AN INTRODUCTION TO BLOCKCHAIN,
CRYPTOCURRENCY, AND
DECENTRALIZED FINANCE

Andreas Park, June 10, 2021

UofT Alumni Presentation

Agenda for the presentation

Answers and quick explainers to some questions - what is \(\ldots\)
- a cryptocurrency
- a blockchain
- Decentralized Finance
An Outlook:
- Some risks and what's coming over the next years.
Resources:
- What's happening at UofT in this area?

What is a cryptocurrency?

What is a blockchain?

What is Decentralized Finance?

decentralized finance =
provision of financial services without the necessary involvement of a traditional financial intermediary

in practice: new financial infrastructure that will be a common resource

payments

stocks, bonds, and options

swaps, CDS, MBS, CDOs

insurance contracts

Application: decentralized trading

Application: Decentralized Lending

\(\vdots\)

dapp-linking, Defi-Legos and flash loans

Source: Harvey, Ramachandran, and Santoro (2020)

Risks and open problems

many apps are still experimental, many kinks need ironing, and tech progress is needed
smart contract risk:
- detecting problems with code
- detecting problems with economic incentives
- foreseeing unforeseen contract contingencies
- contract contagion risks
governance of decentralized organizations
role of regulators

What lies ahead?

cellphone data from 2018 (NewZoo), inflation from 2020 (World Population Review)

DIEM = "new financial infrastructure"

Source: BIS Working Papers No 880 "Rise of the central bank digital currencies: drivers, approaches and technologies" by Raphael Auer, Giulio Cornelli and Jon Frost

central bank ISSUED Digital Currencies

What's happening at UofT?

blockchain/decentralized finance courses at UTM commerce, Rotman MBA, FAS ECE
LedgerHub: blockchain research centre (sponsored by a Connaught grant)
Rotman FinHub: AI/Machine Learning and blockchain focus
active research agendas/groups:
- Andreas Veneris (ECE): decentralized oracles, CBDCs
- Fan Long (DCS): Conflux (Gen 3 blockchain)
- yours truly (UTM & Rotman): decentralized trading, CBDCs, financial infrastructure