Blockchains & Digital Currencies

Prerequisites 
A working knowledge of algebra and basic coding, although no advanced calculus or programming is required.

Description / Program
The course provides the foundations on blockchain technology, from public protocols such as Bitcoin and Ethereum to enterprise solutions, needed to understand and develop business applications. We explain the transition from traditional monetary systems to digital currencies, the use of smart contracts for financial agreements, DeFi, Stable Coins, NFTs, CBDCs, the cryptocurrency market,fiscal and legal issues. Several use cases are described.

Requested Material

A set of handouts will be delivered.

The students will use Excel and a user friendly open-source GUI for a Blockchain network.

The internet will be used often also during lectures.

Readings/Textbooks

While some readings will be suggested, there is no required textbook for the course.

Program

Lesson 1: Current Monetary and Payment Systems

• Commercial bank money and deposits. Money creation.
• Correspondent banking, international payments and SWIFT.
• Settlement finality, RTGS, Netting, Reconciliation.
• Central bank money and the TARGET2 example

Lesson 2: Introduction to Cryptocurrencies

• The three pillars of a digital monetary system: ledger, transactions, management
• Internet Technology and Evolution to Web 3
• Distributed Databases and Computing
• Fault-tolerance and Game-theory for Consensus

Lesson 3: Foundations of Blockchain Technology

• Financial cryptography: hashing
• Asymmetric cryptography and Digital signature
• A Cryptocurrency transaction
• Exercises

Lesson 4: Understanding Bitcoin and Alternatives

• Pseudonymity, Scripts, Fees
• Double-spending risk and Proof of Work
• Block Structure and the business of Mining
• Proof of Stake

Lesson 5: Ethereum and Smart Contracts

• From paper contracts to self-executing code
• Ethereum accounts and Smart Contracts
• The creation of Tokens
• Layer 2 and Side Chains

Lesson 6: Hands-on with blockchain and smart contracts

• Wallets and transactions
• Notarization contracts
• Creating Tokens and Atomic swaps
• Exercises

Lesson 7: The Cryptocurrency Market

• Cryptocurrency data
• Project Financing
• The different kinds of cryptos
• Tokenomics

Lesson 8: Beyond Cryptos

• Stable Coins
• NFTs
• Tokenized Deposits
• CBDCs and the Future of Money.

Lesson 9: DeFI

• DEX
• Borrowing and Lending
• Algorithmic Stable Coins
• Decentralized Governance

Lesson 10: Privacy in Blockchains

• Private Blockchains - Design and Motivations
• The private Smart Contracts (R3 CORDA)
• Privacy in Public Blockchains
• Monero and Zcash approaches

Lesson 11: Enterprise Applications

• Tokenization and Company’s money
• IOT and AI applications. Notarization
• Social and Mutual Networks
• Supply Chain. Transparency and Quality Assurance

Lesson 12: Decentralizing Financial Services

• ERC token standards for stocks and bonds
• Decentralized order books and exchanges
• Transforming Custodians and Depositories
• Digitalizing Trade Finance

Lesson 13: A detailed Case study: advanced financial products

• The current problems of derivatives and collateral
• Smart Contracts as a solution to risks and costs
• Transforming Central Counterparties
• Data providers and oracle technology

Lesson 14: Fiscal, Legal, and Regulatory issues

• Cryptocurrencies and Taxes
• European MICA regulation. The US Howey Test
• Regulating tech. Smart Contracts and the Law
• Cybersecurity

The course aims to forge a solid knowledge of cryptocurrencies and the underlying blockchain technology, from foundations to applications. The student will confront practical explanations and exercises giving them the right perspective to understand and employ this innovation in different business areas, with focus on finance.

In presence

Lessons will be held either with projected slides and on the whiteboard. Few lessons will require an online computer.

Students will be evaluated based on an in-class final, consisting of open questions.

Class participation is a component of the course grade.