Blockchain And Crypt Currency: Building A High Quality Marketplace For Crypt Data

150 Pages·2020·1.998 MB·English

by  Makoto Yano, Chris Dai, Kenichi Masuda, Yoshio Kishimoto

Economics, Law, and Institutions in Asia Pacific
Makoto Yano
Chris Dai
Kenichi Masuda
Yoshio Kishimoto   Editors
Blockchain
and Crypt
Currency
Building a High Quality Marketplace
for Crypt Data
fi
Economics, Law, and Institutions in Asia Paci c
Series Editor
MakotoYano,ResearchInstituteofEconomy,TradeandIndustry(RIETI),Tokyo,
Japan
The Asia Pacific region is expected to steadily enhance its economic and political
presence in the world during the twenty-first century. At the same time, many
serious economic and political issues remain unresolved in the region. To further
academicenquiryandenhancereaders’understandingaboutthisvibrantregion,the
present series, Economics, Law, and Institutions in Asia Pacific, aims to present
cutting-edge research on the Asia Pacific region and its relationship with the rest
oftheworld.Forcountriesinthisregiontoachieverobusteconomicgrowth,itisof
foremostimportancethattheyimprovethequalityoftheirmarkets,ashistoryshows
that healthy economic growth cannot be achieved without high-quality markets.
High-qualitymarketscanbeestablishedandmaintainedonlyunderawell-designed
set of rules and laws, without which competition will not flourish. Based on these
principles, this series places a special focus on economic, business, legal, and
institutionalissuesgearedtowardsthehealthydevelopmentofAsiaPacificmarkets.
The series considers book proposals for scientific research, either theoretical or
empirical, that is related to the theme of improving market quality and has policy
implicationsfortheAsiaPacificregion.Thetypesofbooksthatwillbeconsideredfor
publication include research monographs as well as relevant proceedings. The
series show-cases work by Asia-Pacific based researchers but also encourages the
workofsocialscientistsnotlimitedtotheAsiaPacificregion.Eachproposalandfinal
manuscriptissubjecttoevaluationbytheeditorialboardandexpertsinthefield.
Editorial Board Members:
Aoki, Reiko (Commissioner, Japan Fair Trade Commission, Japan)
Chun, Youngsub (Professor of Economics, Seoul National University, Korea)
Dixit, Avinash K. (John J. F. Sherrerd ’52 University Professor of Economics,
Emeritus, Princeton University, USA)
Fujita, Masahisa (Fellow, The Japan Academy, Japan)
Kamihigashi, Takashi (Director and Professor, Center for Computational Social
Science (CCSS), Kobe University, Japan)
Kawai, Masahiro (Project Professor, Graduate School of Public Policy,
The University of Tokyo, Japan)
Lo, Chang-fa (Honourable Justice, The Constitutional Court, Taiwan)
Matsushita, Mitsuo (Professor Emeritus, The University of Tokyo, Japan)
Nishimura, Kazuo (Professor, Research Institute for Economics and Business
Administration (RIEB) and Interfaculty Initiative in the Social Sciences (IISS),
Kobe University, Japan; Fellow, The Japan Academy, Japan)
Yabushita, Shiro (Professor Emeritus, Waseda University, Japan)
Yoshino, Naoyuki (Dean, Asian Development Bank Institute, Japan; Professor
Emeritus, Keio University, Japan)
More information about this series at http://www.springer.com/series/13451
Makoto Yano Chris Dai
(cid:129) (cid:129)
Kenichi Masuda Yoshio Kishimoto
(cid:129)
Editors
Blockchain and Crypt
Currency
Building a High Quality Marketplace
for Crypt Data
Editors
Makoto Yano Chris Dai
RIETI K.K Longhash
Tokyo,Japan Tokyo,Japan
Kenichi Masuda YoshioKishimoto
Anderson Mori& Tomotsune Ministry of Economy,Trade andIndustry
Tokyo,Japan Tokyo,Japan
ISSN 2199-8620 ISSN 2199-8639 (electronic)
Economics, Law, andInstitutions inAsia Pacific
ISBN978-981-15-3375-4 ISBN978-981-15-3376-1 (eBook)
https://doi.org/10.1007/978-981-15-3376-1
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Preface
Investment in virtual currency over the past few years appears to have somewhat
subsidedrecently.However,thisdoesnotimplythatblockchaintechnology,which
underlies virtual currencies, has become less useful. To the contrary, a new gen-
eration of blockchains, and their applications, are being actively created and
deployed today. The primarypurpose of this book isto explore thepossibilities of
those new blockchains and their applications, to explain the current state of
blockchain technologies, and their future use for a wide range of scholars and
graduate students beyond their respective fields.
Nowadays, a body of information and communication technology (ICT) and its
supportingsocialsystemareoftenperceivedasanecosystem,or,moreprecisely,a
cyber ecosystem. With this term, many people recognize the importance of an
ecosystem in which technology and people can coexist in harmony. In this book,
we study the design of such a system supported by blockchain technology.
Thisbookinvestigatestherolethatthenewgenerationofblockchainsmayplay
in the coming data-driven society. It is expected that data will become the third
major production factor next to labor and capital in the Internet era. Blockchain
technology opens a new way of owning, sharing, and using data.
Ablockchainisoftendefinedasadecentralizedledger.“Ledger”isanoldterm
thatreferstoa“bookofapermanentrecord”.Ablockchainisaledgercreatedina
decentralized manner. In this process, many independent entities contribute to
creating a book of permanent data that is absolutely accurate and unfalsifiable.
Records that are absolutely accurate and unfalsifiable are valuable. A county
recorder’sofficekeepsthevitalrecordsthatrelatetoownershipinrealestate(land)
and to debts or liens upon it. Without these records, it would be practically
impossible to trade land and/or to lend and borrow money with land as security.
These records are economically valuable because everyone trusts that they are
absolutely accurate and unfalsifiable. This trust brings value to the record.
Blockchains have shown that such trusted records can be stored on the Internet
inadecentralizedmanner.Thedecentralizationoftherecordingprocess,whichhas
traditionally been centralized and stewarded by the government, is expected to
significantlyeconomizetransactioncosts(orthecostofcreatingandmaintaininga
v
vi Preface
ledger). That is one reason why blockchain technology has been accepted enthu-
siastically by many.
By making a ledger of data, a blockchain makes it possible to designate the
owner of each piece of data, to trade data pieces, and to market them. This book
examines the formation of markets for various types of data from the theory of
market quality proposed and developed by Yano (for references, see Chap. 4).
Blockchain technology can create a ledger for any type of record. The original
Bitcoinblockchainrecordsthetransfersoffundsbetweendifferentaccounts,thereby
providing the same function as deposit currencies that banks offer. If blockchain
technologyeconomizestransactioncostssignificantly,thecurrentmonetarysystem
basedoncentralbanknotesanddepositcurrenciesmaybereplacedbyablockchain.
Chapter 4 provides an economic analysis of such a possibility, whereas Chap. 5
explainsthe current state ofvirtualcurrency transactions.
EthereumisablockchainthatissimilartooperatingsystemsforPCsandtablets.
Likeanoperatingsystem,itcanletindependentapplicationprograms,calledsmart
contracts, be recorded and executed. On Ethereum, users can execute smart con-
tracts,andresultsofexecutionarealsorecordedsecurelyonEthereum.Thismakes
it possible for users to develop their own businesses based on smart contract pro-
gramsandtoraisefundsforbusinessprojects.Thepossibilitiesofthosebusinesses
and the design of laws and regulations for fundraising for smart-contract-based
businesses are discussed in Chaps. 6–8.
Blockchains are expected togive data itself astatus ofa new production factor.
Currently,peopleholdagreatexpectationonbigdatacreatedthroughtheInternetof
Things (IoT). If all data are shared in various production processes, analyzed by
artificial intelligence (AI), and if the results of data analysis are fed back to pro-
duction processes, productivity may improve drastically. However, data sharing
doesnotprogresseasilybecauseofthefearofinformationleakage.Moreover,there
isgrowing concern overdata monopolyanddata misuse; much ofthedatacreated
through the Internet is accumulating in the hands of large Internet companies. By
bringing the ownership of data into the hands of data producers, blockchains are
expected to reduce the possibility of information leakage, enhance the sharing and
use of IoT data, and prevent data monopoly and misuse. For this purpose, the
current blockchain technology is not sufficiently advanced, and new technology is
being developed. Chapters 2 and 3 cover the economic issues on data ownership
and the current state of blockchain technology for IoT data.
In the ICT industry, the economic process through which a set of ICT tech-
nologies is born and accepted by users has been referred to as an ecosystem.
“Ecosystem”isawidelyusedterminbiology,anddescribesanaturalenvironment
inwhichvariousorganismslivetheirownlives.Thereisaharmoniousenvironment
consisting of land, rivers, and forests upon which the sun shines and living things
are born, grow, reproduce, and undergo evolutionary changes. It is thought that
such an environment (i.e., ecosystem) is essential for healthy development of
computer technology.
Preface vii
ThereisarichcyberspaceontheInternetinwhichmanyhigh-speedserversare
connectedthroughoptical cables.Many computerengineers developnewsoftware
programs.Manypeopleuseandevaluatetheseprograms,andonlythemostuseful
programs are selected. There are also people who evaluate these processes and
invest in promising technologies and software applications. Through these pro-
cesses,existingtechnologiesareimproved,andnewtechnologiesareborn,leading
tothenextgenerationoftechnology.Suchhasbeentheharmonizedenvironmentin
which the ICT industry has developed.
To support this process of technological progress, we need an ecosystem that
harmonizes technology, people, and society as a whole. To that end, not only
computer scientists and engineers but also entrepreneurs and business people who
create and operate new businesses are indispensable. Experts who understand
moneyandfinancearealsoessential.Evenmoreimportantaretheusersofservices
that the engineers and business people produce. All these people are organically
linked, sharing information and contributing to building the ICT infrastructure. To
build such infrastructure, the process also requires the involvement of legal and
economic experts and policymakers who understand the workings of markets and
canfacilitatetheformationofhigh-qualitymarkets.Acyberecosystemreferstothis
whole picture. For the blockchain industry to develop further, it is necessary to
build a healthy cyber ecosystem, the design of which is addressed in this study.
This book is expected to contribute to the creation of such an ecosystem
encompassing both academia and business. After many intensive discussion ses-
sions,agroupofvariousexpertsincomputerscience/engineering,economics,law,
policy, and business have assembled this book. While based on the final report
of the study group “Blockchain and Society 5.0—The Creation of a New
Marketplace based on Distributed Consensus” at the Research Institute of
Economy,Trade,andIndustry(RIETI),forwhichYanoservesasthepresident,the
book is extensively rewritten so that it will appeal to scholars from different fields
and graduate students interested in interdisciplinary issues on blockchain and
relatedsocialandtechnologicalissues.Ofcourse,theviewsexpressedinthisbook
are those of the authors, not those of the RIETI.
In organizing the study group and putting together this book, we have received
extensivesupportfrommembersoftheRIETI,forwhichwearedeeplyindebted.In
particular,wearegratefultoChairmanAtsushiNakajimaoftheRIETIforinitiating
thestudygroupandforthewarmandconstantencouragementandtoMr.Masataka
Saburi, Ms. Kiriko Tanimoto, and Mr. Takehiro Watanabe of the International
Division for the promotion and dissemination of our research. Finally, we are
deeply indebted to the president’s secretary, Ms. Kyoko Nakamura, for supporting
the study group and for checking manuscripts at various stages, which has been a
great help while assembling this book.
Inpreparingthisbook,wehavereceivedverykindhelpfromSpringerstaff.We
are particularly grateful to Ms. Juno Kawakami for her constant encouragement,
patience, and support to our project and Mr. Austin Schultz for excellent copy
editing.
viii Preface
Recently, blockchain currencies and businesses have been targeted by rather
wild speculative activities. Blockchain currencies have been used extensively for
money laundering and illegal drug trafficking. Because these activities have given
theblockchainindustryanimageofriskybusiness,socialperceptionsofblockchain
are rather negative. However, if better technology is developed and a healthy
marketinfrastructurecanbecreatedtosupporttheblockchain market,theindustry
willhaveabrightfuture.Itisourhopethatthisbookwillcontributetothecreation
of a cyber ecosystem in which the blockchain industry will grow in a healthy and
prosperous manner.
Tokyo, Japan Makoto Yano
January 2020 Chris Dai
Kenichi Masuda
Yoshio Kishimoto
Contents
1 Creation of Blockchain and a New Ecosystem . . . . . . . . . . . . . . . . . 1
Makoto Yano, Chris Dai, Kenichi Masuda and Yoshio Kishimoto
2 Market Quality Approach to IoT Data on Blockchain Big Data. . . . 21
Steven Pu and Makoto Yano
3 Industrial Applications of Blockchain to IoT Data . . . . . . . . . . . . . . 41
Steven Pu
4 Theory of Money: From Ancient Japanese Copper Coins
to Virtual Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Makoto Yano
5 Ethereum, Smart Contracts, DApps . . . . . . . . . . . . . . . . . . . . . . . . . 77
William Metcalfe
6 DEX: A DApp for the Decentralized Marketplace . . . . . . . . . . . . . . 95
Chris Dai
7 Blockchain Business and Its Regulation . . . . . . . . . . . . . . . . . . . . . . 107
Makoto Yano, Chris Dai, Kenichi Masuda and Yoshio Kishimoto
8 Bitcoin and Blockchain Technology . . . . . . . . . . . . . . . . . . . . . . . . . 129
Kazumasa Omote and Makoto Yano
Index .... .... .... .... .... ..... .... .... .... .... .... ..... .... 137
ix