. Then, we propose a voting mechanism that integrates Quadratic Voting with the Vote escrow tokens, demonstrating the mitigation of the whale problem while acquiring resilience to collusion in the decision-making process. The numerical examples confirm the high efficacy of our proposed model.
Arbitrage in automated market makers
One of the most interesting applications of blockchain is given by the automated market makers (AMMs). In the paper, we discuss how arbitrage activity between the AMMs and the other exchange nodes can affect the volumes of assets in liquidity pools of constant function AMMs. In particular, we argue that arbitrage superimposes to the constant function in determining the liquidity volumes within the same AMM and across different AMMs. Yet, despite representing an additional condition in the model, equilibrium arbitrage is typically not unique because it may depend on several elements, such as the amount of liquidity in the system and the number of exchange nodes. Hence, the paper discusses how the constant function and arbitrage jointly determine the relationship across the assets’ liquidity volume in the pool but not a unique value for such volumes unless further constraints are introduced. Therefore, a platform interested in predicting the pool’s liquidity volumes may face indeterminacy as to which equilibrium would prevail. Though arbitrage has been discussed in related literature, equilibrium indeterminacy does not seem to have been pointed out.
Protocol for unifying cross-chain liquidity on polkadot
Liquidity is critical for a healthy and thriving blockchain ecosystem, enabling value exchange between participants. However, achieving unified liquidity across heterogeneous blockchain platforms remains challenging due to disparities in architecture, virtual machines, and asset management logic. These disparities force assets to be wrapped into other formats to ensure compatibility with underlying systems, thus fragmenting liquidity into multiple pools. This paper proposes LiquiSpell, a novel protocol that aims to unify liquidity across multiple parachains within the Polkadot ecosystem. By leveraging the cross-chain message passing (XCMP), LiquiSpell introduces the concept of a universal transaction that can be constructed to be compatible with any parachain, regardless of its underlying architecture or asset management pallet. This approach overcomes the obstacles posed by the diverse nature of parachains, enabling seamless asset sharing and enhancing cross-chain interoperability. The proposed solution mitigates liquidity fragmentation within the Polkadot ecosystem. It presents a framework that can be extended to other multichain environments outside Polkadot. Ultimately, LiquiSpell aims to foster a thriving ecosystem by facilitating the introduction of new assets and increasing overall liquidity, thereby driving innovation and adoption within the decentralized finance (DeFi) landscape.
Exploring bitcoin cross-blockchain interoperability: estimation through Hurst exponent
This study aims to investigate the interoperability of the Bitcoin blockchain by comparing the US dollar prices of five cryptocurrencies derived from the Bitcoin price with their corresponding market prices. The deviation rate between the derived price and the market price, referred to as the arbitrage return rate, is examined with respect to its adherence to the efficient market hypothesis and martingale theory principles, specifically regarding mean-reversion and serial independence. Hurst exponents are estimated using R/S and DFA methods, and their dynamics are analyzed using a sliding window technique. Our findings demonstrate that the Bitcoin blockchain effectively facilitates transactions among the five cryptocurrencies, though evidence suggests a potential structural change in Bitcoin blockchain interoperability following April 2023.
Self-sovereign identity on the blockchain: contextual analysis and quantification of SSI principles implementation
Self-sovereign identity (SSI) embodies the fundamental human right to own and control a digital identity that grants access to public, social, and financial services. The absence of a dedicated digital identity layer in the development of the Internet has rendered SSI a significant challenge in contemporary society. Blockchain technology emerges as a promising solution by enabling the creation of decentralized and automatically verifiable identities. This study contextualizes SSI and analyzes how blockchain technology facilitates the autonomous management of digital identities. It explores nine prominent frameworks in this field—Sovrin, uPort, Jolocom, ShoCard, Litentry, Civic, KILT, Idena, and ION—highlighting their features, functionalities, and compliance with digital identity principles. The research concludes by identifying the challenges and opportunities in implementing these systems for digital identity management, thus contributing to the advancement of this emerging field.
The second extended model of consumer trust in cryptocurrency payments, CRYPTOTRUST 2
Cryptocurrencies’ popularity is growing despite short-term fluctuations. Peer-reviewed research into trust in cryptocurrency payments started in 2014. While the model created then, is based on proven theories from psychology and supported by empirical research, a-lot has changed in the past 10 years. This research finds that the original model is still valid, but it is extended to capture the current situation better. A quantitative methodology is used to validate the updated model proposed. The results from the quantitative survey show that (1) personal innovativeness in technology and (2) finance, influence (3) disposition to trust. Disposition to trust influences six variables from the specific context of the payment. Three variables related to the cryptocurrency itself are (4) stability in the value, (5) transaction fees, and (6) reputation. Institutional trust is influenced by (7) regulation, and (8) payment intermediaries. The last contextual factor is (9) trust in the retailer. The six variables from the context influence (10) trust in the payment which, finally, influences (11) the likelihood of making the cryptocurrency payment.
Modeling and analysis of crypto-backed over-collateralized stable derivatives in DeFi
In decentralized finance (DeFi), stablecoins like DAI are designed to offer a stable value amidst the fluctuating nature of cryptocurrencies. We examine the class of crypto-backed stable derivatives, focusing on mechanisms for price stabilization and exemplified by the well-known stablecoin DAI from MakerDAO. For simplicity, we consider a single-collateral setting. We introduce a belief parameter to the simulation model of DAI in a previous work (DAISIM), reflecting market sentiments about the value and stability of DAI, and show that it better matches the expected behavior when this parameter is set within a particular range of values. Our methods include comparing simulated data with real-world data, focusing on monthly correlations between ETH and DAI prices and scatter plots illustrating the relationship of their price trends over time. We also propose a simple mathematical model of DAI price to explain its stability and dependency on ETH price. Finally, we analyze possible risk factors associated with these stable derivatives to provide valuable insights for stakeholders in the DeFi ecosystem.
Decentralized science (DeSci): definition, shared values, and guiding principles
Rapid advancements in Distributed Ledger Technology (DLT), including blockchain, are foundational to a new era of digital innovation. This innovation has catalyzed the emergence of “Decentralized Science (DeSci),” a new concept and movement that aims to address the challenges of modern science. Given the novelty of the field of DeSci, this study aims to provide a comprehensive definition of the term and explore and conceptualize the shared values and guiding principles inherent to DeSci. To achieve these objectives, an exploratory literature review was conducted to identify and synthesize the scholarly and secondary literature. The search and selection process included six databases (PubMed, Google Scholar, Web of Science, IEEE Xplore, arXiv, and Social Science Research Network), focusing on the last 15 years (2008 to 2023). Owing to the novelty of DeSci, the literature review was supplemented by an anonymous online-based expert survey using a combination of single-choice and open-ended questions. The experts were selected based on predefined inclusion criteria related to their activities in the DeSci field. Seven studies were selected for evaluation from the scholarly literature, and additional 24 sources of information were included in the analysis. In the expert survey, 39 valid datasets were collected and analyzed. The synthesis of the exploratory literature review and expert survey results led to a comprehensive definition of “Decentralized Science” (DeSci) reflecting recurring themes. As no publications explicitly discussed or addressed the values or principles of DeSci in the literature review, a set of shared values and guiding principles was defined based on the expert survey results. This study proposes a comprehensive definition of DeSci and a set of shared values and guiding principles, highlighting the importance of future research in this area.
Blockchain for local communities: an exploratory review of token economy aspects
Blockchain for local communities are blockchain-based applications that support the participation of people in the social and economic life of their local community. These applications leverage tokenization to enable socio-economic processes involving transactions of values where community members take part actively and intentionally. In this field, mechanisms that regulate the functioning of blockchains need to be redirected towards collaborative and social purposes that often differ from the logics on which mainstream cryptocurrencies are based. In order to redesign these mechanisms, sound examination of their system of tokenization and of dynamics of their token economy is required. This paper provides an exploratory review of token economy elements found within cases of blockchain for local community economies, which is an under-explored domain in the relevant literature. The analysis considers 9 projects for systems that incentivize or reward participation, or implement community currency schemes. The dimensions analyzed encompass the type of goals and communities, the blockchains adopted, and token economy design aspects such as: token types, their distribution and incentive mechanisms, the associated platform/wallet functionalities, and the project governance models. We have observed a variety of combinations of these elements being used to facilitate new forms of value circulation. However, there is a tension between the aspiration to introduce transformative systems and the need to ensure the stability of the economic framework. The highly experimental nature of these initiatives requires continuous monitoring of their emergence and development.
DAO voting mechanism resistant to whale and collusion problems
With the widespread adoption of blockchain technology, a novel organizational structure known as Decentralized Autonomous Organizations (DAOs) has attracted considerable attention. DAOs facilitate decision-making through member voting, realizing the governance in a decentralized manner. However, DAOs face unique challenges compared to traditional organization. This paper focuses on two key challenges of governance within DAOs: the whale problem and collusion issue. The whale problem is characterized by the concentration of power among specific members, while for the collusion problem, voting results are distorted by fraudulent collaboration. In terms of voting, we consider Quadratic Voting, a voting system expected to deter the concentration of voting power among a subset of participants, analyzing its resistance to the collusion problem. We show with numerical examples that in comparison to Linear Voting, Quadratic Voting lacks resistance to collusion. Then, we propose a voting mechanism that integrates Quadratic Voting with the Vote escrow tokens, demonstrating the mitigation of the whale problem while acquiring resilience to collusion in the decision-making process. The numerical examples confirm the high efficacy of our proposed model.