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Blockchain, Cryptocurrency, and Artificial Intelligence in Finance

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Fintech with Artificial Intelligence, Big Data, and Blockchain

Part of the book series: Blockchain Technologies ((BT))

Abstract

This chapter describes the principles of blockchain, cryptocurrency, and artificial intelligence (AI) and their applications to the financial sector. We first discuss blockchain, and discuss cryptocurrency, the best-known application of blockchain. We present the question of whether a cryptocurrency is a currency or an asset and whether it can be a new safe haven asset. We summarize the controversy regarding the issuance of a central bank digital currency (CBDC). We argue that digital currencies only show the potential to inject liquidity into an economy during market stress. Additionally, most of the recognized advantages of blockchain applications relate to two concepts: decentralization and consensus. Blockchain’s decentralization can be used to democratize banking services, corporate governance, and the real estate industry. Finally, we present the strengths of and concerns in using AI technologies in banking, lending platforms, and asset management, bearing in mind the most recently developed applications in these areas. This chapter provides a contribution to the literature that incorporates both theory and practice in blockchain, presenting a detailed review of performances and limitations of AI techniques in finance, including recent publications relating to the COVID-19 pandemic, CBDC, and alternative data.

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Notes

  1. 1.

    M: money supply, V: money velocity, P: GDP deflator, and Y: real GDP.

  2. 2.

    First, they sort the returns of individual cryptocurrencies into quintiles given the factor. Then, they track the returns of each portfolio in the following week and calculate the excess return over the risk-free rate. Next, they form long-short strategy based on the difference between the fifth and first quintiles.

  3. 3.

    The researchers claim that Bitcoin is not a safe haven asset against U.S. stocks because in bearish stock markets, it is positive and statistically significantly correlated with them.

  4. 4.

    The impossible trinity (also known as the impossible trilemma) is a concept regarding the value of a conventional currency in international economics. The trilemma is that it is impossible to simultaneously achieve three goals: a fixed foreign exchange rate, free movement of capital, and independent monetary policy.

  5. 5.

    https://digiconomist.net/bitcoin-sustainability-report-01-2018.

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Acknowledgements

Special thanks are due to Dhananjay Singh (Series Editor), Loyola D’Silva, Sudhany Karthick, Karthik Raj Selvaraj, and anonymous referees. An and Choi are grateful for the research support from Yonsei University and Ewha Womans University, respectively. This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2019S1A5A2A03053680). We thank Jaysang Ahn, Ethan Jaesuh Kim, Sabin Kim, SaMin Kim, Young Jin Kim, Hyun Jun Lee, and Jaehyun Rhee for their excellent research assistance. All errors are of authors’ own.

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Authors and Affiliations

  1. School of Economics, Yonsei University, 50 Yonsei-ro, Seodaemun-gu, Seoul, 03722, South Korea

    Yun Joo An

  2. College of Business Administration, Ewha Womans University, 52-Ewhayeodae-gil, Seodaemun-gu, Seoul, 03760, South Korea

    Paul Moon Sub Choi

  3. Department of Business Management, The State University of New York, 119-2 Songdo Moonhwa-ro, Yeonsu-gu, Incheon, 21985, South Korea

    Seth H. Huang

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  1. Yun Joo An
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Correspondence to Paul Moon Sub Choi .

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  1. Ewha Womans University, Seoul, Korea (Republic of)

    Paul Moon Sub Choi

  2. The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong

    Seth H. Huang

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An, Y.J., Choi, P.M.S., Huang, S.H. (2021). Blockchain, Cryptocurrency, and Artificial Intelligence in Finance. In: Choi, P.M.S., Huang, S.H. (eds) Fintech with Artificial Intelligence, Big Data, and Blockchain. Blockchain Technologies. Springer, Singapore. https://doi.org/10.1007/978-981-33-6137-9_1

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