No Access

Navigating the labyrinth of smart contract financial derivatives: Unraveling technical detail and application

Ekansh Agarwal

NMIMS Mukesh Patel School of Technology Management & Engineering, Mumbai, Maharashtra, India

E-mail Address: onlyforwork15@gmail.com

E-mail Address: ekansh.agarwal01@nmims.edu.in

Corresponding author.

Search for more papers by this author

Manav Singh

NMIMS Mukesh Patel School of Technology Management & Engineering, Mumbai, Maharashtra, India

Search for more papers by this author

Naman Chawre

NMIMS Mukesh Patel School of Technology Management & Engineering, Mumbai, Maharashtra, India

Search for more papers by this author

Aum Sampat

NMIMS Mukesh Patel School of Technology Management & Engineering, Mumbai, Maharashtra, India

Search for more papers by this author

, and

Aparna Sharma

School of Liberal Arts, Noida International University, Noida, Uttar Pradesh, India

Search for more papers by this author

https://doi.org/10.1142/S2424786324420052Cited by:1 (Source: Crossref)

This article is part of the issue:

Special Issue on “Metaverse and the Future of Finance”
Guest Editors: Ruchika Gupta, Puneet Kumar and Neeraj Saxena

Abstract

This research paper delves into the intricate world of smart contract derivatives, aiming to unravel the technical intricacies and explore their applications. Smart contract derivatives represent a burgeoning intersection of blockchain technology and financial instruments, providing decentralized and automated solutions for derivative trading. The paper navigates through the complex landscape of smart contract derivatives, addressing both the technical aspects of their implementation and the diverse range of applications they unlock. Through a comprehensive review of existing literature, case studies, and real-world examples, this research aims to provide a holistic understanding of the challenges, opportunities, and implications associated with smart contract derivatives. By comprehensively addressing both the technical intricacies and practical applications of smart contract derivatives, this study contributes valuable insights into the rapidly evolving field of decentralized finance.

Keywords:

References

Aithal, PS [2023] Advances and new research opportunities in quantum computing technology by integrating it with other ICCT underlying technologies, International Journal of Case Studies in Business, IT, and Education (IJCSBE), 7(3), 314–358, https://doi.org/https://doi.org/10.5281/zenodo.8326506. Google Scholar
Alharby, M, A Aldweesh and A van Moorsel [2018] Blockchain-based smart contracts: A systematic mapping study of academic research, International Conference on Cloud Computing, Big Data and Blockchain, Vol. 1, pp. 56–68. Google Scholar
Allioui, H and Y Mourdi [2023] Exploring the full potentials of IoT for better financial growth and stability: A comprehensive survey, Sensors 23(19), 8015, https://doi.org/https://doi.org/10.3390/s23198015. Crossref, Google Scholar
Bayón, PS [2019] Key legal issues surrounding smart contract applications, KLRI Journal of Law and Legislation, 9(1), 63–91. https://ssrn.com/abstract=3525778 or http://dx.doi.org/10.2139/ssrn.3525778. Google Scholar
Bhardwaj, A, SBH Shah, A Shankar, M Alazab, M Kumar and TR Gadekallu [2021] Penetration testing framework for smart contract blockchain, Peer-to-Peer Networking and Applications 14, 2635–2650, https://doi.org/10.1007/s12083-020-00991-6 Crossref, Google Scholar
Biryukov, A, D Khovratovich and S Tikhomirov [2017] Findel: Secure derivative contracts for Ethereum23. In eds. M. Brenner, K. Rohloff, J. Bonneau, A. Miller, P. Y. A. Ryan, V. Teague, A. Bracciali, M. Sala, F. Pintore and M. Jakobsson (Eds.), Financial Cryptography and Data Security: FC 2017 International Workshops, WAHC, BITCOIN, VOTING, WTSC, and TA, Sliema, Malta, April 7, 2017, Springer, pp. 453–467. Crossref, Google Scholar
Buterin, V (2014). Ethereum white paper: A next generation smart contract & decentralized application platform1, Ethereum.org. https://ethereum.org/en/whitepaper/. Google Scholar
Clack, CD and G Vanca [2018] Temporal aspects of smart contracts for financial derivatives1. In eds. T. Margaria and B. Steffen , Leveraging Applications of Formal Methods, Verification and Validation. Industrial Practice, Springer, pp. 339–355. Crossref, Google Scholar
Diego, O and O John [2014] In search of an understandable consensus algorithm. 2014 USENIX Annual Technical Conference (USENIX ATC 14), USENIX Association, Philadelphia, PA, pp. 305–319. Google Scholar
Fatima, S [2022] Impact of COVID-19 pandemic on the microfinance sector in India. Globus An International Journal of Management & IT, 14(1), 25–27. Crossref, Google Scholar
Flaczyk, C [2019] Technology, the changing nature of disputes, and the future of equitable principles in Canadian contract law, Canadian Journal of Law and Technology, 17(2), 144–193. Google Scholar
Fries, CP and P Kohl-Landgraf and B Paffen, S Weddigen and L Del Re, W Schütte, D Bacher, R Declara, D Eichsteller, F Weichand, M Streubel (2019). Implementing a financial derivative as smart contract (February 25, 2019). Available at SSRN: https://ssrn.com/abstract=3342785 or http://dx.doi.org/10.2139/ssrn.3342785. Google Scholar
Griggs, KN, O Ossipova, CP Kohlios, AN Baccarini, EA Howson and T Hayajneh [2018] Healthcare blockchain system using smart contracts for secure automated remote patient monitoring, Journal of Medical Systems, 42(7), 130. Crossref, Google Scholar
Grishchenko, I, M Maffei and C Schneidewind [2018] Foundations and tools for the static analysis of Ethereum smart contracts. In eds. H. Chockler and G. Weissenbacher , Computer Aided Verification, Springer, pp. 128–148. Crossref, Google Scholar
Gupta, T and S Khan [2023] Education and international collaboration in the digital age, Globus Journal of Progressive Education, 13(1), 79–87. Google Scholar
Hare, LR and K O’Neill [2000] Effectiveness and efficiency in small academic peer groups: A case study [Abstract from Sociological Abstracts]. Small Group Research, 31(1), 24–49. Crossref, Google Scholar
Hewa, TM, Y Hu, M Liyanage, S Kanhare and M Ylianttila [2021] Survey on blockchain based smart contracts: Technical aspects and future research. IEEE Access, 9, 87643–87668. Crossref, Google Scholar
Incutti, V (2023). Streamlining derivative trading: Enhanced liquidity and risk mitigation with blockchain-based tokenised collateral management (Master’s thesis). University College London. Google Scholar
Kaousar Nassr, I [2020] The tokenisation of assets and potential implications for financial markets, OECD Blockchain Policy Series, 1, 1–56. Google Scholar
Karantias, K, A Kiayias and D Zindros (2020). Smart contract derivatives, Lecture Notes in Computer Science, 1, 1–19. Google Scholar
Kiayias, A, A Polydouri and D Zindros (2021). The velvet path to superlight blockchain clients. Proceedings of the ACM on Asia Conference on Computer and Communications Security (ASIA CCS), pp. 205–218. Crossref, Google Scholar
Kosba, A, A Miller, E Shi, Z Wen and C Papamanthou [2016] Hawk: The blockchain model of cryptography and privacy-preserving smart contracts. 2016 IEEE Symposium on Security and Privacy (SP), IEEE, pp. 839–858. Crossref, Google Scholar
Kumar, A and R Singh [2020] A study of the impact of demonetization on the Indian economy, International Journal of Research in Commerce, Economics and Management, 10(1), 1–8. http://ijrcm.org.in/download.php?name=ijrcm-1-vol-10_issue-1-art-1.pdf&path=uploaddata/ijrcm-1-vol-10_issue-1-art-1.pdf. Google Scholar
Leka, E, B Selimi and L Lamani [2019] Systematic literature review of blockchain applications: Smart contracts. Proceedings of the 2019 IEEE International Conference on Information Technologies, pp. 221–226. Crossref, Google Scholar
Li, X, X Wu, X Pei and Z Yao [2019] Tokenization: Open asset protocol on blockchain1. 2019 IEEE 2nd International Conference on Information and Computer Technologies, pp. 204–209. Crossref, Google Scholar
Liu, J and Z Liu [2019] A survey on security verification of blockchain smart contracts, IEEE Access 7, 77894–77904. Crossref, Google Scholar
Lone, AH and R Naaz [2021] Applicability of Blockchain smart contracts in securing Internet and IoT: A systematic literature review, Computer Science Review, 39, 100319. Crossref, Google Scholar
Macrinici, D, C Cartofeanu and S Gao [2018] Smart contract applications within blockchain technology: A systematic mapping study. Telematics and Informatics, 35(8), 2337–2354, https://doi.org/10.1016/j.tele.2018.10.0043 Crossref, Google Scholar
Massimo, M (2017). How the business model must change to make blockchain work in financial markets: A detailed example on derivatives, two years later, SSRN, doi: 10.2139/ssrn.3075540. Google Scholar
Mik, E [2017] The legal challenges of smart contracts. Computer Law & Security Review, 33(6), 761–771, https://doi.org/10.1016/j.clsr.2017.03.016 Google Scholar
Nayudori, B, R Kummari, V Kunareddy, NK Vunnam [2023] Securing data communication using blockchain, Cosmos Journal of Engineering & Technology, 13(1), 95–97. Crossref, Google Scholar
Omar, IA, HR Hasan, R Jayaraman, K Salah and M Omar [2021] Implementing decentralized auctions using blockchain smart contracts, Technological Forecasting and Social Change, 168, 120739. Crossref, Google Scholar
Rehman, AA and K Alharthi [2016] An introduction to research paradigms, International Journal of Educational Investigations, 3, 2410–3446. Google Scholar
Rouhani, S and R Deters [2019] Security, performance, and applications of smart contracts: A systematic survey, IEEE Access, 7, 50759–50779, https://doi.org/10.1109/ACCESS.2019.29110312 Crossref, Google Scholar
Sheth, A and H Subramanian [2019] Blockchain and contract theory: Modelling smart contracts using insurance markets, Managerial Finance 46(6), 803–814, https://doi.org/10.1108/MF-10-2018-0510 Crossref, Google Scholar
Singh, MK, S Tripathi and P Singh [2022] Cybersecurity and data privacy, Cosmos An International Journal of Management, 11(2), 01–04. Google Scholar
Subramanian, H [2020] Security tokens: Architecture, smart contract applications and illustrations using SAFE1, Managerial Finance, 46(9), 1137–1152, https://doi.org/10.1108/MF-09-2018-04672 Google Scholar
Tian, Y, P Adriaens, RE Minchin, C Chang, Z Lu and C Qi [2021] Asset tokenization: A blockchain solution to financing infrastructure in emerging markets and developing economies1, SSRN Electronic Journal, https://doi.org/10.2139/ssrn.3837703 Google Scholar
Trivedi, S and R Malik (2022). Blockchain technology as an emerging technology in the insurance market. Proceedings of the International Conference on Business and Social Sciences, Vol. 1, pp. 1–15. Crossref, Google Scholar
Vacca, A, A Di Sorbo, CA Visaggio and G Canfora [2020] A systematic literature review of blockchain and smart contract development: Techniques, tools, and open challenges, The Journal of Systems & Software, 174(7), 110891. Google Scholar
Wang, S, L Ouyang, Y Yuan, X Ni, X Han and FY Wang [2019] Blockchain-enabled smart contracts: Architecture, applications, and future trends. IEEE Transactions on Systems, Man, and Cybernetics: Systems, 49(11), 2266–2277. Crossref, Google Scholar
Zhang, F, E Cecchetti, K Croman, A Juels and E Shi [2016] Town crier: An authenticated data feed for smart contracts. Proceedings of the 2016 ACM SIGSAC Conference on Computer and Communications Security, Association for Computing Machinery, New York, pp. 270–282. Crossref, Google Scholar