1. “NFT Wash Trading in the Ethereum Blockchain” by Massimo La Morgia, Alessandro Mei, Alberto Maria Mongardini, and Eugenio Nerio Nemmi

TLDR:

• Wash trading is a type of market manipulation in which an individual simultaneously buys and sells the same asset in order to create the appearance of higher trading volume and liquidity. This can be done for a variety of reasons, such as to inflate the price of a cryptoasset.

• Many have hypothesized that the growth of obscure NFT markets in 2021 and 2022 was due, in part, to entities involved with those projects engaging in wash trading.

• This paper tests this hypothesis using both on-chain and off-chain data. Astoundingly, they find that 5.66% of all NFT collections have been impacted by wash trading, with a total artificial volume of $3,406,110,774.

2. “Garrison: A Novel Watchtower Scheme for Bitcoin” by Arash Mirzaei, Amin Sakzad, Jiangshan Yu, and Ron Steinfeld

TLDR:

• The Lightning Network has the potential to solve one of Bitcoin’s biggest challenges: the scalability and practicality of payments. However, there are still security issues that have prevented its adoption, such as the requirement for participants to be online to secure their channels.

• In order to solve this impractical requirement, the concept of so-called “Watchtowers” was invented. “Watchtowers” are monitoring systems that circumvent the impractical requirement for participants to be online by socializing the monitoring of payment channels.

• This paper introduces a new schema for the creation of Watchtowers called Garrison. Unlike many previous constructs, Garrison does not require changes to Bitcoin’s code and offers several efficiency benefits.

3. “Automated Market Makers: Mean-Variance Analysis of LPs Payoffs and Design of Pricing Functions” by Philippe Bergault, Louis Bertucci, David Bouba, and Olivier Guéant

TLDR:

• One of the biggest research areas in the industry in 2022 was the dynamics of liquidity provision to decentralized exchanges, such as Uniswap, given that not much is known about the users engaging in market making.

• Much of the research in this area analyzes a phenomenon called Impermanent Loss (IL), which can drastically impact the returns of Liquidity Providers (LPs). Previous papers have found that LPs often underperform simple buy-and-hold strategies.

• This paper corroborates this hypothesis and shows that, even when accounting for transaction fees, LPs perform poorly relative to the efficient frontier and very often face negative PnL.

4. “An Auditable Confidentiality Protocol for Blockchain Transactions” by Aoxuan Li, Gabriele D’Angelo, Jacky Tang, Frank Fang, and Baron Gong

TLDR:

• Privacy is important for the long-term viability of cryptoassets since it allows for greater economic freedom and autonomy, as individuals are able to make financial decisions without fear of surveillance or interference.

• At the same time, privacy is hard to achieve in public blockchains because all transactions are recorded on a public ledger and associated with a unique cryptographic address that can potentially be traced back to a real-world identity.

• This paper introduces an interesting privacy-protection mechanism for blockchains that uses Zokrates, an SDK for zkSNARKs on Ethereum, as well as Solidity to build a privacy-oriented zkRollup.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.

1. “NFT Wash Trading in the Ethereum Blockchain” by Massimo La Morgia, Alessandro Mei, Alberto Maria Mongardini, and Eugenio Nerio Nemmi

TLDR:

• Wash trading is a type of market manipulation in which an individual simultaneously buys and sells the same asset in order to create the appearance of higher trading volume and liquidity. This can be done for a variety of reasons, such as to inflate the price of a cryptoasset.

• Many have hypothesized that the growth of obscure NFT markets in 2021 and 2022 was due, in part, to entities involved with those projects engaging in wash trading.

• This paper tests this hypothesis using both on-chain and off-chain data. Astoundingly, they find that 5.66% of all NFT collections have been impacted by wash trading, with a total artificial volume of $3,406,110,774.

2. “Garrison: A Novel Watchtower Scheme for Bitcoin” by Arash Mirzaei, Amin Sakzad, Jiangshan Yu, and Ron Steinfeld

TLDR:

• The Lightning Network has the potential to solve one of Bitcoin’s biggest challenges: the scalability and practicality of payments. However, there are still security issues that have prevented its adoption, such as the requirement for participants to be online to secure their channels.

• In order to solve this impractical requirement, the concept of so-called “Watchtowers” was invented. “Watchtowers” are monitoring systems that circumvent the impractical requirement for participants to be online by socializing the monitoring of payment channels.

• This paper introduces a new schema for the creation of Watchtowers called Garrison. Unlike many previous constructs, Garrison does not require changes to Bitcoin’s code and offers several efficiency benefits.

3. “Automated Market Makers: Mean-Variance Analysis of LPs Payoffs and Design of Pricing Functions” by Philippe Bergault, Louis Bertucci, David Bouba, and Olivier Guéant

TLDR:

• One of the biggest research areas in the industry in 2022 was the dynamics of liquidity provision to decentralized exchanges, such as Uniswap, given that not much is known about the users engaging in market making.

• Much of the research in this area analyzes a phenomenon called Impermanent Loss (IL), which can drastically impact the returns of Liquidity Providers (LPs). Previous papers have found that LPs often underperform simple buy-and-hold strategies.

• This paper corroborates this hypothesis and shows that, even when accounting for transaction fees, LPs perform poorly relative to the efficient frontier and very often face negative PnL.

4. “An Auditable Confidentiality Protocol for Blockchain Transactions” by Aoxuan Li, Gabriele D’Angelo, Jacky Tang, Frank Fang, and Baron Gong

TLDR:

• Privacy is important for the long-term viability of cryptoassets since it allows for greater economic freedom and autonomy, as individuals are able to make financial decisions without fear of surveillance or interference.

• At the same time, privacy is hard to achieve in public blockchains because all transactions are recorded on a public ledger and associated with a unique cryptographic address that can potentially be traced back to a real-world identity.

• This paper introduces an interesting privacy-protection mechanism for blockchains that uses Zokrates, an SDK for zkSNARKs on Ethereum, as well as Solidity to build a privacy-oriented zkRollup.

Research collected and curated by @cipherix.

This newsletter is for informational purposes only and is not intended as legal, business, investment, or tax advice.

The Smart Contract Research Forum’s (SCRF) bold mission is to advance web3 through actionable research and knowledge-sharing. To this end, SCRF connects researchers and builders, sponsors projects, and constructs collaborative forums. SCRF’s community is an active, international network of academics, industry architects, and blockchain advocates.