Blockchain Labs Working Group Reports 2019
The 2018-2019 Working Groups Cycle was the first year that Blockchain Labs was a full MIT course. Due to the success of our first year we had an increased number of research projects. All Projects resulted in a written report during this Cycle.
Outputs
Blockchain and AI applied to Supply Chain with ATKearney
Emerging technologies such as AI, blockchain and IoT are changing the way our supply chains operate. Combined together these advanced technologies are set to turn the industry on its head. In particular the combination of blockchain and AI offers great potential. Blockchain is the key underlying component that enables the verification and validation of the data across the supply chain, and the creation new types of cross-organizational datasets. AI is the algorithm that can be used on these new datasets to deliver new types of insights. This project focuses on the supply chain for retail and consumer products.
Research on the topic with AT Kearney experts.
Project goal / Research question
What is the state of the digital supply chain?
What types of AI algorithm should we build and how should we be organized to capture the value of these innovations and rapidly respond to changes (sense and pivot)?
Build an AI algorithm suited for a blockchain-based cross-organizational dataset
———————————————————————————————————————————————————
Choosing and Implementing an Enterprise Blockchain to Solve Supply Chain Challenges
Authors: Dickson Li (MIT Sloan), Yih Lin Teh (MIT Sloan), Roland Xu (MIT Sloan)
Abstract: In this paper, we develop a framework that allows a company to evaluate different enterprise blockchain offerings when looking to procure a solution that addresses solves their supply chain challenges. We recommend companies to consider business factors, technical factors, and implementation factors.
The business factors to consider are the vision and purpose of the blockchain’s creation, the governance and track record of the blockchain, and the blockchain’s business model. For technical factors, we recommend looking at a blockchain solution in terms of four layers (the fundamental, smart-contract, data storage, and interface layer), and then comparing the nuances of those across the offerings. Finally, we highlight certain implementation considerations for companies.
Along the way, we also evaluate the landscape of supply chain challenges that could be solved by blockchain. We see these challenges as in three main categories - traceability, low digitization, and trust & costly intermediaries. Our evaluation of these problems and the solutions presents a primer for companies who have decided to implement a blockchain solution and are evaluating different offerings.
Healthcare Applications with BCG
Amongst industries, health care is often seen as an industry that lends itself well to typical applications based on blockchain technology. Whether the tracking of goods (e.g. organs) through a supply chain or managing personal health records – blockchain may provide attractive technical features to support as a data base. Start-ups and corporates alike have started to prove this concept by running pilots or setting up for a commercial journey. In this working group, we focus on potential use case cluster in health care and identify most promising applications of blockchain in this field.
Project goal / Research question
Identify use case clusters for blockchain technology in health care
Provide an overview of start-up and corporate venture activity in this space
Assess the feasibility, desirability and viability of most promising examples
———————————————————————————————————————————————————
Traceability in Genetic Data Sharing
Authors: Stephanie MacConnell (MIT), Nick Hong (MIT), Ajeet Singh (Harvard), Mayank Aranke (Harvard), Connery Noble (MIT)
Executive Summary: Over the past decade, significant breakthroughs in gene sequencing has allowed gene analysis and therefore data to become readily available. However, with an influx of genetic data, another problem arose: the problem of data stewardship and governance. As of today, an individual donor who has his DNA analyzed through 23andMe or Ancestry.com has no way of knowing where the data goes and for what purposes the data is used for. We believe that a blockchain solution, leveraging non-fungible tokens, will enable an individual donor to become a better steward of his own genetic data by enabling him to trace where the genetic data goes, and will strengthen the privacy of the individual’s identity. By doing so, we hope to peel off any stigma around the donation of genetic data, regain the trust of individual donors, and thereby empower a community of citizens to adopt the practice of donating genetic data for the greater good of society.
Digital Fiat Currencies with BCG
Explore the implementation of digital fiat currencies and analyze their impact on the economy as an alternative form of payment. On the technical side, work with engineers to develop architecture and open source protocol for their implementation and interoperability. On the business side, engage with central banks and private actors to design use cases.
Project goal / Research question
Assess the opportunity for digital fiat currencies leveraging blockchain technology
Understand the regulatory framework and potential other challenges for implementation
Summarize the feasibility, desirability and viability of the use case
———————————————————————————————————————————————————
Authors: Jeremy Ney (MIT), D. Ross Martin (MIT), Nicolas Xuan-Yi Zhang (MIT)
Abstract: The structure of the US financial system deserves modifying. In the 10 years since the financial crisis, technological advancements and regulatory tools have laid the foundation for Central Bank Digital Currencies to emerge as an economic resolution. Our paper illustrates that introducing Central Bank Digital Currencies (CBDCs) can improve financial stability without degrading credit availability in the long term. We show this by focusing on the effects in a single credit market, namely, the U.S. student loan market. Our analysis showcases that by introducing CBDCs, market participants can subsequently remove two types of market subsidies that promote poor risk practices and improper pricing. These two subsidies are FDIC deposit insurance as well as risk-free deposit rent. We calculate the effect of introducing CBDCs by focusing on historical market examples when similar fundamental market shifts happened, both in the student loan market as well as in other advanced economies. Our conclusion is that CBDCs diminish credit availability within one-year, but this effect is ameliorated as financial stability improves in subsequent years. Accordingly, we recommend a roadmap for rolling out CBDCs in the least disruptive fashion.
Reliability and Consensus Protocol with Deloitte
Many stakeholders rely on the design and implementation of a Blockchain’s consensus protocol. These stakeholders include Blockchain software developers, ICOs, consortia, investment funds, digital currency exchanges / wallets, others in public / private. There are many risks to consider but those around Governance will be key (what happens when there are intended or unintended changes or when governance breaks down?). There needs to be a commonly accepted framework for assessing risk and reliability for existing and newly proposed consensus mechanisms. Research on the topic with Deloitte experts.
Project goal / Research question: Develop a framework to assess the reliability of a blockchain consensus protocol
———————————————————————————————————————————————————
Team Research Report: Reliability and Consensus Protocols Project
Authors: Ingrid Mosquera (MIT), Mert Karakus (MIT), Nicholas A Ulven (MIT)
Excerpt from Executive Summary: In computer science “distributed consensus is the problem of how multiple, independently run computers can reliably agree on a set of common data in the presence of faults (i.e. in the case that one computer intentionally or unintentionally is programmed to introduce false information).”
Ledger technologies - known as Blockchain – are based on cryptographic locks and computational algorithms that record and verify transactions and engagement terms under distributed consensus protocols. The consensus protocol creates an append-only log (transaction ledger) which then creates an auditable database. “This database is constructed by multiple, possibly distrusting participants and is secured using cryptography so that every entry can be audited and verified.”
The consensus protocol is the center of the blockchain based system as it is the mechanism that creates the ledger and maintains the legitimacy of the database. In evaluating different consensus protocols, it is important to assess different dimensions such as scalability; latency; costs; privacy and reliability. The reliability is the likelihood that the distributed consensus will produce the correct output in the presence of faults. The objective of the project is to develop a framework to assess the reliability of permissionless blockchain consensus protocols. [Continued…]
Blockchain Interoperability with Deloitte
A major question and area of concern of blockchain within the Enterprise space is the use of blockchains creating vendor lock in and/or leveraging one technology only to find the majority of participants embrace an alternative leading to the need for switching and perhaps creating competitive disadvantage. This is analogous to the early days of the internet when the view was there would be individual Intranets but the challenge was how to enable the individual platforms to interact efficiently and securely.
Project goal / Research question
Research protocols and how easily the consensus method can be modified or changed? Are there any protocols that support pluggable consensus and if so does this create points of vulnerability, failure, or bottlenecks for transaction speed?
What is the future of blockchain for interoperability among individual chains? For example, what is the timeline and likelihood that solutions in Supply Chain, for example, built on Ethereum and Hyperledger will be able to effectively and seamlessly interact? What is the likely timeline for such capabilities?
How to allow different permissioned blockchains which issue keys at different levels (e.g. node/user) to cross-authenticate each other's transactions? How to guarantee data written in one chain as an immutable record are also committed in another chain?
———————————————————————————————————————————————————
The Shipping Industry & Blockchain Interoperability
Authors: Kenny Li (MIT Sloan), Eilon Shalev (MIT Sloan)
Introduction: In this paper, we discuss the definition of interoperability and blockchain interoperability, we identify three interoperability solutions and discuss their risks and risk mitigation methods, and we provide a market landscape of the shipping industry, all to suggest a framework for addressing interoperability issues. This paper serves as an initial approach to blockchain interoperability from both tech and business perspectives, and more research should accompany this paper to assess the challenges and solutions for blockchain interoperability in other industries, as well as further the research in the shipping industry.
Utreexo Wallet with DG
One of the biggest challenges in scaling Bitcoin mass adoption is the current complexity involved in running a full node. Installing a full node requires significant storage space and can be difficult to run for a user with no computer science experience. The DCI is working on a project, Utreexo, to reduce the storage needs for full nodes, which could enable full nodes to run on smartphones.
Project goal / Research question
Understand the technical underlying aspects of Utreexo and analyze potential benefits
Build a Utreexo Wallet
———————————————————————————————————————————————————
Authors: Benjamin Celermajer, Nicholas Swindell (Northeastern), Will Lopez-Cordero (MIT)
Executive Summary: Cryptographic accumulators have been explored for decades, but in Bitcoin’s 10 year existence, no viable solution has been identified to apply accumulators to produce a representation of the Bitcoin current state and reduce the data requirements of nodes. The primary reason for this is the need for proofs to identify membership to the accumulator, bridge nodes to communicate with non accumulator aware transactions and updating proofs in the accumulator as the state changes. UTreeXO is a solution developed by Tadge Dryja of the MIT Media Lab’s Digital Currency Initiative that has designed a solution that seemingly has met a lot of these requirements in an efficient way.
UTreeXO is a dynamic hash based solution to reducing the data requirements of running a fully validating UTXO blockchain node (e.g. Bitcoin). Through a novel approach to swaping deleted leaves or branches with new leaves and branches within Merkle Trees, UTreeXO manages to reduce a Bitcoin full node data requirements from 3GB to under 1KB.
If Bitcoin full nodes can be run in under 1KB it significantly improves the ability of users to run their own full node on mobile devices, rather than downloading SPV wallets or third party provider wallets. This has significant implications for the distribution and decentralization of UTXO blockchains, with the potential to attract thousands of customers that otherwise would not have owned and operated full nodes. Further, by owning and operating a full node, users will benefit from improved security and privacy when compared to SPV or third party wallets.
It is worth noting that UTreeXO is still a code in development. There are significant hurdles that are required to be overcome before it is operational and functioning to its potential. Some of these include the existence of multiple bridge nodes to protect the network, the existence of many UTreeXO aware nodes to fully benefit from storing proofs, increased peer review of the UTreeXO code and greater stability of the code (still many improvements that can be made).
Stablecoins, Decentralized Exchange and Security Tokens with Fidelity
Stablecoins, decentralized exchange and security tokens have recently emerged as new promising applications in the crypto ecosystem. Research on the topic with Fidelity experts.
Project goal / Research question
Perform a comprehensive industry primer for each of these topics, which should include:
Definition, market size and industry trends
Major players and competitive landscape
Implementation designs
Identify and analyze successful use cases for each of these topics
———————————————————————————————————————————————————
Tokenized Securities & Commercial Real Estate
Authors: Julie Smith (MIT), Manasi Vora, CFA , Dr. Hugo Benedetti (MIT), Kenta Yoshida (MIT), Zev Vogel, CFA
Executive Summary: The following research investigates the application of security tokenization to commercial real estate assets. Primary research through interviews was conducted to uncover some of the most salient use cases and blockchain benefits for the space. The report explores three domains of blockchain application to real estate: (1) the application of blockchain to securities issuance and trading, (2) the application of blockchain to the real estate investment value chain, and (3) the application of blockchain to the representation of the physical assets themselves. Overall, we find that the value creation provided by tokenization can come in several layers, with some standalone benefits emerging by applying tokenization to each of the three domains in isolation. However, significant synergies can arise from combining these layers. As integration increases, additional features become possible. Our conclusion offers a general framework that can be used to perform future research on the tokenization of other types of assets and their related securities.
This research was conducted as a part of the MIT Digital Currency Initiative and was sponsored by Fidelity Center for Applied Technology (FCAT). The authors take full responsibility for the content and views in this paper.
The Economics of Mining with Fidelity
The economics of mining are quite complex. On one side of the equation we have costs that include hardware, and electricity; on the other side we have income in the form of block rewards and transaction fees. The income side of the equation is particularly interesting because, for many cryptocurrencies, the block reward will eventually disappear. This evolution of the block reward means that a combination of falling costs, increasing fees, and increasing asset prices will need to keep miners incentivized. Moreover, it is important to consider the energy consumption of cryptocurrency mining and potential synergies with clean energy production in the long term.
Project goal / Research question
Major Part: Conduct research and create models for fee market and asset price evolution over time to maintain sustainability for miners:
A model for Bitcoin taking into account the fee market, BTC price, and falling block reward. What conditions could lead to a collapse?
A generalized model for other assets.
How far could costs be pushed down?
Identify and analyze successful use cases for each of these topics
Minor Part: Review existing research on energy consumption at global scale and sustainability of cryptocurrency mining.
———————————————————————————————————————————————————
Authors: Sacha Ghebali (MIT), Kiranmayi Reddy Muntha (MIT), Yue Wu (MIT)
Abstract: The economics of mining Bitcoin are investigated from the perspective of the miner. First, the profitability of the entire ecosystem is studied. For this, global estimates of hardware price, electricity rates, depreciation expenses, and mining rewards are derived and the global profits arising from mining Bitcoin are calculated. According to the estimates used, Bitcoin mining has not been profitable since mid 2018, even with a depreciation schedule as long as 24 months. In addition, the overall hashrate of the Bitcoin network is studied and its relationship to the BTC/USD exchange price is analysed. It is observed that there is a lag between the hashrate and the exchange price of the order of about 200 days. Moreover, a linear model is constructed to reproduce the hashrate from lagged information on the top-pools mean hashrate and the BTC/USD exchange price.
Decentralized Cryptographic Darkpool with Fidelity
The economics of mining are quite complex. On one side of the equation we have costs that include hardware, and electricity; on the other side we have income in the form of block rewards and transaction fees. The income side of the equation is particularly interesting because, for many cryptocurrencies, the block reward will eventually disappear. This evolution of the block reward means that a combination of falling costs, increasing fees, and increasing asset prices will need to keep miners incentivized. Moreover, it is important to consider the energy consumption of cryptocurrency mining and potential synergies with clean energy production in the long term.
Users often wish to compute something without harming their privacy by revealing more information than is necessary for the task. A common example that exists in financial markets is when large orders can move the market.
Project goal / Research question
In this project, we will explore creating a “Decentralized Cryptographic Darkpool” which can be operated in the open (all participants seeing all data, or sensitive data hidden behind zero knowledge proofs or multiparty computation), possibly using a blockchain, but removing the problems associated with spoofing and front-running through cryptography.
———————————————————————————————————————————————————
Paper not published
Applications of b_verify with IDB
One of the more promising use cases of blockchain technology involves the development of secure digital registries for property title and smart contracts. This will continue the development of b_verify, an open-source protocol developed by the MIT Media Lab. Together with IDB experts, the working group will focus on identifying potential applications for b_verify.
Project goal / Research question - Research use cases for b_verify
———————————————————————————————————————————————————
Authors: Eric Peña (MIT Sloan)
Excerpt from Executive Summary: This report aims to document the process of use case assessment, business case development and pilot planning of a blockchain-based protocol application for a public sector organization. More specifically, the team focused on building a pilot of the b_verify protocol for a financial inclusion solution on the agricultural credit sector in Peru … The opportunity to use a blockchain based solution in the context of Agrobanco’s situation is clear, however, developing the underlying software infrastructure also involves a non-trivial investment of resources. B_verify provides an opportunity to tackle the challenge of providing Agrobanco with a blockchain based solution without the need to jumpstart a whole network. The effort necessary to create the product is closer to a regular centralized implementation than developing an independent blockchain solution.
Traceability of Agricultural Products in Latin America with IDB
In Latin America and the Caribbean (LAC), 127 million tons of food are lost or wasted every year. 1/3 of total production for human consumption. This phenomenon takes place throughout the supply chain: 28% during production, 17% at storage and transportation, 6% at processing; 21% at distribution, and 28% at consumption.
Project goal / Research question
The goal of the project (working group) is to research the potential of blockchain-based applications to reduce food loss and waste in LAC. The project would work around four areas: innovate applications, policy, knowledge and behavior.
———————————————————————————————————————————————————
Authors: Priya Sampath (MIT) and Rohit Sharma (MIT)
Excerpt from Executive Summary:
The project – Traceability of Agricultural Products in Latin America – was commenced by Inter-American Development Bank (IDB) to evaluate the potential of blockchain technology in improving the traceability of agricultural produce in Latin America, with an aim of reducing the waste that is generated at different points in the supply chain.
As part of the project, we first started looking into the applicability of blockchain as a traceability solution. Our aim was to determine if the technical complexity of blockchain solutions make them too complex for a use case such as traceability. After reviewing a host of literature on the usage of blockchain in supply chain systems and evaluating few real life blockchain-traceability prototypes, we arrived at the conclusion that blockchain as a transparent, immutable and distributed database can be a good tool for improving traceability across food supply chains.
Once we established the case for blockchain as a potential traceability solution, and explored the use case – avocado supply chain in Colombia. This is an extremely scattered, low tech, low trust, complex supply chain with many actors that presents unique challenges for traceability. While we were not able to discover data about food waste and loss at various points of the supply chain, we were able to come up with criteria to identify traceability targets in this supply chain. We suggested warehouses as the starting point, as they are often the first instance of formality in a fragmented supply chain.
Next we created a framework to help IDB think about how they implement the solutions on ground, and the prerequisites and conditions they need to account for, before implementing a solution…
Trusted Oracles for Smart Cities with MAS
There is an increasing interest in DLT. The immutable and distributed nature of DLT makes it useful for potential application in a smart city where there exists a large number of interconnected devices. How can we identify, develop/promote key areas in a smart city such as finance, government services, transportation, energy, healthcare, public safety and education in a sustainable fashion? What are the challenges involved?
Project goal / Research question
Oracles are trusted data feeds that sends information into the Smart Contract, removing the need for Smart Contracts to directly access information outside their network. Oracles are usually supplied by third parties and are authorized by companies that use them.
The dependency on Oracles in Smart Contracts and the security challenges it poses give rise to a potential opportunity in this space. We would like to explore possible ways that can be used to determine the trustworthiness of an Oracle. And how these can be extended to various application verticals given the use of Smart Contract.
How to secure the inputs (oracle trustworthiness) given to these blockchain verticals?
———————————————————————————————————————————————————
Oracle for Smart Cities With Use Case: Parametric Flight Delay Insurance
Authors: James Fok - SFMBA 2019, Mark Adams - MBA 2019, Santhosh, Narayan - MIT EECS MENG 2019, and Thomaz do Nascimento - SFMBA 2019
Excerpt from Executive Summary: Oracles and smart contracts can create and deliver value for parametric insurance by eliminating current transactional frictions and opening up new opportunities. The challenges are both technical and behavioral. The key to success is in navigating these challenges methodically and making the right decisions in system design and specification.
In basic contract law, a judicial system adjudicates contractual disputes and enforces terms of the agreement. Meanwhile, smart contracts are enforced by built-in code or in other words, “code is law.” Smart contracts have the potential to speed up contract execution (i.e. transactions) and empower individuals to become independent from bureaucracies while maintaining the reliability of these institutions.
One potential use-case of these smart contracts is in parametric insurance. Parametric insurance, unlike traditional insurance, revolves around a pre-agreed payout based on projected loss and probability that is automatically triggered when a parameter is met (e.g. flight delay) based on inputs from a trusted source. It has logical applications in the flight delay use case because it can easily be purchased digitally, separately or bundled with tickets, and there are limited hassles to claim the benefits since it’s paid out to travelers as soon as the delay is confirmed. Thanks to logical alignment, it also stands to benefit greatly from the use of smart contracts, which is why this was selected as our focus use case in collaboration with MAS…
Token Quality Based on Source Code with MAS
Source code may determine how a particular software will behave. Similarly, smart contract may determine how tokens are issued, traded, and retired. Could we explore the possibility of classifying token quality based on source code?
Project goal / Research question
Identify source code features and highlight differences between source code of utility token and security tokens
Identify source code features to determine token quality (e.g. number and frequency of commits to github, number of contributors, time/comments before merging pull request) and formalize signals about quality
Elaborate a technical framework to assess token quality
———————————————————————————————————————————————————
Cryptoasset Quality Based on Source Code and Developer Dynamics
Authors: Yashashree Kokje (MIT), Océane Boulais (MIT)
Abstract: With interest in cryptocurrencies booming since the introduction of Bitcoin in 2008 [1], billions of dollars have been invested in the vast landscape of tokens and cryptocurrencies. This enthusiasm also comes with a number of scams that prey on lack of technical understanding in order to exploit the waves of hype in this space. We build on prior research by looking into open-source repositories to give insight into varying dimensions of quality. By looking at a cryptocurrencies’ foundation from the perspective of code base, we investigate developer dynamic.
For our definition of cryptocurrency health, we have chosen to exclude monetary value and other associated characteristics such as initial distribution, current supply, max supply. Instead, we gather Github metadata, which provides information associated with github repositories of open-source cryptocurrencies and tokens [2]. Building on previous work around implementation of cryptographically-secure code [3] , we infer a set of patterns that categorize different dimensions of a cryptocurrency project. Many cryptocurrencies list tokens that are built on existing cryptocurrencies, the most common of those being ERC20 tokens built on Ethereum. We assess only those tokens with which have files that are publically available. Upon inferring these patterns for what constitutes a ‘quality’ token, we use the defined features as signals to train our machine learning model.
Social Capital and Blockchain with NRI
To better understand and improve the quality of our lives, there has been a need for measuring non-economic capital such as social capital and natural capital in addition to economic capital. Quantifying non-economic capital, however, is not easy and has not been widespread. Researchers at the MIT Media Lab and NRI have proposed a system where any individual can start measuring their social capital, specifically focusing on friendship, turning them into a real-world asset that enables improving their economic well-being, while preserving individual privacy and security. In order to implement such system, blockchain technology offers great potential due to its decentralized consensus and accessibility. Research on this topic with NRI.
Project goal / Research question
Research on the potential of applying cryptokernel tools to measure friendship. How would such a system work?
Build a simple demo using cryptokernel (and optionally lit)
———————————————————————————————————————————————————
Authors: Ambuj Jhunjhunwala (MIT), Keita Zenki (MIT)
Background: The report tries to address a premise that there are many people in remote areas/ from economically weaker sections who are creditworthy. Latest world bank data shows that over 3 Billion people around the world remain unbanked. The unbanked do not have adequate availability to formal means of finance and many people do not have records that allow them to prove their credit worthiness. It is a known fact that financial inclusion uplifts the quality of life of people and increases their opportunities to gain livelihood. However, the current methods of finance are not suitable for people from low economic backgrounds and many first time bankers/borrowers. The preponderance of technology, mobile phones and internet has created new means to onboard people who have not been able to participate in the formal economy so far.