Blockchain Economics
University of Paris-Dauphine
Master 297: Digital Economics
2020 – 2021
Louis Bertucci
Institut Louis Bachelier
louis.bertucci@institutlouisbachelier.org
Objectives
While this is a fairly recent technology, this class will take students through the
fundamentals of blockchains as well as implications regarding financial, economic or
social interactions. The class will start by some history needed to understand what lead
to the creation of Bitcoin, the first blockchain, in 2009. We will then review the detailed
functioning of a blockchain. We will continue by discussing important current
developments in the industry as well as implications for the economic environment.
Lastly, we will discuss potential future developments and how blockchains will impact a
broad range of industries. Students will also be introduced to recent academic work
related to blockchains.
Students will be asked to pick a blockchain project from a list and present it briefly during
the presentation session in front of the class (group presentation). When reaching this
presentation session, students will be expected to be able to assess the pros and cons of
a given blockchain project, and have a critical opinion on this project.
Prerequisites
The only prerequisite is basic economics (competition, market economy, utility
maximization).
While knowledge in computer science and economics is needed to properly understand
what a blockchain is, we will go through what is needed just to make sure everyone is on
the same page. In particular we will go through asymmetric cryptography, distributed
networks, consensus, game theory, financial markets and corporate finance. Although
students with knowledge in any of those topics will be more confortable, I intend to
present them “from scratch”.
Course Objectives:
The objective of this class is to give students a deep theoretical overview of what a
blockchain is. Nonetheless we will also use mock-blockchains, write smart contracts and
interact with them, through some computer sessions. This will help solidify the knowledge
learned and de-mystify the functioning of a blockchain.
Students will gain a deep knowledge of how a blockchain works internally. They will also
be very aware of the different issues and perhaps they will be able to spot new use cases
for a blockchain.
Mode of Assessment
The evaluation is still uncertain but will likely be composed of class participation (10%), a
group presentation (30%), some homework (30%) and a final exam (30%). Students are
encouraged to actively interact during the class.
Table of contents
Chapter 1. Prerequisites
Hash functions - Asymmetric cryptography - Peer-to-peer communication - The double
spending problem - The impossibility of consensus
Chapter 2. Blockchain Basics
Bitcoin - Asymptotic solution to consensus: Proof-of-work - Properties of a well
functioning blockchain - Updating the protocol : forks
Chapter 3. Advanced Concepts
Ethereum - Smart contracts - Alternative consensus algorithms : Proof-of-Stake - Scaling
the blockchain - SideChains - Lightning Network - Permissionless VS permissioned
blockchains - Libra (diem)
Chapter 4. Crypto-Economics
The economics of consensus - Token economics - Decentralized finance (DeFi) -
Cryptocurrency and money - Central Bank Digital Currency (CBDC)
References / Recommended Readings
• Melanie Swan, Blockchain: Blueprint for a new economy, O’Reilly, 2015
• Andreas Antonopoulos, Mastering Bitcoin, 2nd edition, O’Reilly, 2017
• Andreas Antonopoulos / Gavin Wood, Mastering Ethereum, 1st edition, O’Reilly, 2018
• Primavera De Filippi/ Aaron Wright, Blockchain and the Law: The Rule of Code,
Harvard University Press, 2018
Academic integrity
Be aware of the rules in Université Paris- Dauphine about plagiarism and cheating during
exams. All work turned in for this course must be your own work, or that of your own
group. Working as part of a group implies that you are an active participant and fully
contributed to the output produced by that group. When you use the web, please state
your sources.
