Estimating (Miner) Extractable Value is Hard, Let’s Go Shopping!

The term miner extractable value (MEV) has been coined to describe the value which can be extracted by a miner, e.g., from manipulating the order of transactions within a given timeframe. MEV has been deemed an important factor to assess the overall economic stability of a cryptocurrency. This stability also influences the economically rational choice of the security parameter k, by which a merchant defines the number of required confirmation blocks in cryptocurrencies based on Nakamoto consensus. Unfortunately, although being actively discussed within the cryptocurrency community, no exact definition of MEV was given when the term was originally introduced. In this paper, we outline the difficulties in defining different forms of extractable value, informally used throughout the community. We show that there is no globally unique MEV/EV which can readily be determined, and that a narrow definition of MEV fails to capture the extractable value of other actors like users, or the probabilistic nature of permissionless cryptocurrencies. We describe an approach to estimate the minimum extractable value that would incentivize actors to act maliciously and thus can potentially lead to consensus instability. We further highlight why it is hard, or even impossible, to precisely determine the extractable value of other participants, considering the uncertainties in real world systems. Finally, we outline a peculiar yet straightforward technique for choosing the individual security parameter k, which can act as a workaround to transfer the risk of an insufficiently chosen k to another merchant

SoK: The Ghost Trilemma

Trolls, bots, and sybils distort online discourse and compromise the security of networked platforms. User identity is central to the vectors of attack and manipulation employed in these contexts. However it has long seemed that, try as it might, the security community has been unable to stem the rising tide of such problems. We posit the Ghost Trilemma, that there are three key properties of identity -- sentience, location, and uniqueness -- that cannot be simultaneously verified in a fully-decentralized setting. Many fully-decentralized systems -- whether for communication or social coordination -- grapple with this trilemma in some way, perhaps unknowingly. We examine the design space, use cases, problems with prior approaches, and possible paths forward. We sketch a proof of this trilemma and outline options for practical, incrementally deployable schemes to achieve an acceptable tradeoff of trust in centralized trust anchors, decentralized operation, and an ability to withstand a range of attacks, while protecting user privacy.Comment: 22 pages with 1 figure and 8 table

Beyond Coase: Emerging Technologies and Property Theory

In addition to prompting the development of the Coase Theorem, Ronald Coase’s landmark 1959 article on the Federal Communications Commission touched off a revolution in spectrum policy. Although one of Coase’s proposed reforms (that spectrum should be allocated through markets) has now become the conventional wisdom, his other principal recommendation (that governments stop dedicating portions of the spectrum to particular uses) has yet to be fully embraced. Drawing on spectrum as well as Internet traffic and electric power as examples, this Article argues that emerging technologies often reflect qualities that make defining property rights particularly difficult. These include the cumulative nature of interference, the presence of significant interdependencies, and the presence of significant geographic discontinuities in interference patterns, exacerbated by the localized nature of information. These technological considerations define the natural boundaries of property by creating transaction-free zones that must be encompassed within a single parcel. They also complicate defining property rights by making it difficult to identify and attribute harm to particular sources of interference. These challenges can make governance a more attractive solution than exclusion. Other commentators have suggested that the failure of creating well-defined property rights in spectrum support wider use of open access regimes, citing the work of Elinor Ostrom and Michael Heller, or arguing that spectrum is not scarce. Ostrom’s work points out that governance of common property requires features that are quite inconsistent with open access, including a finely tailored and unequal allocation mechanism, strict internal monitoring, strong property protection to prevent outside interference, stability, and homogeneity. Heller’s theory of the anticommons is sometimes misinterpreted as being hostile towards property. Instead, it is better understood as condemning giving exclusionary rights in the same piece of property to multiple owners, all of whom must agree on any major decision. The primary solution to the anticommons is not open access, but rather unitization of the interests in a single owner. Moreover, bargaining over an anticommons is also properly modeled through the chicken (or snowdrift) game, which has more of a zero-sum, all-or-nothing quality, rather than opportunities for cooperation frustrated by a lack of trust that characterize the prisoner’s dilemma and traditional holdout behavior. The final argument, that spectrum is not scarce, simply cannot be squared with Shannon’s Law. Instead the solution may lie in reconfiguring rights to increase owners’ ability to bargain towards workable solutions. A market maker controlling sufficient property and able to integrate local information could design a mechanism that can solve some of these problems. Property could also be reconfigured to provide more of the primitives needed to write effective contracts. Finally, these challenges, as well as the need to reduce information costs on third parties, provide an explanation for the persistence of use restrictions. In addition, continuing the fiction of government ownership of the spectrum may make it easier to reconfigure rights when necessary

Beyond Coase: Emerging Technologies and Property Theory

In addition to prompting the development of the Coase Theorem, Ronald Coase’s landmark 1959 article on the Federal Communications Commission touched off a revolution in spectrum policy. Although one of Coase’s proposed reforms (that spectrum should be allocated through markets) has now become the conventional wisdom, his other principal recommendation (that governments stop dedicating portions of the spectrum to particular uses) has yet to be fully embraced. Drawing on spectrum as well as Internet traffic and electric power as examples, this Article argues that emerging technologies often reflect qualities that make defining property rights particularly difficult. These include the cumulative nature of interference, the presence of significant interdependencies, and the presence of significant geographic discontinuities in interference patterns, exacerbated by the localized nature of information. These technological considerations define the natural boundaries of property by creating transaction-free zones that must be encompassed within a single parcel. They also complicate defining property rights by making it difficult to identify and attribute harm to particular sources of interference. These challenges can make governance a more attractive solution than exclusion. Other commentators have suggested that the failure of creating well-defined property rights in spectrum support wider use of open access regimes, citing the work of Elinor Ostrom and Michael Heller, or arguing that spectrum is not scarce. Ostrom’s work points out that governance of common property requires features that are quite inconsistent with open access, including a finely tailored and unequal allocation mechanism, strict internal monitoring, strong property protection to prevent outside interference, stability, and homogeneity. Heller’s theory of the anticommons is sometimes misinterpreted as being hostile towards property. Instead, it is better understood as condemning giving exclusionary rights in the same piece of property to multiple owners, all of whom must agree on any major decision. The primary solution to the anticommons is not open access, but rather unitization of the interests in a single owner. Moreover, bargaining over an anticommons is also properly modeled through the chicken (or snowdrift) game, which has more of a zero-sum, all-or-nothing quality, rather than opportunities for cooperation frustrated by a lack of trust that characterize the prisoner’s dilemma and traditional holdout behavior. The final argument, that spectrum is not scarce, simply cannot be squared with Shannon’s Law. Instead the solution may lie in reconfiguring rights to increase owners’ ability to bargain towards workable solutions. A market maker controlling sufficient property and able to integrate local information could design a mechanism that can solve some of these problems. Property could also be reconfigured to provide more of the primitives needed to write effective contracts. Finally, these challenges, as well as the need to reduce information costs on third parties, provide an explanation for the persistence of use restrictions. In addition, continuing the fiction of government ownership of the spectrum may make it easier to reconfigure rights when necessary

An analysis of griefs and griefing factors

We consider griefing factors, a system for measurement of the cost-effectiveness of sabotage, which have been used to analyze the attack resistance of blockchain systems. Attackers are said to “grief” if they accept economic harm to themselves in order to harm others; the griefing factor is the ratio of the harm done to the victim to the harm taken on by the attacker. In this work, we study the mathematical properties of this notion, particularly focusing on how the presence of players willing to engage in griefs at varying griefing factors impacts the equilibria present in games

A Model For Improving Ethics In Construction Materials And Products Supply Chain Using Blockchain

There are countless materials and products that make up a building, including cladding, glazing, roofing, floors, ceilings, systems, etc., and the hidden and fragmented structure of the supply chain makes it highly vulnerable to several forms of ethical breaches at different tiers. Consumers also are increasingly concerned about where the products they are buying come from, highlighting important areas of concern that include the ethical, environmental, and social issues. Whereas current research identifies digitalization as a key part of providing transparency and increasing fairness in supply chains, and blockchain technology is lauded as having the potential to deliver this. However, while there has been a growing emphasis on ethics in construction in recent years, and an increase in studies around blockchain, there remains a paucity of studies related to how blockchain may help to improve the environmental and social dimensions of ethics in construction supply chains. A gap that this study fills through a holistic triple bottom line (TBL) approach. To achieve this, the study aims to develop and validate a model for improving ethics in construction materials and products supply chains (CMPSC) following the TBL construct using blockchain technology. The study also explores the current state of ethics in the CMPSC and the implementations of blockchain for ethics and applies the learnings to develop a conceptual model to improve environmental, social and business ethics in the CMPSC using blockchain. The model was then refined and validated via a dual-phase validation protocol consisting of expert interviews and focus group discussions. A total of 30 participants participated in this study, this comprised of 16 construction industry supply chain professionals, 10 professionals in the ethics/ sustainability in construction and 4 blockchain technology experts. NVivo 12 was utilised to thematically analyse both the interviews and the focus group data. This approach was utilised to investigate the data from both a data-driven perspective (a perspective based on coding in an inductive way); and from the research question perspective (to check if the data is consistent with the research questions and if it provides sufficient information). The 30 interviews resulted in 4 high-level themes, 15 mid-level themes and 28 low-level themes, with the total number of codes within the themes being 721. The analysis of the focus group data resulted in 3 high-level themes and 10 mid-level themes, bringing the total number of codes within all themes to 74. Results from this study revealed that the effectiveness of current ethical measures in the CMPSC has been limited due to weak implementation and compliance, the inability of the government to play its role, and the outright denial of unethical practises within supply chains. Results also show that even though greater emphasis is placed on the business component of ethics while the environmental or social component may only receive as much attention if it can be monetised or if it is demanded; nonetheless, the current state of ethics in the CMPSC remains weak across the three dimensions examined. Further results show that while blockchain may help improve ethics in the CMPSC, in addition to the transparency and digitization that technology provides, the need for education and the upholding of personal ethical values by supply chain players are key to the success of both current and new ethical supply chain initiatives. Individuals must first be made ethically aware in order to act ethically; only then may the implementation of a technological tool prosper. The main contribution of this study to knowledge is the development of a model for improving ethics in the CMPSC within the TBL construct through blockchain technology. The model developed in this study provides practical clarity on how blockchain may be implemented within fragmented supply chains and a significant understanding of a socio-technical approach to addressing the issue of ethics within construction supply chains. It also has a vital role in helping the intended users and actors improve their knowledge of the technology and how blockchain can help to improve ethics in the CMPSC and also understand their roles and responsibilities on the network, thereby providing a framework and prerequisite guidance for the Blockchain-as-a-Service (BaaS) providers in the development of the computer model (blockchain network). The findings of this thesis demonstrate new insights and contribute to the existing body of knowledge by further advancing the discussion on the role of the blockchain in the construction industry

Assessing the Solvency of Virtual Asset Service Providers: Are Current Standards Sufficient?

Entities like centralized cryptocurrency exchanges fall under the business category of virtual asset service providers (VASPs). As any other enterprise, they can become insolvent. VASPs enable the exchange, custody, and transfer of cryptoassets organized in wallets across distributed ledger technologies (DLTs). Despite the public availability of DLT transactions, the cryptoasset holdings of VASPs are not yet subject to systematic auditing procedures. In this paper, we propose an approach to assess the solvency of a VASP by cross-referencing data from three distinct sources: cryptoasset wallets, balance sheets from the commercial register, and data from supervisory entities. We investigate 24 VASPs registered with the Financial Market Authority in Austria and provide regulatory data insights such as who are the customers and where do they come from. Their yearly incoming and outgoing transaction volume amount to 2 billion EUR for around 1.8 million users. We describe what financial services they provide and find that they are most similar to traditional intermediaries such as brokers, money exchanges, and funds, rather than banks. Next, we empirically measure DLT transaction flows of four VASPs and compare their cryptoasset holdings to balance sheet entries. Data are consistent for two VASPs only. This enables us to identify gaps in the data collection and propose strategies to address them. We remark that any entity in charge of auditing requires proof that a VASP actually controls the funds associated with its on-chain wallets. It is also important to report fiat and cryptoasset and liability positions broken down by asset types at a reasonable frequency