IB9YW-15 FinTech: Digital Currencies and Decentralised Finance
Introductory description
In this class we discuss the emerging areas of Digital Currencies and Decentralized Finance (or DeFi). By utilizing blockchain and smart contract technologies, DeFi provides a new platform for programmable, automated finance services that remove the reliance on central trust and intermediaries.
In this course we will examine the economics of blockchains, decentralized applications like lending protocols and exchanges, and stablecoins, which are the bridge between decentralized and centralized finance. We will also consider alternative applications like the rise of central bank digital currencies.
Students will examine critically the welfare and associated risks of these applications, and compare them to traditional financial markets. In a group project, students conduct a case study and critically evaluate the design of a DeFi protocol.
Module aims
The module aims are for students to:
Learn both the economics and computer science aspects behind blockchains and DeFi applications.
Compare and contrast the design and efficiency of traditional finance systems with decentralized finance
Understand the potential use cases of DeFi, and its associated risks
Think critically about DeFi protocol design and how it can be used to improve traditinal financial markets
Understand basic programmability features of smart contracts
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
Economics of blockchains
Cryptocurrency pricing (theory+empirics)
Stablecoins
Decentralized Lending Protocols
Decentralized Exchanges
Miscellaneous DeFi innovations (eg. Tokenized Assets, Governance, Oracles)
CBDCs
Learning outcomes
By the end of the module, students should be able to:
- Demonstrate understanding of key design issues of blockchains and DeFi applications.
- Demonstrate understanding of the economics behind different blockchain systems such as proof of work and proof of stake.
- Apply the framework for analysing DeFi to a new protocol and think critically about the efficiency and risks of a protocol.
Indicative reading list
Teaching resources:
Harvey, Campbell R., Ashwin Ramachandran, and Joey Santoro. DeFi and the Future of Finance. John Wiley & Sons, 2021.
Course notes on DeFi at Berkeley: https://defi-learning.org/f22
Course notes on DeFi at Duke: https://people.duke.edu/~charvey/Teaching/562F_2023/562F_Topics.htm
Research element
Students are expected to research a DeFi protocol in depth for a case study. Students are expected to outline the design of the protocol and quantify the efficiency and risks of the protocol.
Interdisciplinary
This module can be taken by students of other majors in economics, mathematical finance, and students in computer science. While it focuses on the economics and finance of these applications, there will be discussion of programmability of blockchains and DeFi applications and an introduction to programming with smart contracts.
Subject specific skills
Apply empirical financial analysis used in traditional finance markets in DeFi.
Analyse the design and stability features of stablecoins.
Assess the design and efficiency of lending protocols and decentralized exchanges.
Transferable skills
Written communication
Study time
| Type | Required |
|---|---|
| Lectures | 9 sessions of 2 hours (12%) |
| Seminars | 8 sessions of 1 hour (5%) |
| Private study | 50 hours (33%) |
| Assessment | 74 hours (49%) |
| Total | 150 hours |
Private study description
Private study to include pre-reading for lectures
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group D1
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
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| Group Report | 20% | 15 hours | Yes (extension) |
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3000 words |
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Reassessment component |
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| Individual Assignment | Yes (extension) | ||
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Individual Assignment 1000 words |
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Assessment component |
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| Participation | 10% | 7 hours | No |
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Combination of graded quizzes and participation at seminars. |
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Reassessment component is the same |
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Assessment component |
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| Written Examination | 70% | 52 hours | No |
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Reassessment component is the same |
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Feedback on assessment
via my.wbs
There is currently no information about the courses for which this module is core or optional.