Andreas Park PRO
Professor of Finance at UofT
Intro Lecture Blockchain and DeFi 2025-26
What is a blockchain and why should you care?
Instructor: Andreas Park
Some Technological Innovations throughout History
technological innovation removes barriers:
many innovations move power to do things from selected few to the masses
=> "decentralization" (loosely)
tech disrupts a group of people who built a living around a technological restriction and they disrupt government power exerted via these groups
Some examples
fundamentally change established networks, intermediaries, and value extraction processes
What problem does Satoshi want to solve?
Traditional Finance vs Decentralized Finance: the 30,000 ft perspective
Institutional Arrangements in Traditional Finance
deposit money in a bank
hold cash directly
hold assets with a brokerage
Institutional Arrangements in Traditional Finance
hold cash directly
Key Features
This "physical world" arrangement is NOT what we are interested in!
Institutional Arrangements in Traditional Finance
deposit money in a bank
Key Features
Institutional Arrangements in Traditional Finance
hold assets with a brokerage
Key Features
Institutional Arrangements in Traditional Finance
Big Picture Insight
Institutional Arrangements in Decentralized Finance
all assets are held in "crypto wallets"
self-custody (owner controls the wallet)
external custody (third party controls the wallet)
Institutional Arrangements in Decentralized Finance
all assets are held in "crypto wallets"
external custody (third party controls the wallet)
Key Features
Institutional Arrangements in Decentralized Finance
all assets are held in "crypto wallets"
self-custody (owner controls the wallet)
Key Features
This arrangement is the focus of "decentralized finance"!
Institutional Arrangements in Decentralized Finance
Key Insight
What is a Blockchain?
transactions cannot be faked \(\Rightarrow\) cryptography/digital signatures
the past cannot be altered
\(\Rightarrow\) hash-linking of past transaction records
the past cannot be made to disappear
\(\Rightarrow\) process of how new blocks are added
Summary of how Satoshi solved the problem
What is a Cryptocurrency?
Conceptually, what is a blockchain?
payments
stocks, bonds, and options
swaps, CDS, MBS, CDOs
insurance contracts
payments
stocks, bonds, and options
swaps, CDS, MBS, CDOs
insurance contracts
Smart contract accounts
Externally owned accounts
controlled by private keys
private
key
public
key
seed phrase
public
address
wallet = software to keep and use private keys
{
{
features
consequences
What is "Crypto"?
History of Crypto and Blockchain how I'd like you to see it
single-purpose digital money
general purpose platform
DeFi applications
alternative digital money
alternative smart contract platforms
scaling solutions and higher level (d)apps
money applications
An Alternative View of Blockchain
crazy internet money with no value
a vehicle to create unlimited crazy internet money
utility
tokens
DAOs
NFTs
Meme
other crazy
money
alternative vehicles for vaporware
?
= Meme Coins!
p'nut
DogWIFHat
End of Intro
By Andreas Park
This lecture introduces the fundamental concepts of decentralization versus centralization and the implications for financial intermediation. It explains how a blockchain functions as a hash-linked database that records a full series of transactions. Participants will learn about key concepts, including immutability, distributed networks, and how decentralization can eliminate traditional intermediaries. It also introduces smart contracts, defining their capabilities, limitations, and use cases in decentralized applications.