Topics in Finance: Blockchain & Cryptocurrencies

Winter 2020

This course constitutes an introduction to blockchain and cryptocurrencies. We use Bitcoin as a benchmark to study blockchain's structure and associated economic issues. Lectures will provide historical context, critically assess Bitcoin's economic value proposition and highlight economic limitations. We pay special attention to Proof-of-Work (PoW), Bitcoin's consensus protocol. We discuss both the need for a consensus protocol and whether PoW succeeds in satisfying that need. The course then transitions to a discussion of leading alternatives to Bitcoin. We focus upon two features of some leading Bitcoin alternatives: Proof-of-Stake (PoS) and smart contracts. We discuss PoS, a consensus protocol, conceptually and contrast PoS with PoW. We then discuss PoS more concretely through a discussion of a leading blockchain platform that employs it. Next, we discuss smart contracts via a discussion of Ethereum, the leading permissionless smart contract blockchain. Lectures discuss the economic value proposition offered by smart contracts but also stress practical limitations. For concreteness, we examine an existing smart contract on the Ethereum blockchain. The final portion of the course introduces students to the blockchain ecosystem more broadly. Topics of discussion are subject to change but potential topics include Basic Attention Token, Ripple, Tether and IBM Blockchain.

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