Cross-border Exchange of CBDCs using Layer-2 Blockchain

This paper proposes a novel multi-layer blockchain architecture for the cross-border trading of CBDCs. The permissioned layer-2, by relying on the public consensus of the underlying network, assures the security and integrity of the transactions and ensures interoperability with domestic CBDCs implementations. Multiple Layer-3s operate various Automated Market Makers (AMMs) and compete with each other for the lowest costs. To provide insights into the practical implications of the system, simulations of trading costs are conducted based on historical FX rates, with Project Mariana as a benchmark. The study shows that, even with liquidity fragmentation, a multi-layer and multi-AMM setup is more cost-efficient than a single AMM.Comment: This paper was presented at the Crypto Finance Conference (CfC) Academic Track 2024 in St. Moritz, Switzerlan

Bots Sociais: Como robôs podem se tornar pessoas influentes no Twitter?

Sistemas que classificam usuários influentes nas redes sociais têm sido usados com grande frequência, sendo referenciados em artigos científicos e na mídia como padrão ideal para avaliação de influência na rede social Twitter. Consideramos esta medição algo complexo e subjetivo e por isso suspeitamos da vulnerabilidade e facilidade de manipulação nesses sistemas. Baseado nisto, realizamos experimentos e análises em dois sistemas de classificação de influência: Klout e Twitalyzer. Criamos robôs simples capazes de interagir, através de contas no Twitter e medimos suas influências. Nossos resultados mostram que é possível ser influente através de estratégias simples. Isso sugere que os sistemas não possuem métricas ideais para classificar influência

Understanding Blockchain Governance: Analyzing Decentralized Voting to Amend DeFi Smart Contracts

Smart contracts are contractual agreements between participants of a blockchain, who cannot implicitly trust one another. They are software programs that run on top of a blockchain, and we may need to change them from time to time (e.g., to fix bugs or address new use cases). Governance protocols define the means for amending or changing these smart contracts without any centralized authority. They distribute instead the decision-making power to every user of the smart contract: Users vote on accepting or rejecting every change. The focus of this work is to evaluate whether, how, and to what extent these protocols ensure decentralized governance, the fundamental tenet of blockchains, in practice. This evaluation is crucial as smart contracts continue to transform our key, traditional, centralized institutions, particularly banking and finance. In this work, we review and characterize decentralized governance in practice, using Compound -- one of the widely used governance protocols -- as a case study. We reveal a high concentration of voting power in Compound: 10 voters hold together 57.86% of the voting power. Although proposals to change or amend the protocol (or, essentially, the application they support) receive, on average, a substantial number of votes (i.e., 89.39%) in favor, they require fewer than three voters to obtain 50% or more votes. We show that voting on Compound governance proposals can be unfairly expensive for small token holders, and also discover voting coalitions that can further marginalize these users. We plan on publishing our scripts and data set on GitHub to support reproducible research.Comment: We have submitted this work for publication and are currently awaiting a decisio

Dissecting Bitcoin and Ethereum Transactions: On the Lack of Transaction Contention and Prioritization Transparency in Blockchains

In permissionless blockchains, transaction issuers include a fee to incentivize miners to include their transaction. To accurately estimate this prioritization fee for a transaction, transaction issuers (or blockchain participants, more generally) rely on two fundamental notions of transparency, namely contention and prioritization transparency. Contention transparency implies that participants are aware of every pending transaction that will contend with a given transaction for inclusion. Prioritization transparency states that the participants are aware of the transaction or prioritization fees paid by every such contending transaction. Neither of these notions of transparency holds well today. Private relay networks, for instance, allow users to send transactions privately to miners. Besides, users can offer fees to miners via either direct transfers to miners' wallets or off-chain payments -- neither of which are public. In this work, we characterize the lack of contention and prioritization transparency in Bitcoin and Ethereum resulting from such practices. We show that private relay networks are widely used and private transactions are quite prevalent. We show that the lack of transparency facilitates miners to collude and overcharge users who may use these private relay networks despite them offering little to no guarantees on transaction prioritization. The lack of these transparencies in blockchains has crucial implications for transaction issuers as well as the stability of blockchains. Finally, we make our data sets and scripts publicly available.Comment: This is a pre-print of our paper accepted to appear to the Financial Cryptography and Data Security 2023 (FC '23

BOTS SOCIAIS: COMO ROBÔS PODEM SE TORNAR INFLUENTES NO TWITTER

Systems like Klout and Twitalyzer were developed as an attempt to measure the influence of users within social networks. Although the algorithms used by these systems are not publicly known, they have been widely used to rank users according to their influence in the Twitter social network. As media companies might base their viral marketing campaigns on influence scores, in this paper, we investigate if these systems are vulnerable and easy to manipulate. Our approach consists of developing Twitter robot accounts able to interact with real users in order to verify strategies that can increase their influence scores according to different systems. Our results show that it is possible to become influential using very simple strategies, suggesting that these systems should review their influence score algorithms to avoid being tricked by automatic activity.Sistemas como Klout e Twitalyzer foram desenvolvidos em uma tentativa de medir a influência de usuários nas redes sociais. Embora os algoritmos utilizados por esses sistemas não sejam de conhecimento público, eles têm sido amplamente utilizados para ranquear usuários, de acordo com sua influência no Twitter. Como as empresas de mídia baseiam suas campanhas de marketing viral na pontuação de influência, neste trabalho, investigamos se esses sistemas são vulneráveis e fáceis de manipular. Nossa abordagem consiste no desenvolvimento de contas robôs no Twitter, capazes de interagir com usuários reais, a fim de verificar estratégias que podem aumentar sua pontuação de influência, nos diferentes sistemas. Nossos resultados mostram que é possível se tornar influente por meio de estratégias muito simples, o que sugere que esses sistemas devem rever os seus algoritmos de pontuação de influência para evitar atribuir alto grau de influência a contas que possuem atividade automática

Facebook Ads Monitor: An Independent Auditing System for Political Ads on Facebook

The 2016 United States presidential election was marked by the abuse of targeted advertising on Facebook. Concerned with the risk of the same kind of abuse to happen in the 2018 Brazilian elections, we designed and deployed an independent auditing system to monitor political ads on Facebook in Brazil. To do that we first adapted a browser plugin to gather ads from the timeline of volunteers using Facebook. We managed to convince more than 2000 volunteers to help our project and install our tool. Then, we use a Convolution Neural Network (CNN) to detect political Facebook ads using word embeddings. To evaluate our approach, we manually label a data collection of 10k ads as political or non-political and then we provide an in-depth evaluation of proposed approach for identifying political ads by comparing it with classic supervised machine learning methods. Finally, we deployed a real system that shows the ads identified as related to politics. We noticed that not all political ads we detected were present in the Facebook Ad Library for political ads. Our results emphasize the importance of enforcement mechanisms for declaring political ads and the need for independent auditing platforms

On fairness concerns in the blockchain ecosystem

Blockchains revolutionized centralized sectors like banking and finance by promoting decentralization and transparency. In a blockchain, information is transmitted through transactions issued by participants or applications. Miners crucially select, order, and validate pending transactions for block inclusion, prioritizing those with higher incentives or fees. The order in which transactions are included can impact the blockchain final state. Moreover, applications running on top of a blockchain often rely on governance protocols to decentralize the decision-making power to make changes to their core functionality. These changes can affect how participants interact with these applications. Since one token equals one vote, participants holding multiple tokens have a higher voting power to support or reject the proposed changes. The extent to which this voting power is distributed is questionable and if highly concentrated among a few holders can lead to governance attacks. In this thesis, we audit the Bitcoin and Ethereum blockchains to investigate the norms followed by miners in determining the transaction prioritization. We also audit decentralized governance protocols such as Compound to evaluate whether the voting power is fairly distributed among the participants. Our findings have significant implications for future developments of blockchains and decentralized applications.Blockchain-Technologien revolutionierten zentralisierte Bereiche wie Bankwesen und Finanzen, indem sie Dezentralisierung und Transparenz förderten. In einer Blockchain wird Informationen durch Transaktionen übertragen, die von Teilnehmern oder Anwendungen ausgestellt werden. Miner wählen Transaktionen aus, ordnen sie an und validieren sie für die Aufnahme in einen Block. Dabei priorisieren sie jene Transaktionen mit höheren Gebühren. Die Reihenfolge, in der Transaktionen aufgenommen werden, kann den endgültigen Zustand der Blockchain beeinflussen. Anwendungen, die auf einer Blockchain laufen, oft auf Governance-Protokolle angewiesen, um die Entscheidungsbefugnis zur Änderung ihrer Kernfunktionalität zu dezentralisieren. Diese Änderungen können beeinflussen, wie Teilnehmer mit diesen Anwendungen interagieren. Da ein Token einem Stimmrecht entspricht, haben Teilnehmer mit mehreren Tokens eine höhere Abstimmungsbefugnis, um die vorgeschlagenen Änderungen zu unterstützen oder abzulehnen. Fraglich ist, inwieweit diese Abstimmungsbefugnis verteilt ist. In dieser Arbeit prüfen wir die Bitcoin- und Ethereum-Blockchains, um die Normen zu untersuchen, denen Miner folgen, um die Priorisierung von Transaktionen festzulegen. Wir überprüfen dezentrale Governance-Protokolle wie Compound, um festzustellen, ob die Abstimmungsbefugnis fair unter den Teilnehmern verteilt ist. Unsere Ergebnisse haben wesentliche Auswirkungen auf zukünftige Entwicklungen von Blockchains und dezentralen Anwendungen