FUQINTRD 697: Innovation and Cryptoventures


 


Campbell R. Harvey
Professor, Fuqua School of Business, Duke University, Durham, NC USA
Research Associate, National Bureau of Economic Research, Cambridge, MA USA

Partner and Senior Advisor, Research Affiliates, LLP, Newport Beach, CA USA

Investment Strategy Advisor, Man Group PLC, London, UK

Fuqua Spring Term I, 2018


Course Description

My 2015 course I&E 550 was the first course offered anywhere in the world focused on blockchain technology. In 2016, the course was offered by the Fuqua School of Business for the first time. Blockchain is a distributed ledger technology that provides proof of ownership and allows for the efficient, secure exchange of ownership. It is called blockchain because transactions are grouped together in blocks. Each block is cryptographically linked to the previous block. A public blockchain is usually transparent and distributed and anyone can put it on their computer. It requires no trust. However, you cannot change any entry in the blockchain. It is immutable.

In the most popular version of the public blockchain - the bitcoin blockchain, the blocks are “mined”. The miner takes a group of transactions and adds an arbitrary number called a "nonce" (also known as the "magic number") and applies a cryptographic hashing function (one-way encryption). The nonce is varied because the miner is looking for a very rare resulting hash – currently one with 17 leading zeros. [Think of having five decks of cards. You shuffle and draw the first five cards. You are looking for five consecutive ace of spades. You would have to shuffle many times to get the desired five cards.] It takes the network about 10 minutes to find this “solution” with 17 billion gigahashes being tried every second.

The bitcoin blockchain is secure because to win a new block the admission price is about $500 million of specialized hardware (this would get you 50% of the network hashing power). Hence, it is off limits to almost all hackers. Furthermore, it is not possible to rewrite history. Changing history involves working backwards through the bitcoin blockchain, changing blocks and finding new hashes. No one has the computing power to pull this off.

The security is very important. For example, questions over security constrain the widespread adoption of the Internet of Things. Currently someone can hack into your house and turn your thermostat up to 100 degrees – or even worse, hack your car while you are driving (or being driven by a self-driving car). Blockchain makes this extremely unlikely. This is exactly why IBM (a leader in IoT) has a team researchers dedicated to blockchain research. Every major financial institution has teams working on blockchain.

In my opinion, this is an extremely disruptive technology and has its place in every leading business school’s curriculum. However, Duke is the only school offering a course like mine.

This is not simply a course about bitcoin. The focus of the course is blockchain. Bitcoin uses a particular type of blockchain technology. 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 blockchain technology and the many ventures that have already begun to capitalize this innovation. This network, which includes blockchain, provides a secure way to verify ownership of anything. The security is established by the massive computing power necessary to add to a 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 usually available to Fuqua students as well as Law students, graduate students, and advanced undergraduates (with the expectation that undergraduate students will demonstrate a strong set of technical skills). Permission of the instructor is required for enrollment of all non-Fuqua students.


Who Am I?

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 Partner and Senior Advisor at Research Affiliates, LLP, who overseas more than $200 billion in investment products and Investment Strategy Advisor to the Man Group, PLC. The Man Group is the largest listed hedge fund group in the world.


Prerequisites

There are no prerequisites.


Class Schedule

We meet Tuesday-Friday at 9:00, 12:30, and 15:00 in Sauer Classroom. A full schedule of the class meetings is found in the Class Schedule. However, the schedule is fluid.


Deliverables

The course work mainly consists an entrepreneurial project. There are five deliverables. Groups will identify an interesting company that uses blockchain and explain what they do [10% of grade.] There will be an assignment where you individually comment on a video that I will provide [12%]. There is a Python hashing program that you will need to run [4%]. There is also a Python program for some simple ciphers [4%]. There is a coding assignment where you will individually build a simple smart contract on the Ethereum blockchain [19%]. Finally, and most importantly, the largest part of the course grade is determined by a entrepreneurial group project that is presented at the end of the course. [51% of grade.]

The group size is four and ideally we draw students from diverse backgrounds. You will use team builder to form your groups (all members within your enrolled section). Once, your group is determined, you must enter the group members and emails into the Google home sheet. 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. I have front-ended the course with the basic concept. It is essential that you start work as soon as possible. It is also important to meet with me as a group. Each group will present the last day of classes. You must turn in a 15 page pitch deck as the main deliverable. The in-class elevator slide limit is 4 slides (no building).

Outside Class Contact

E-mail me at cam.harvey@duke.edu. At odd hours, you can text me at 919-271-8156 (if I am not available, I simply set to DND, 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 and Other Legal

NDAs may be required for outside presentations.


Texts

There are no required texts in FUQINTRD 697. There is an extensive recommended reading list below.


Pre-Class Assignment

If you do not have a bitcoin wallet, you must get one and you should get the Coinbase.com app (co-founded by a 2009 Duke grad). You do not have to add any money to the account. Add the email address associated with your Coinbase.com account to the class Google sheet and I will send you $10 worth of bitcoin (you can later easily move between bitcoin, bitcoin cash, ethereum, litecoin or USD within your Coinbase wallet). You must also establish an account with https://earn.com/. You can link to your Coinbase account. You will be offered some tasks to do to earn bitcoin.

At the end of the course, you will be required to send the $10 back (or whatever it is worth if the currency decreases in value). If the currency increases in value, you should send more than $10 (but keep some in your wallet). I will then donate the funds to the DukeBlockchainLab.com.

Once you have established accounts and loaded the Coinbase information into the class sheet. Take screen shots of the Coinbase account and paste into a document. You can submit this as the Pre-Assignment. The Preassignment is due January 18, 2018 at 11:59pm.

Read whatever you can on bitcoin and blockchain 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 a great paper but somewhat of a challenge to read if you have no background in computer science). There are now plenty of sites that have introductions to bitcoin and I have listed some useful videos (see section Introductory Materials and Short Videos). You should take the time to view at least one of these videos. You should also be checking the reddit/bitcoin discussion. The course is very short and it is crucial that we get up to speed as quickly as possible.


Guest Appearances

We will have a number of guest appearances. The speakers are complex to organize (especially with three sections) and almost all will be done via video conference. Not all sections will have the same speaker. There are some speakers that I will present on Wednesday afternoons.


Class Topics

See the class schedule tab. 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.


Key Materials


Introductory Materials and Short Videos



On-Line Courses

Blockchain



Useful Resources

Recommended Books (Crypto):


Books (General Interest):

Discussions/News:


Personalities:

Cryptography:



Other Key Resources from Jameson Lopp

Jameson Lopp has served as an advisor to the course for the last four years. Follow him on Twitter. His site include numerous valuable links in the areas of:

Legal and Regulatory Resources

Duke Law has an excellent set of resources focused on Blockchain and Fintech. The resources include Twitter feeds, websites, blogs, podcasts, news articles, government/regulatory/legal documents, white papers, videos, and data.. The basic categories include: learning bitcoin/cryptocurrencies, blockchain, cybersecurity, data, fintech and the financial industry, initial coin offerings, marketplace lending/P2P lending, payments, RegTech, regulatory agencies and central banks, robo-advisers, smart contracts, and fintech groups.



You will also have access to a shared Google sheet that has the lastest news that I have found relevant. You can also contribute to this sheet.