Preview of Activities

Quiz

This assessment will count towards your individual participation grade

Case

The Robinhood Case is due this week

Group Presentations

The assigned group(s) will present their case findings

Session 10

Digital Assets + Blockchain

At the end of this week, you will be able to:

  1. Compare and contrast the features of traditional currency and digital currency.
  2. Describe the clearing and settlement process and the role of central counterparties.
  3. In the context of transaction settlement, describe the features of distributed ledger technology that, if applied perfectly, eliminate the need for a central counterparty.
  4. Identify and describe several new business models in decentralized finance that may utilize blockchain technology.



Digital currencies: how do they work and what makes them different?

Bank of England, Dan Nixon & Robleh Ali

Central Counterparty - CCP … in simple terms

Deutsche Börse Group & explainity.com

Blockchain Explained

IBM Cloud & Sai Vennam

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Blockchain disruption and decentralized finance - The rise of decentralized business models

Blockchain technology can reduce transaction costs, generate distributed trust, and empower decentralized platforms, potentially becoming a new foundation for decentralized business models.
June 2020, Yan Chen & Cristiano Bellavitis

How China’s New Cryptocurrency Could Challenge Facebook’s Libra

Wall Street Journal

Theory and Empirics

These readings are optional and will not be tested, but they provide excellent background for the topics discussed this week.

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Does a Central Clearing Counterparty Reduce Counterparty Risk?

We show whether central clearing of a particular class of derivatives lowers counterparty risk. For plausible cases, adding a central clearing counterparty (CCP) for a class of derivatives such as credit default swaps reduces netting efficiency, leading to an increase in average exposure to counterparty default.
July 18, 2011, Darrell Duffie & Haoxiang Zhu

Is Bitcoin a Real Currency? An economic appraisal

A bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria.
April, 2014, David Yermack

Market Design with Blockchain Technology

Blockchain or, more generally, distributed ledger technology allows to create a decentralized digital ledger of transactions and to share it among a network of computers.
July 26, 2017, Katya Malinova & Andreas Park

Smart Settlement

Recent regulatory and FinTech initiatives aim to streamline post-trade infrastructures. Does faster settlement benefit markets?
May 1, 2018, Mariana Khapko & Marius Zoican

Some Simple Economics of the Blockchain

We build on economic theory to discuss how blockchain technology can shape innovation and competition in digital platforms.
April 20, 2019, Christian Catalini & Joshua S. Gans

The Economics of Cryptocurrencies – Bitcoin and Beyond

How well can a cryptocurrency serve as a means of payment? We study the optimal design of cryptocurrencies and assess quantitatively how well such currencies can support bilateral trade.
September 1, 2017, Jonathan Chiu & Thorsten V. Koeppl

Deliverables

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Robinhood Capital (Case Study)

This case study is due Nov 13, 2020 at 11:59 PM. Students are expected to deliver a written case study report. This assignment is to be completed individually. The final report must be submitted on D2L.
Robinhood Capital (Case Study)

Session 10 Quiz

This quiz will count towards your individual participation grade. Ensure you have completed all mandatory readings before starting the quiz (they will be tested). Please note that these quizzes are being assessed on a participation basis only; full marks will be given to those that complete the quiz (scores will not affect the participation grade).
Session 10 Quiz