Blockchain is the underlying technology of a number of digital cryptocurrencies. Blockchain is a chain of blocks that store information with digital signatures in a decentralized and distributed network. The features of blockchain, including decentralization, immutability, transparency and auditability, make transactions more secure and tamper proof. Apart from cryptocurrency, blockchain technology can be used in financial and social services, risk management, healthcare facilities, and so on. A number of research studies focus on the opportunity that blockchain provides in various application domains. This paper presents a comparative study of the tradeoffs of blockchain and also explains the taxonomy and architecture of blockchain, provides a comparison among different consensus mechanisms and discusses challenges, including scalability, privacy, interoperability, energy consumption and regulatory issues. In addition, this paper also notes the future scope of blockchain technology.

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A Survey of Blockchain From the Perspectives of Applications, Challenges, and Opportunities

We establish that cryptocurrency returns are driven and can be predicted by factors that are specific to cryptocurrency markets. Cryptocurrency returns are exposed to cryptocurrency network factors but not cryptocurrency production factors. We construct the network factors to capture the user adoption of cryptocurrencies and the production factors to proxy for the costs of cryptocurrency production. Moreover, there is a strong time-series momentum effect, and proxies for investor attention strongly forecast future cryptocurrency returns.

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Risks and Returns of Cryptocurrency

Permissionless blockchains require a protocol to generate consensus. Many prominent permissionless blockchains employ Proof-of-Work (PoW) for that purpose, but PoW possesses significant shortcomings. Various alternatives have been proposed. This paper provides the first formal economic model of the most famous alternative, Proof-of-Stake (PoS), and establishes conditions under which PoS generates consensus. A sufficiently modest reward schedule not only implies the existence of an equilibrium in which consensus obtains as soon as possible but also precludes a persistent forking equilibrium. The latter result arises because PoS, unlike PoW, requires that validators are also stakeholders.

Blockchain without Waste: Proof-of-Stake

We develop a dynamic asset-pricing model of cryptocurrencies/tokens that allow users to conduct peer-to-peer transactions on digital platforms. The equilibrium value of tokens is determined by aggregating heterogeneous users' transactional demand rather than discounting cashflows as in standard valuation models. Endogenous platform adoption builds upon user network externality and exhibits an S-curve — it starts slow, becomes volatile, and eventually tapers off. Introducing tokens lowers users' transaction costs on the platform by allowing users to capitalize on platform growth. The resulting intertemporal feedback between user adoption and token price accelerates adoption and dampens user-base volatility.

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Tokenomics: Dynamic Adoption and Valuation

Blockchain for smart cities: A review of architectures, integration trends and future research directions

Blockchain Without Waste: Proof-of-Stake

Do the rich always get richer by investing in a cryptocurrency for which new coins are issued according to a proof-of-stake (PoS) protocol? We answer this question in the negative: Without trading,...

Evolution of Shares in a Proof-of-Stake Cryptocurrency

We demonstrate theoretically that Bitcoin's limited adoption arises as an equilibrium outcome rather than as a short-lived property. Our results are driven by negative network effects which arise due to Bitcoin's need for consensus and the existence of network delay. As the Bitcoin network expands, network delay grows thereby prolonging the time needed for generating consensus. In turn, transaction settlement becomes prolonged, and users abandon the system, yielding limited adoption. Increasing transaction rates fails to solve this problem because increasing transaction rates increases fork probabilities which prolongs the consensus process and generates limited adoption.

Bitcoin's Fatal Flaw: The Limited Adoption Problem

This paper provides an empirical overview of the largely unexplored public blockchain ecosystem. Our overview highlights that only a few blockchains dominate the ecosystem although no single blockchain, not even Bitcoin, dominates uniformly. We explain our empirical findings with a simple theoretical framework that establishes three key economic attributes - adoption, scale, and security - as the determinants of blockchain user utility. We examine each blockchain along those dimensions empirically. Comparing across these attributes, we establish whether a blockchain could be optimal relative to all other blockchains for some user type. Applying that comparison yields that only a few blockchains could be optimal for some user type. Our results thus explain why only a few blockchains dominate the broader blockchain ecosystem and further provide an empirical framework from which to evaluate progress within the blockchain ecosystem.

Fahad Saleh

Papers

Blockchain without Waste: Proof-of-Stake

Blockchain Without Waste: Proof-of-Stake

Evolution of Shares in a Proof-of-Stake Cryptocurrency

Bitcoin's Fatal Flaw: The Limited Adoption Problem

The Public Blockchain Ecosystem: An Empirical Analysis