WEEK 1: INTRODUCTION

1. How does Bettina Warburg describe the economic significance of blockchain technology?
- The economic significance of blockchain technology for institutional economics:
+ Ensure the conduct of the marketplaces
+ Blockchain will change how we exchange value
+ Shift from centralized to decentralized platform
2. What can blockchain technology (potentially) accomplish to facilitate faster and more
efficient trading?
- Blockchain will lower uncertainty associated with transactions: identity management ( identity
of sellers,…) ; asset tracking and reneging ( thất hứa) on deals
- Benefits:
+ No more intermediary or middle man, facilitates peer-to-peer transactions
+ Faster transactions
+ Cheaper transaction
3. What does the article by Steven Johnson argue is wrong with the current Internet?
- Revenue streams and data are controlled by a few big tech companies: FB, Google and Amazon
- People do not know who has access to their data
- Your fortune depends on the goodwill of these companies:
+ Amazon might decide to produce your product yourself
+ Google might change their alogorithm such that users can no longer find your company
+ Facebook determines your feed, which is based on intransparent alogarithms or taken over by
Russian robots
4. How is the structure of the Internet described and how could Blockchain Technology
change that structure?
* Layer 1: basic protocols, which were open and owned by no one: HTTP, POP, SMTP
- The first layer was open and decentralized
- What was missing: secure open standard to establish identity
* Layer 2: closed protocol era
- Controlled by centralized for profit companies
- Winner takes all the economy
- Why we have this outcome:
+ need to store data
+ need someone to organize trading and transaction
+ platform to switching costs that are high for customers
* Layer 3: Return to open-protocol era
- Data is stored in a decentralized way on blockchains
- Everybody would own their data and decide what to provide
5. How could Uber be replaced by a decentralized protocol on the blockchain?
- Standard protocol for transportation transactions: registered drivers, book and pay a ride, still
need a platform on top
- Who would provide and why:
+ A developer collective rewarded by tokens
+ Early adopters and drivers rewarđe by tokens
+ Where does the token value come from?
6. What was the unique selling proposition of Silk road, relative to, for example, Amazon?
Why did it fail?
- The unique selling proposition of Silk Road:
+ Easy to access for illegal goods
+ Reputation to be relatively reliable
+ No ID
- It fails because of following reasons:
+ Enforce the rules: sanctions/bans, threat of violence/repercussions (hậu quả xấu)
7. How anonymous was Silk Road really?
- Buyers: Had to give their home address
- Sellers: Could exit anytime with a scam, otherwise stay in the dark
- Buyers and sellers had to cash in and cash out Bitcoin
WEEK 2: PRINCIPLES OF BLOCKCHAIN TECHNOLOGY
1. How can you prove that you have created digital content at a certain point in time?
- You could register your data with something like a patent office: You bring your data, they
store it and issue a receipt, record the storing time in a ledger, post it online
2. Can you propose a solution that does not require a trusted third party?
- Distribute the ledger so that everybody can verify the data for themselves
+ the stamp on the envelope can serve as time-stamp
+ Wide distribution of the ledger is important because otherwise somebody can establish an
alternative ledger by distributing the ledger more widely
- Problems:
+ Creating and sending out ledgers extremely costly
+ People would have to be incentivized to keep and store the ledger
3. Haber/Stornetta: Hash digital content and post it in newspaper
* Basic idea
- An algorithm called the hash-function is applied to any digital document that needs to be
time-stamped
+ The outcome is a short, unique code
+ Information about time and date is added
- A stack of hashes of digital documents is hashed again and the resulting code is posted in the
NYT for everybody to see-> Distributed ledger
* Hash function
- Input is converted to a hexadecimal string (“hash”) by scrambling in a way that is impractical to
invertible ( có input sẽ cho ra một hàm hash output và không thể từ output để suy ra input)
- Fixed length, generally 64 or 128 characters: tells you nothing about the length of the input
- 16 possible characters in each space: Digits 0 through 9, letters a through f, Number of possible
outputs = 16^64 or approximately 1.16 x 1077
- Small changes in input will drastically change the output
+ Cannot use patterns of characters in the output as a roadmap for recovering the input, even if
you know the hash function that generated the output
* Summary:

4. Electronic cash
- One unit of digital cash is indistinguishable from any other unit of the same digital cash
( Fungibility is a key characteristic of money, whether it's physical currency or digital cash, and it
means that each unit of the currency is interchangeable with any other unit of the same
denomination, and they are all considered equal in value and characteristics)
- Owner is whoever is in possession
- Even if units of cash have a serial number, you do not have a claim to a specific unit of cash.
→ You cannot reclaim stolen cash from its current holder (but you are entitled to take legal
action against whoever took it away from you)
- Problems with electronic cash:
+ Database solutions require a trusted third party administrator
+ Decentralized peer-to-peer solutions need to address these questions:
• How can you own something digitally that is fungible? How can you verify that somebody is
the owner of fungible electronic cash?
• How can you store and validate data in a decentral fashion?
- Read-only distributed ledger:

5. Digital signatures
- Using double-key cryptography to make secure transfers of assets from one wallet to another

+ Using private key to generate public key which is available to everyone

+ If someone wants to send something, they will use public key to encrypt that and then send to
receivers. Only receivers with the private key which generates public key can open
- It is impossible to derive the private key from the public key
+ Only the private key can generate a correct signature
+ However, the public key is linked to the private key in a way such that you can check whether
the corresponding private key was used to generate the signature
6. The blockchain

- Every new block contains the hash information of all blocks that ever created
7. Proof of work
- Cơ chế Proof of work:
+ Tất cả các giao dịch sẽ hash và được gom vào chung với nhau để tạo thành 1 block mới ~
Merkle root block N

Sau khi mỗi giao dịch được băm, các giá trị băm được tổ chức thành cái được gọi là cây Merkle
(còn được gọi là cây chuỗi băm). Cây Merkle được tạo bằng cách tổ chức các chuỗi băm giao
dịch thành các cặp, sau đó băm chúng.
+ Các thợ đào sẽ cùng nhau thực hiện xác minh giao dịch. Hệ thống sẽ đưa ra cho thợ đào một
câu đố toán học phức tạp ví dụ như Create a hash of the above four components that satisfies a
pre-defined condition ( first four digits of the hash need to be 0)
+ Để tạo ra block mới, các thợ đào đều có được các thông tin là Hash of block N-1, Merkle root
block N, timestampt. Việc các thợ đào cần làm là tìm 1 con số nonce bất kì sao cho khi kết hợp
lại sẽ generate ra hash thoả mãn yêu cầu của hệ thống
+ Khi nhận được lời giải, hệ thống sẽ thông báo cho các thợ đào khác. Nếu lời giải đó được xác
nhận là chính xác bởi phần lớn các thành viên (>51%) thì block mới sẽ được tạo ra và các giao
dịch được xác nhận ( các thợ đào khác sẽ cùng xác nhận dựa vào các thông tin dữ liệu sẵn có
của mình và xem số nonce đã được tính toán đúng hay chưa)
WEEK 3: BITCOIN
1. The mechanics of bitcoin
* General information
- Bitcoin is a virtual currency traded and recorded by a peer-to-peer network on a “blockchain”
+ Peers are equally privileged, equiptent participants in the application
+ They form a peer-to-peer network of nodes
+ One node == Bitcoin client
* Bitcoin consensus (đồng thuận) alogorithm:
- Steps in Bitcoin consensus:
+ New transactions are broadcast to all nodes
+ Each node collects new transactions into a block
+ In each round, proof-of-work determines a random node to broadcast its block ( work to find
nonce ~ number to generate the required hash)
+ Other nodes accept the block only if all transactions in it are valid
+ Nodes express their acceptance of the block by including its hash in the next block they create
- Consensus mechanism needs to prevent:
+ Theft of bitcoins: If it exists a pool which has more than 51% voting power => can make a new
block with the transaction of stealing bitcoin from one address to another)
+ Denial of service attrack: If it exists a pool which has more than 51% voting power => can use
that power to deny to record unwanted transactions to the new block
+ Double spend attrack
* Bitcoin mining
- Mining is the process of adding a new block of transactions to the blockchain
+ With every block, new Bitcoins are created (coinbase transaction) and rewarded to the node
that mines the block ( được thưởng bằng newly created bitcoin + transaction fees)
+ To mine the block, nodes have to solve a puzzle known as proof-of-work
- The task of bitcoin miners:
+ Listen for transactions
+ Maintain blockchain and listen for new blocks
+ Assemble a candidate block
+ Find a nonce that creates a valid hash of your block ( the number)
+ Hope your block is accepted
+ Receive a reward in terms of minted bitcoins and transaction fees
- Mining is necessary for a decentral platform to work because:
+ Mining requires miners to make an investment (computing power and hardware) in order to
make a profit
+ To ensure the integrity of the blockchain = maximize expected return ( phải sử dụng thông tin
chính xác như các nodes khác lưu trữ để có thể được chấp thuận)
 Check newly added blocks for consistency and accuracy
 Keep copies of the blockchain
+ Mining is a commitment device through smart economic incentives
- Profitability of mining:

NOTE: BTC rewards for miners is considered to be inflation because the supply of bitcoin is
limited. Besides, if we lost private key for bitcoin => the accessible of bitcoin then decreases
Ví dụ:

- Mining pools: can be joined by any miner willing to contribute “hashes” to the pool
+ Provide insurance to miners: pay out block reward even if miner does not solve the puzzle: Dù
miners không tìm ra được số nonce để tạo ra required hash => vẫn được reward nếu người
trong pool tìm ra được số đó. Vì cơ chế insure này nên mining pools receive được 1 khoản fee in
return vì đã đảm bảo cho các miners (sharing risk and rewards)
- Insurance contract components:
+ Pay per share (of hash rate in the network): rewards được chia cho các miners trong pool dù
không solve được puzzle
+ With or without transaction fees: có thể có transaction fees trừ thẳng hoặc pay out
+ Dependent or independent of pool’s success: nếu được pay independent of the pool success
thì insurance fee sẽ higher
* Bitmain and corporate capture of blockchain governance
- Bitmain produces ASIC miners ( máy đào), 75% market share and affiliated pools have at least
30% of the total network hash rate => different from Nakamoto’s (2008) vision of perfect
competition among independent computer nodes ( các máy tính đơn lẻ sẽ compete với nhau để
tìm ra nonce ~ probability là như nhau thay vì tập hợp lại thành các pool như thế probability sẽ
không công bằng vì có pool lớn, pool nhỏ)
2. The implications of centralized pool for decentralized mining
- Centralized pools and risk sharing:
+ Risk sharing benefits increase in pool size, no other economies of scale: the larger the pool,
the higher possibility it win win => less volatility in return
+ Certainty equivalent more than doubles: the certain amount of money to be given to not
participate in gamble
=> Allow small miners to contribute to the network
- Centralized pools and network hash rates
+ Acquisition of hash rates hurts others’ payoffs: a pool get more hash rates (tốc độ đào) means
that other pools have lower chance to win
+ Others’ will in turn acquire hash rates: try to increase hash rates
=> Mining pools escalate arms race, driving up energy consumption
- Centralized pools and decentralized networks
+ Fees increase in pool size, implying a limit to pool size as long as miners can freely allocate
their hash rates over several pools ~ a larger pool implies that when the pool receives the
reward, they have to share with a larger amount of miners and it also implies that the total hash
rate increases (larger pool ~ increase hash rate)
+ Pool sizes should mean-revert endogenously (nội sinh) ~ giữ cho sizes ở mức vừa phải
=> Mining pools centralize the network, but there are limits to it
3. Transaction structure

- The transaction has to be signed by the input-address

0.2 ~ output 0 0.4 ~ output 1 5.6 ~ output 2
- Bitcoin scripts: Scripts are used to sign transactions, MULTISIG allows to define more than one
signee
4. Block size
- Each block has a limit of 1 MB, each transaction has a size of at least 250 bytes
- Limit of 4000 transactions per block
- Maximum throughput: 7 transactions per second
- Visa can handle 10K transactions per second, handles 2K on average
5. Segregated Witness
6. Transaction fees
- Any bitcoin service that creates transactions (including wallets) must implement dynamic fees
+ Third party service
+ Own algorithm
- Parameters for determining dynamic fees: capacity, priority, average fees recently paid,….)
+ Fees are chosen such that recording of the blockchain is likely ( transactions được record
limited for each block và chỉ khi block này được record mới tới block kia => waiting time => if
want transactions recorded in time => pay higher fee)
+ Many services allow users to indicate priority
- Transaction fees are not welfare-improving and induce some users to drop out of the market
(vì transaction fee cao in the time of congestion)
- Transaction fees are driven by queuing problems, not by reductions in miner rewards
(transaction fees based on lượng demand transactions recorded và prioritized)
* Ransomware activity and blockchain congestion (Sokolov, 2021)
- Ransomware activity exogenous shock to transaction demand (network congestion)
+ Ransom usually has to be paid in BTC
+ Ransom usually comes with a deadline
- Results:
+ Demand for transaction settlement positively related to fees
+ Regular users forgo blockchain settlement in times of congestion
+ Will transaction fees alone be able to compensate miners?
* Bitcoin’s impossibility triangle
+ Tạo 1 block mới tốn time => tồn động transactions chưa record => chưa thể scale lớn. Nếu có
scale lên thì tính chất decentralized và consensus cũng sẽ tồn time nên phải trade-off 1 among 3

* Anonymity
- Bitcoin: You do not use your real name, but a pseudo-identity (address) ~ cannot change the
address because if do so cannot access fund on blockchain => Bitcoin provides pseudonymity
- Does Bitcoin ensure unlinkability? NO
+ All transactions of one address can be linked
+ Addresses can be linked to the user through
• Hacking wallets
• Obtaining home/mail addresses from counterparties
• Revealing your identity in real world transactions (“buying a cup of coffee”)
=> While Bitcoin addresses are pseudonymous and do not directly reveal the identity of the
user, the entire transaction history associated with each address is visible on the blockchain.
This transparency allows anyone to analyze the blockchain and attempt to link addresses to
specific transactions or users.
WEEK 4: ETHEREUM
1. Ethereum, Ether and Gas
- Ethereum is a decentralized, open-source blockchain with smart contract functionality
- Ether (ETH or Ξ) is the native cryptocurrency of the platform
+ Miners receive Ether for their service: mining reward and transaction fees
+ In order to run applications or smart contracts on the Ethereum blockchain, you need Ether
- Gas reflects the amount of computational effort required to execute specific operations on the
Ethereum network
+ Transaction fee = Gas used x Gas price = Gas used x (Base fee + tip) ~ Base fee do network
automatically determined based on the congestion và tip là do người execute offer
+ The base fee is set by the system such that block size reverts to target size
+ Max fee: For a transaction to be executed, the max fee must exceed the actual transaction fee,
the remainder is refunded ( nếu không dùng hết lượng gas được tính làm transaction fee, sẽ
được trả lại cho người excecute transaction. Và khi muốn excecute transaction, người muốn
execute sẽ tính toán lượng fee max mà họ muốn trả. Nếu transaction fee thực tế lớn hơn số
max người đó muốn pay, transaction sẽ không được execute. Thông thường, người muốn
execute sẽ tăng lượng gas lên 1 xíu để make sure là transaction của mình sẽ được execute trong
khoảng acceptable)
 Transaction fee does not (directly) depend on transaction value
NOTE: ICO khác IPO vì ICO không có protections như IPO. Đối với IPO thì các investors thường sẽ
có quyền như nhau và highly regulated nhưng đối với ICO, sẽ liên quan đến việc các tổ chức lớn
thâu tóm
2. Comparison between bitcoin and ETH

- Deflation means that giá trị của 1 đồng tăng lên ~ giá trị cần mua tốn ít hơn vì giá trị của đồng
tiền đó tăng
- Transaction base fee is burnt ~ trong transaction fee được trả cho miners có phần base fee và
tip, phần transaction fee này sẽ được burn 1 phần => làm giảm lượng supply của ETH ( không bị
burn hết)
Question: Are more Ether burned or mined?
- Net Ether supply = Ether mined – Ether burned, depends on gas price, currently more Ether
are mined
- We burn Ether since it is equivalent to monetary policy, extend or reduce supply
- It matters whether the monetary policy is deflationary or inflationary since it provides the
stability to the network
- We are burning transaction fee because:
+ Miners have no incentive to increase block sizes
+ Directly counters the inflationary effects of mining
3. Smart contract
- Smart contract: A set of promises, specified in digital form, including protocols, within which
the parties perform on these promises
- Smart contract on Ethereum:
+ Program that runs on the Ethereum blockchain, consisting of code (its functions) and data (its
state) with a specific address on the Ethereum blockchain.
+ Deploying a smart contract is a transaction, requiring Gas
+ Deployment is irreversible ( nếu điền sai bất cứ 1 thông tin nào đó cannot fix)
4. Tokens
- Tokens are digital coins with extended functionality. Unlike coins, their functionality goes
beyond the store of value: voting rights, asset rights, service rights,…
- Tokens are defined, created and destroyed by smart contracts
+ Fungible-tokens: One token is like the other, all tokens generated from the same smart-
contract have the same value
+ Non-fungible-tokens: Each token is unique, values differ most likely ~ chỉ có duy nhất tokens
đó nên có thể apply để xác định quyền sở hữu ví dụ đối với pictures, arts piece,…
- ERC20-Token: Standard for fungible tokens
- ERC721: Non-fungible Token (NFT) standard
5. Decentralized Applications (Dapps)
- A Dapp is an application that is mostly or entirely decentralized
+ Frontend usually is a web user interface (mobile DApps are possible too, but currently not as
well supported)
+ Backend is a set of smart contracts on the Ethereum blockchain
+ Data may be stored on- and off-chain
6. Decentralized autonomous organization (DAOs)
* Basic information
- Là một organization trong đó sẽ bao gồm 1 số lượng người tham gia nhất định. Những người
tham gia sẽ đổi ETH lấy tokens được sử dụng trong DAO và những người này sẽ sử dụng tokens
để tham ra voting cho các sự kiện diễn ra trong DAO
Question: How would you derive the value of a DAO token? The cashflow expected
Question: What would be the corporate finance equivalent to DAO token? Share
* The DAO Hack
- Collusion of a minority of 20% might lead to manipulated investment decisions.
- Solution: Split function that allows investors to move their tokens to a newly created child-
DAO. Often used to convert tokens back into Ether and send them to their wallet.
- As a security mechanism, it takes 41 days before Ether can be withdrawn from a Child-DAO
- During this period, the community considered three options
1. Accept the hack and move on
2. Freeze the stolen Ether (soft fork)
3. Undo the hack and return the Ether to the DAO investors (hard fork)
- Do the DAO hack mà ETH được chia làm 2 nhánh ETH và ETH Classic
- Soft Fork: Một soft fork là một thay đổi trong giao thức (protocol) của một mạng blockchain
mà cho phép các phiên bản cũ của phần mềm tiếp tục hoạt động mà không cần phải nâng cấp.
Soft fork xảy ra khi các quy tắc mới được áp dụng trên mạng blockchain và được coi là hợp lệ
bởi các phiên bản cũ của phần mềm.
- Hard Fork: Một hard fork là một thay đổi trong giao thức của mạng blockchain mà yêu cầu tất
cả các nút mạng và phần mềm tham gia cần phải nâng cấp để tiếp tục hoạt động trên mạng.
Hard fork xảy ra khi các quy tắc mới được thêm vào mạng blockchain và không được coi là hợp
lệ bởi các phiên bản cũ của phần mềm
NOTE from the hack: Phát hiện ra có lỗ hổng trong việc code của ETH. Trong việc đó đến cuối
cùng có 2 phương án viết lại code cho ETH và mọi người đổi sang system mới và giữ nguyên,
chấp nhận việc mất mát và work tiếp ở chain cũ
7. Proof-of-stake
- Proof-of-stake: Commit financial resources rather than computing power (addresses
sustainability & security)
+ Khi miners muốn tham gia ghi nhận transaction vào blockchain, họ phải stake 1 khoản ETH
(32ETH). Họ sẽ được reward nếu thành công và sẽ có 1 khoản penalty nếu không thành công.
Khoản đó sẽ bị trừ vào khoản mà họ đã stake. Chính vì nhờ việc cọc mà giúp làm giảm tình trạng
tốn năng lượng và cạnh tranh vì không phải ai cũng có ETH để stake và nếu không làm được sẽ
bị phạt. Bên cạnh đó, các stakers cũng sẽ được chọn randomly để tham gia 1 community với
nhiệm vụ xác nhận validiating proposed blocks.
+ Stakers sẽ có thể được nhận/phạt từ các nguồn sau: proposing a block + reward, tham gia vào
community để xác nhận blocks được proposed từ các stakers khác. Nếu stakers inactive trong
mạng lưới cũng có thể bị phạt 1 khoản penalty ( 2 nguồn thu chính )
+ Bên cạnh đó, nếu một thợ mạng cố gắng xác nhận giao dịch không hợp lệ, họ có thể mất một
phần hoặc toàn bộ tiền cọc của họ.
ETH 1.0 ETH 2.0
Proof-of-work Proof-of-stake
Problems about sustainability and Solve problems about
security sustainability and security
8. ETH 2.0
* Beacon chain
- Quản lý danh sách các validators và chọn ra validators tham gia vào quá trình validate blocks
( cơ chế lựa chọn các validators xây và xác minh blocks)
- Xác định thứ tự của các khối và thực hiện các hợp đồng thông minh PoS.
- Đảm bảo đồng bộ hóa giữa các shard chains (chuỗi shard), mỗi shard chain quản lý một phần
của dữ liệu mạng Ethereum ~ Cross-links shard chains and mainnet
* Shard chains
- Phân tách và xử lý các giao dịch và hợp đồng thông minh trên từng shard cụ thể ( 1 block lớn
gồm nhiều giao dịch sẽ được chia thành các block nhỏ hơn để dễ dàng xác minh giao dịch)
- Tăng khả năng xử lý song song, giúp tăng tốc độ xác nhận giao dịch và cải thiện hiệu suất của
mạng
- Đảm bảo tính bảo mật bằng cách sử dụng Beacon Chain để quản lý và đồng bộ hóa các shard
WEEK 5: DECENTRALIZED FINANCE
DeFi is a financial platforms or instruments which operate on smart contracts and are governed
by token owners
1. Stablecoins
- A stablecoin is pegged to a stable asset such as USD. The value of coin equals to the unit of
pegged asset
- There are 2 types of stablecoins:
+ Asset-backed stablecoins: stability depends on pledged collateral ( stablecoins được back up
bởi các tài sản có giá trị tương đương với lượng stablecoins lưu hành)
+ Algorithmic stablecoins: stability depends on mechanism to match supply and demand (là cơ
chế điều chỉnh lượng demand/supply sao cho giá trị stablecoins không bị biến đổi quá nhiều
xung quanh giá trị = 1 USD)
- Functions of stablecoins:
+ Frictionless transfer of crypto-investments into a crypto-asset with low volatility ( ví dụ trong
trường hợp giảm giá trị thì có thể bán quy đổi ra stablecoins vì giá trị của stablecoin hầu hết
fluctuate xung quanh giá trị = 1 USD)
+ Payments
+ Crypto-collateralized ~ thế chấp
2. Fiat-collateralized: Tether (USDT)
- Tether limited creates and redeems Tether:
+ To create Tether:
• Send USD to Tether Inc. (currently 0,1% fee for fiat deposit)
• Tether Inc. mints USDT on all major blockchains: Bitcoin, Ethereum, EOS, Tron, Algorand, SLP,
and OMG
+ To redeem Tether:
• Return Tether to Tether inc.
• Tether Inc. pays back Dollar (“not guaranteed”) and destroys token (currently 0,1% fee for fiat
withdrawal)
3. Crypto-collateralized DAI
- MakerDAO governs the stablecoin DAI via smart contracts
- The smart contract MakerVault mints DAI

+ Nếu investors muốn dùng 100 DAI ~ 100 USD thì họ phải có thế chấp 1 khoản collateral ERC
tokens trị giá 150 USD với khoản fee là 4%. Sau khi họ có khoản thế chấp tương ứng, họ sẽ được
phép mint 100 DAI
+ Trong trường hợp khoản thế chấp để mint DAI < collateral ratio min cho phép ~ giá trị khoản
collateral giảm so với DAI thì khoản collateral đó sẽ bị liquidate với phí là 13%. Phần giá trị còn
lại sẽ được chuyển trả cho owners ( khi mint DAI vượt quá mức đã collateral trước đó)
* Mint DAI
- People want to mint DAI for taking advantage of leverage (66%) for earning profit/hedging
- If collateral value no longer sufficient to collateralize the generated DAI, the collateral will be
liquidated.
+ If the liquidation value is not enough (i.e., lower than the value of the minted DAI), the value
of DAI will depreciate
+ If the DAI drops below one dollar, additional MKR tokens are issued and auctioned for DAI,
which get destroyed
Discussion questions
1. How should you obtain DAI if you want to move your crypto-assets in a stablecoin?
- Buy DAI in the secondary market rather than mint
2. Does it makes sense to buy DAI and put it in DSR contract to earn interest?
- Yes, in case the investors expect that there will be a decline in the crypto market, they want to
convert their assets into stable coin which is pegged to USD
3. Why does MKR hold value?
- MKR holds value because it has a positive CF from stability and liquidation fee
4. What is the real world corporate finance equivalent to buying and burning MKR?
- Token repurchases
3. TerraUSD (UST)
- Proof-of-stake blockchain with smart contract functionality like Ethereum
TerraUSD là stablecoin có giá trị tương đương 1 USD. Khi TerraUSD có giá trị dưới 1$, investors
sẽ mua terra và convert sang Luna vì lúc này giá trị Luna khi mua bằng Terra sẽ rẻ hơn. Và ngược
lại nếu giá trị Terra > 1$, investors sẽ mua Luna và đổi ra Terra sau đó bán Terra
4. Decentralized exchanges
Centralized exchanges Decentralized exchanges
- Assets not under our control - No intermidiary and transact
- Have to trust the exchange to buy and sell directly with other parties
on your behalf
- Costly because of intermediates
* Liquidity pool
- The design of a liquidity pool is very simple
+ Each pool hosts one trading pair, e.g., ETH – USDT (has many pools)
+ Each pool holds liquidity of both currencies
+ The ratio between both currencies constitutes the current exchange ratio
+ For example: If a pool holds 1000 Eth and 2,500,000 USDT, the exchange ratio is 1 : 2,500
- Liquidity providers have to add both ETH and USDT in exactly that ratio
+ For example: Add 10 ETH and 25,000 USDT (cung cấp 1% trong pool => fee được nhận =1%)
+ Earn a 0.3% transaction fee relative to share in the liquidity pool
+ At any point in time, liquidity providers can withdraw their share from the pool at the
CURRENT exchange rate
+There is risk of “impermanent loss” if prices move substantially (do tỷ lệ giữa cặp tài sản trong
pool thay đổi)
- Can you swap currencies at the current exchange ratio?
+ Not really, an automated market maker (AMM) determines the ratio depending on the
amount you want to exchange
+ Basic rule: The product of the liquidity (N) of both currencies must always stay constant
→ The exchange rate gets less favorable the larger the amount you exchange
→ Similar to price impact when trading in a limit order market
+ AMMs determines the exchange ratio by applying a constant production function:

+ Arbitrageurs usually keep the exchange ratio a close reflection of current market prices of the
underlying assets.
+ Oracles provide the current market price to ensure price manipulation does not pay off: If
exchange ratio too far off, trade will not be executed

+ Impermanent loss ( trường hợp cung cấp liquidity cho liquidity pool thay vì giữ tài sản)
+ Tỷ lệ lấy ra khác với tỷ lệ mới
- Formula for impermanent loss:

5. The evolution of uniswap

- Uniswap v1: Each liquidity pool allowed swapping against ETH
- Uniswap v2: Any two cryptos can be swapped directly
- Uniswap v3: Concentrated liquidity ~ Allows LPs to provide liquidity between pre-defined price
ranges (cho phép các investors cũng cấp thanh khoản nếu giá trong khoảng a-b mà họ mong
muốn khác với uniswap v1 là pool chung và không có khoảng giá mong muốn được bán ~ follow
theo thị trường)
+ Similar to a limit order book
+ Price ranges put a limit on impermanent loss
+ Create higher liquidity around the current exchange rate

- Khi giá trị của UNI tokens tăng lên => phần giá trị của inactive UNI token holders giảm
WEEK 6: TOKENOMICS, CRYPTOCURRENCIES AND THE FUTURE OF MONEY
1. Taxonomy of tokens
- Coin: medium of exchange and store of value
- Security token: conventional security, recorded and exchanged on a blockchain: track
ownership, CF rights
- Utility token: tradable ownership rights of products or services
* When a digital asset is considered as a security
- An investment scheme qualifies as a security if:
+ An investment of money is made by the purchaser
+ The investment is part of a common enterprise among numerous purchasers
+ The success of the enterprise depends on the efforts of a third-party promoter ( put efforts
such as management,… to make the success not just simply buying a machine còn 2 parties
nhắc đến ngoài third-party là giữa người mua và người bán)
+ A purchaser has an expectation of a financial return, such as capital gains
- ETH is a coin ~ medium of exchange and store value but not a security ( third-party promoter
not really)
- DAI is a token but not a security ( financial return)
- UNI is a token and a security
2. Basic attention token (BAT) and the BRAVE ecosystem
- Advertisers thực hiện campains through Brave platforms. Từ Brave platforms => chuyển sang
Brave browser, users khi xem ads trên Brave Browser sẽ nhận được BAT reward cho hành động
của mình. Users có thể chuyển BAT earn được vào wallet để consume (VD như việc reward cho
người tạo content trên BRAVE browser)
- Benefits of the Brave system:
+ Tailored marketing
+ Consumers can decide who to compensate for creating content
+ Incentive to create high quality ad-campaigns
* Airmiles tokens
- Common features:
+ Entitle you to use services provided by issuer
+ You can earn them by using the services of the issuer
+ It is also (in principle) possible to buy additional Airmiles
- Drawbacks:
+ Airmiles cannot be traded (easily)
+ Airlines can determine freely how many airmiles are necessary for a flight.
3. Blockchain-based utility tokens
- Blockchain-based utility tokens bring two novel features to table:
+ They are tradeable. Hence, their value is endogenously determined by the value of the
attached service(s).
+ They are decentralized. The value generated from using and modifying the service cannot be
appropriated by the issuer.
- The blockchain-based utility tokens can help:
+ To secure commitment from future customers by selling a first batch of tokens at a low (or no)
price
+ To accelerate network effects as users are incentivized to create demand for the service
+ To reward network creators without giving them operational control after the network has
launched
4. The price of utility tokens
- Price of tokens is determined by aggregating users’ transactional demand, rather than
discounting cash flows
+ Network effect: the positive externality of one user’s adoption on other users
+ Network effect is key driver of token value
- The equilibrium token pricing formula has 3 features:
+ Token value depends on the platform’s productivity, which captures the platform’s
functionality and other related factors (e.g., technology and regulatory environment).
+ The user base enters positively into the pricing formula, capturing the positive network
externality of user adoption (càng nhiều người dùng càng tốt)
+ User heterogeneity (i.e., transaction needs/types) matters for both platform adoption and
token pricing ( mục đích sử dụng token)
5. Optimal financing with utility tokens
6. Initial coin offerings (ICO)
- An ICO is a fundraising method by which digital tokens are sold in the primary market
+ ICO is different from IPO because of their entirely digital nature, and also because of unknown
geographic location, ICOs have mostly ignored security regulation
7. Initial exchange offering (IEO) and Initial DEX offering (IDO)
- Centralized exchanges platforms for token offerings (Binance): có sàn giao dịch provide a set of
rules for initial offering
- IDO: issue new tokens by swapping one token into another one (-> PancakeSwap) ~ đổi 1 token
hiện có lấy 1 token mới theo tỷ lệ nhất định
8. The future of money
* Differentiate between money, currency and fiat-currency
Money Currency Fiat-currency
- Medium of exchange - A bearer instrument - A government-issued
- Store of value - Transactions cannot be reversed currency
* Central bank digital currency (CBDC)
- CBDCs are likely to replace stablecoins, because they are free of (counterparty) risk
- CBDCs will come in three flavors:
+ E-money (need to transfer money to an app)
+ Account-based CBDC (need to transfer money to a central bank account)
+ Official cryptocurrencies operated on permissioned, proof-of-stake blockchains (not simply the
digital equivalent of existing fiat-currency)
- CBDC also may:
+ Extend the toolbox of monetary policy
+ Eliminate money laundering, corruption and financing illegal activities
- Cryptocurrencies (stablecoins) hurt strong currencies, but may benefit weaker currencies by
reducing fiat competition and dollarization
+ U.S. and USD will benefit from regulation requiring that dollar backed stable coins are
collateralized with dollars
+ If fully dollar-collateralized, dollar pegged stable coins would increase the demand for dollars
- Pecking order of digital currency adaption:
+ Countries with strong, but non-dominant currencies are the first to adopt CBDCs to gain
technological first mover advantage.
+ Countries with dominant currencies move next to nip cryptocurrency growth in the bud and
to counteract competitors’CBDCs.
+ Countries with weak currencies adopt cryptocurrencies instead