Knowledge unlocks truth

The Blockchain Intelligence Academy (BIA) relies on the combined research might of ICI Bucharest and ChainArgos. The relentless pursuit of truth is deeply embedded in our DNA, and is the reason our partners have uncovered some of the biggest frauds and deficiencies in the crypto-asset and stablecoin industry.

The Pursuit of Knowledge in Service of the Truth

Intellectual curiosity drives everything we do. Our team contributes regularly to academic and scholarly endeavors to further research and development of blockchain technology in areas such as computer science, financial mathematics and law, publishing in peer-reviewed and highly-respected publications and journals, while collaborating with academics and industry leaders.

Academic Work

Our management team regularly collaborates with academics from some of the world’s most renowned universities and ChainArgos CEO Jonathan Reiter maintains his own SSRN page with academic pre-prints here.

By Ben Charoenwong, National University of Singapore – Department of Finance, Robert M. Kirby, University of Utah – School of Computing and Scientific Computing and Imaging Institute and Jonathan Reiter, ChainArgos

We examine the question of whether it is possible to create a decentralized and capital-efficient stablecoin using smart contracts that algorithmically trade to maintain stability.

We explore what new functionality decentralized stablecoins offer and address several outstanding conjectures in the space. We find that such an algorithmic stablecoin cannot be provably stable.

Finally, we also provide a formal exposition of the workings of Central Bank Digital Currencies, connect this to the space of possible stablecoin designs and then outline several striking regulatory similarities between money-market funds and working stablecoins.

By Ben Charoenwong, National University of Singapore – Department of Finance, Robert M. Kirby, University of Utah – School of Computing and Scientific Computing and Imaging Institute and Jonathan Reiter, ChainArgos

Decentralized Finance (DeFi) aims to use advancements in both computation and cryptography to tackle standard economic problems. It must, therefore, operate within the intersection of constraints required by both the computer science and economic domains.

We explore a foundational question at the junction of those fields: is it possible to synthesize variable market-clearing risk-free yield for native tokens via smart contracts?

We show using a stylized model representing a large class of existing decentralized consensus algorithms that this is not possible. This places strong bounds on what decentralized financial products can be built and constrains the shape of future developments in DeFi. Among other limitations, our results reveal that markets in DeFi are incomplete.

By Jonathan Reiter, ChainArgos

We examine the distribution of realized Bitcoin daily log-returns and find significantly-thin tails.

From there we construct a simple connection back to traditional volatility modelling.

And then we discuss how this connection can serve as a foundation to leverage existing derivative quant research to explore cryptocurrency market dynamics.

These results also suggest a connection between cryptocurrency exchange structure and trading dynamics.

By Jonathan Reiter, ChainArgos

We explore the properties of a product, the so-called “anti-stablecoin,” inspired by a Twitter comment from a well-known cryptocurrency fund manager. This begins by providing a clear definition for such a product and then work several of its properties.

We then sketch a general proof that anti-stablecoins require more capital than stablecoins while also constructing an anti-stablecoin design that requires an arbitrarily small quantum of incremental capital to work indefinitely.

The main contribution here is to show that odd asymmetries exist between stablecoins and anti-stablecoins that feel foreign relative to traditional financial math.

By Jonathan Reiter, ChainArgos

We investigate how no-arbitrage conditions from finance impact the applicability of conventional distributed-computing tools in DeFi.

Many synchronization proto- cols resemble derivative structures and are therefore priceable using standard techniques.

By applying these techniques to stylized synchronization protocols we can see how dynamic-replication trading imposes severe limits on what can be achieved.

What we find are emergent conflicts of interest when financially-motivated trading counterparties are also participants in a cooperative recordkeeping system.

Policy Work

Our management team regularly contributes to policy work, to help in the development of effective regulatory frameworks for crypto-assets and stablecoins.

There is no question that financial markets and regulators are currently working to manage turmoil in the cryptocurrency space.

Unfortunately, a recent string of high-profile bankruptcies and collapses of over 20 “stablecoins” whose peak market capitalisations were collectively over US$26 billion ($34.4 billion) has exposed many problems in the nascent ecosystem. Even one of the largest remaining stablecoin issuers — Binance — admitted to pooling company and client assets in issuing their stablecoins after the publication of a report written by one of the authors of this article.

Read more at the National University of Singapore’s BizBeat (no paywall), or click on the button below for The Edge.

The recent collapse of the stablecoin TerraUSD (UST) unveiled a hard truth—decentralised stablecoins are not stable.

At the outset, stablecoins are cryptocurrency that aim to hold a stable price against some target asset. The most common target is $1, always redeemable at any point. Proponents of stablecoins assert they will reduce transaction costs and make economic activities more efficient. In particular, the most desirable form of stablecoin is trustless and capital-efficient: it depends only on code to maintain the target price with no trusted party and requires less than full backing.

Read more at the National University of Singapore’s BizBeat (no paywall), or click on the button below for The Edge.

As much as cryptocurrency and decentralised finance (DeFi) markets had giveth, this year they taketh away. Market participants were rudely awakened to the fact that the decentralised utopia envisioned in Satoshi Nakamoto’s 2008 writing on bitcoin was simply an unrealistic dream. Investors walked in, lured by incentives and computer code; they walked out, with displaced trust.