FinTech: Bitcoin, Blockchain, and Algorithmic Trading

 

FinTech generally refers to the application of technology to improve financial activities – e.g. mobile payments, fundraising, transaction clearing, automated investing. This class studies the modern FinTech industry through the lens of ‘creative destruction’ – the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one” [p. 82, Schumpeter (1942)]. Finance is especially vulnerable to disruption by technological innovations because so many financial services are information based (similar to how technology has continually transformed the publishing and music businesses).

 

We will begin our study of modern fintech with the blockchain – what is it (a way of keeping records), who uses it (Bitcoin, NASDAQ, Airbnb, amongst many others), and how might it disrupt the financial world (by transforming how we create, store, and transfer value and information). This section of the course will cover the most famous application of blockchain technology, that of cryptocurriencies (e.g. Bitcoin, Ethereum, Bitshares, etc.), as well as other applications which include property registries, “smart contracts,” and methods of storing, establishing, and sharing identity. Throughout this section, we will use the blockchain as a lens through which to view the changing financial world.

 

We then take a step back and investigate the history of finance, which is itself a story of constant innovation and evolution. Our focus here is on the development of different types of money and credit, but we also discuss the history of payment systems, joint-stock companies, debt securities, and exchanges. This section of the course illustrates that, while finance is a process of constant innovation and evolution, it is also often the case that, in some sense, “everything old is new again”.

 

In the last section of the course, we return to the modern age to study more disruptive innovations in finance. Here we cover such topics as algorithmic and high-frequency trading, robo-advisors, and crowd-sourced and peer-to-peer funding. We assess to what degree the modern developments in fintech are merely a continuation of prior evolutions, or are truly innovative and revolutionary.

 

SOUNDCLOUD PODCASTS:

 

  • “The Darkweb — E. Phan, A. Mohanty, G. Lopez, D. Andersson, & D. Orrell” https://soundcloud.com/user-616270364/the-darkweb-e-phan-a-mohanty-g-lopez-d-andersson-d-orrell/s-VDK7K
  • “Regulation of cryptocurrencies — C. Martin, S. Shapiro, C. Hakimi & S. Jakkampudi” https://soundcloud.com/user-616270364/regulation-of-cryptocurrencies-c-martin-s-shapiro-c-hakimi-s-jakkampudi
  • “Trading algorithms and data mining – S. Pant, E. Robb, & S. Mandava” https://soundcloud.com/user-616270364/trading-algorithms-and-data-mining-s-pant-e-robb-s-mandava
  • “PB&J — Wills and smart contracts — J. Mock & B. Kennedy” https://soundcloud.com/user-616270364/pbj-wills-and-smart-contracts-j-mock-b-kennedy
  • “Quantum Computing and the Blockchain – K. Chen” https://soundcloud.com/user-616270364/quantum-computing-and-the-blockchain-k-chen