Blockchains & Digital Currencies
A working knowledge of algebra and 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, the practice of ICOs, the cryptocurrency market,fiscal and legal issues, several use cases.
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.
While some readings will be suggested, there is no required textbook for the course.
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
- From negative rates to cryptocurrencies
- The three pillars of a digital monetary system: ledger, transactions, management
- Basics of Internet Technology, 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
Lesson 4: Understanding Bitcoin
- Pseudonymity, Scripts, Fees
- Double-spending risk and Proof of Work
- Block Structure and the business of Mining
Lesson 5: The Cryptocurrency Market
- Cryptocurrency time series, investment strategies and funds
- The different cryptos: Monero, Z-cash, IOTA…
- New roles for intermediaries: wallets and key management
- Cryptocurrencies issued by banks (ripple, USC) and Central Banks
Lesson 6: Ethereum and Smart Contracts
- From paper contracts to self-executing code
- Ethereum accounts and Smart Contracts
- Potential and risk: The DAO example
- The creation of Tokens
Lesson 7: Hands-on with blockchain and smart contracts
- Wallets and transactions
- Blockchain scan
- Notarization contracts, Tokens and atomic swaps
Lesson 9: Private Blockchains
- Design and Motivations
- The private Smart Contracts (R3 CORDA)
- Bilateral Ledgers: advantages and limitations
- The JP Morgan Ethereum style. A bridge between public and private.
Lesson 10: Business Applications
- Tokenization and Company’s money
- IOT and AI applications. Notarization
- Social and Mutual Networks
- Supply Chain. Transparency and Quality Assurance
Lesson 11: Decentralizing Financial Services
- ERC token standards for stocks and bonds
- Decentralized order books and exchanges
- Transforming Custodians and Depositories
- Digitalizing Trade Finance
Lesson 12: Initial Coin Offerings
- How they work
- The different types of tokens
- Legal and regulatory approaches
- The Good, the Bad and the Ugly. EOS, TEZOs… the famous ICOs.
Lesson 13: Fiscal, Legal, and Regulatory issues
- The status of cryptos: money? Commodities? Securities?
- Different approaches for different jurisdictions
- Regulating tech. Smart Contracts and the Law
Lesson 14: 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
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.
Lessons will be held either with projected slides and on the whiteboard. Few lessons will require an online computer with some software (see Requested Material).
Students will be evaluated based on an in-class final, consisting of theoretical questions and exercises. An optional project work will be proposed to students.
Class participation is a mandatory component of the course grade.