I&E 550: Innovation and Cryptoventures
Spring Term 1 and 2, 2015
The way that we exchange property is ripe for disruption over the next few years. Current methods are expensive (e.g. credit cards have 3% transaction charges and many other fees) and they are not secure (e.g. Target "lost" private information for 40 million customers). This course analyzes peer-to-peer methods of exchanging and identifying ownership that are highly secure, involve minimal trust between transacting parties, and have extremely low transactions costs.
This is not simply a course exploring transactions in bitcoin. The idea of the course is to understand a disruptive technology and to assess its implications on how business is conducted in the future. Much of our focus is on the network behind bitcoin and the many ventures that have already begun to capitalize this innovation. This network, which includes the blockchain, provides a secure way to verify ownership of anything. The security is established by the massive computing power necessary to add to the blockchain. Think of the blockchain as a secure repository of common knowledge. A wide range of items can be attached to the blockchain from ownership of a car or access to cloud computing to medical records. Indeed, it is possible to create algorithmic contracts within this network. This leads to the possibility of disruptions not just in finance (stocks, bonds, etc.) but also in law (simple contracts) and other fields. It is even possible to create what is known as a distributed autonomous corporation – essentially an autonomous computer program that employs people and conducts business as a corporation would.
The course is available to Law students, MBA students, graduate students, and undergraduates (with the expectation that undergraduate students will demonstrate a strong set of technical skills). Permission of the instructor is required for enrollment. This university-wide course is offered through Duke's Innovation & Entrepreneurship initiative (hence, the "I&E").
To get to know me, go to my homepage and follow some of the links, for example my Media page or my most recent research papers.
In addition to my job at Duke University, I am Investment Strategy Advisor to the Man Group, PLC. The Man Group is the second largest hedge fund group in the world.
There are no prerequisites.
We meet once a week on Thursdays from 3:20pm to 5:35pm. The first class meeting is on January 15. A full schedule of the class meetings is found below.
There is a single deliverable. This course is a challenge to grade because everyone has their own expertise. Hence, the course grade is determined by a single entrepreneurial group project that is presented near the end of the course. The ideal group size is four with representation from law, business, computer science and other. I will form the groups. At the end of the term, group members score the contributions of each member to avoid free-riding. The project is to pitch a new venture idea linked to blockchain. Each group comes up with an idea and hopefully the distribution of expertise within the group makes the ideas very high quality.
E-mail me at email@example.com. At odd hours, you can text me at 919-271-8156 (if I am not available, I simply turn it off, so don't hesitate to text) You can also call me. Again, when I am busy or sleeping, my phone is on do not disturb.
NDAs may be required for outside presentations. In addition, we (yes, including me) will need to sign documents to minimize the chance that any group ideas are poached after the course ends.
There are no required texts in I&E 550. There is a reading list below.
Read whatever you can on bitcoin to start with. It is easy to find material and some of that material is listed below. You should look at the original Satoshi Nakamoto paper (it is difficult to read). There are now plenty of sites that have introductions to bitcoin -- even the Khan Academy.
We will have a number of guest appearances both from within Duke University and outside. We will frequently engage guests by video conference. In class experts include, David T. Robinson, J. Rex Fuqua Professor of International Management, Fuqua School of Business who lectures on venture capital. James D. Cox, Brainerd Currie Professor of Law, Duke Law School, who will talk about the risk of cryptocurrencies being classified as securities. Will update soon...
Here is a tentative list of topics. The schedule is somewhat fluid in that I may spend longer on some topics and spillover to the next class. I might add or delete topics. I will also be interested in your input for topics.
High level introduction. We explore some of the common misunderstandings about bitcoin. The strengths and weakness of the current implementation are also introduced.
We circle back and explore in greater details how transactions occur on the blockchain. Mining is also examined.
The history and mechanics of digital currencies. We detail the pros and cons of digital currencies. We introduce some alternative currencies.
We first discuss the problem the blockchain solves. This involves a discussion of Byzantine General's Problem. We also spend time on recent developments of businesses using blockchain technology. This includes an introduction to counterparty, bitshares, coloredcoins, and side-chains
Discussion of all of the risks that the new technology faces. The list includes 51% problem, scalability, other technology concerns and illiquidity
Examples of disruption include: medical radiology, media, mail, education, the share economy (taxis, accommodations, food), and others. There is an open discussion on the next targets for disruption.
Objective will be to help students understand why VC's are interested in investing in bitcoin-related technologies. Topics include walking students through some of the mechanics surrounding how VC's take ownership stakes in private companies, how these stakes are diluted through subsequent rounds of investing, and how their returns are realized through exits. Some simple math helps to illustrate why VC's naturally gravitate towards highly right-skewed payoff distributions. Then, coordinating with the law faculty, students are taken through the contours of a VC term sheet.
An explaination, legally, what money means and how—and functionally, why—bitcoins fit within that definition..
The legal environment is explored with attention paid to Anti-Money Laundering (AML) laws, and Know Your Customer (KYC). The regulatory environment is also assessed. Case: E-gold
Introduction of the science of communication the presence of an adversary. Topics include: common keys, Diffie-Hellman key exchange, RSA, and ECDSA. While we only provide an overview of each method, this is a challenging but important lecture.
The time allotment depends on the enrollement. Presentations need to allow time for questions.
The time allotment depends on the enrollement. Presentations need to allow time for questions. Last half hour for course summary.
Protocol definitions and history:
https://en.bitcoin.it/wiki/Main_Page (bitcoin wiki)
http://historyofbitcoin.org/ (general information, history of bitcoin)
https://bitcoin.org/bitcoin.pdf Original Satoshi Nakamoto Whitepaper
Cryptofinance in education:
http://www.coindesk.com/top-us-colleges-begin-offering-bitcoin-courses/ (info on courses)
http://ssrn.com/abstract=2438299 (Duke course)
http://pages.stern.nyu.edu/~dyermack/courses/BitcoinCourse.pdf (NYU course)
http://www.cryptolina.com/ (conference, Raleigh August 2014)
Network Status and Adoption Trends:
https://blockchain.info/charts (Historic trade prices, transactions, mining hash rate, block sizes)
http://www.bitcoinpulse.com/ (Adoption and usage metrics)
Select Web Hosted Wallets
https://www.coinbase.com (Wallet/exchange services/payment processor)
https://www.circle.com (Wallet / exchange services)
Select client side software
https://bitcoin.org/en/ (core protocol implementation)
https://bitcoinarmory.com/ (wallet software / cold storage)
https://multibit.org/ (light, non-full node wallet)
http://www.infoworld.com/t/encryption/bitcoin-finally-pays-in-secure-cloud-storage-240386 (general information, Storj.io to use blockchain as basis for cloud storage)
Exchanges and ATMs
http://planetbtc.com/complete-list-of-bitcoin-exchanges/ (list of current Bitcoin exchanges)
http://www.coindesk.com/3-forces-shaping-next-generation-bitcoin-exchanges/ (information on exchanges)
http://www.coindesk.com/7-charts-show-year-growth-bitcoin-atms/ (info ATM growth)
http://www.coindesk.com/margin-trading-blame-bitcoins-price-decline/ (discussion of price fluctuations)
Payment processors for retailers
https://bitpay.com (payment solution)
https://coinbase.com (payment solution and wallet)
https://bips.me/ (payment solution)
https://www.gocoin.com/ (payment solution)
Bitcoin legal, accounting, and regulatory status:
http://cooklaw.co/blog/irs-bitcoin-is-property-not-currency (general information, blog)
http://bitcoinmagazine.com/11984/data-series-interview-patrick-murck-general-council-bitcoin-foundation/ (general information, legal)
http://www.dfs.ny.gov/about/press2014/pr1407171.html (Bitlicence proposal by NY DFS)
Bitcoin risks and critiques:
http://www.positivemoney.org/2014/04/bitcoins-fatal-design-flaws/ (details potential design flaws)
https://econsultancy.com/blog/64542-bitcoin-or-bitcon-the-challenges-facing-the-crypto-currency-sector#i.171o56551icz2x (details potential security flaws)
http://www.businessinsider.com/why-it-takes-so-long-to-buy-bitcon-2014-7 (length of time to buy a bitcoin)
https://www.surfeasy.com/will-bitcoin-ever-be-truly-secure/ (questions security of bitcoin)
Mining, Security, and Network Scalability:
https://bitcoinfoundation.org/2014/10/a-scalability-roadmap/ (Discussion on future protocol changes)
https://bitcoinfoundation.org/2014/10/blocksize-economics/ (Discussion on future protocol changes)
https://bitcointalk.org/index.php?topic=157141.0;all (proposal to fund mining through assurance contracts)
http://www.topbitcoinmininghardware.com/top-bitcoin-asic-miners-comparison-chart/ (comparison of mining hardware manufacturers)
Bitcoins and Venture Capital:
http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/?_php=true&_type=blogs&_r=0 (Marc Andreessen in the New York Times).