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Blockchain Beyond Bitcoin: Harnessing Disruptive Technological Potential Yorke Rhodes IV, Achal Srinivasan Spring 2018

Blockchain Beyond Bitcoin: Harnessing Disruptive Technological Potential

Yorke Rhodes IV, Achal Srinivasan

Spring 2018

Contact Information

Instructor:Yorke Rhodes IV, Achal Srinivasan Email:​​Yorke.Rhodes@rice.edu, achal@rice.edu Office Hours:Hours can be made by appointment via email at any suitable location on campus

Course Description

Bitcoin has commanded the public’s attention: despite over $300 billion invested at its peak,

it remains widely unregulated, highly volatile, and poorly understood. Designed in the wake of

the 2008 financial crisis, Bitcoin is a digital currency controlled by no single entity. Like the internet in the early 2000’s, many remain skeptical of Bitcoin’s transformative potential, failing to understand how and why it rethinks upon traditional financial systems.

In a world where personal lives largely exist as online data, we place blind faith—in people & institutions we have never met—to protect data from malicious actors. Instead, Bitcoin uses

a public, transparent record-keeping system, a blockchain, to track ownership and transfer of digital assets without requiring a third-party such as a bank.

Blockchains will allow for trust between participants without the costs of involving “trusted” third-parties, allowing existing social, economic, and political systems to be redesigned in a truly democratic manner. Thus, this course will seek to answer: how will blockchains empower positive and radical change in our increasingly globalized and data-driven society?

Students should be prepared for exposure to highly interdisciplinary discussions regarding applying new technology to rethink existing economic & social structures. No technical or engineering experience is required. Classes will involve discussion of supplementary

background readings and interactive lectures. For their final assignment, students will submit a proposal for a novel solution utilizing blockchains in a problem space of the student’s choice.

Course Objectives and Learning Outcomes

1. Communicate the historical contexts and events which motivated the creation and design decisions of blockchains.

2. Summarize a blockchain’s technical nature by identifying components and their respective purposes.

3. Reflect on a blockchain’s principal role as a provider of trust and security in peer-to-peer systems.

4. Evaluate applications of blockchains as transformative solutions to problems involving information asymmetries in modern economic and social structures.

Required Texts and Materials

No special materials are required. All reading texts and project materials will be distributed in class, or available online.

Assessments

Comprehension Checks and Attendance

To ensure active participation and assess students’ ability to apply interdisciplinary concepts to real-world problems, students will be assessed with brief quizzes on material discussed in class. These “exit tickets”, collected at the end of every class, can be revised until satisfactory, and will be used for attendance.

Weekly Readings and Online Discussions

Students will be assigned supplementary reading materials related to concepts discussed in class. Readings will include open-ended questions which should be answered before the following class period via Canvas Discussions. Students are encouraged to collaborate with & critique posts from fellow students.

Term Project

To assess their understanding of the principles, motivations, and capabilities of blockchains, students will collaborate (in groups of two) on a term project. Students will choose a problem space of personal interest, assess existing solutions through a historical lens, identify the motivations and criteria for a revised solution utilizing blockchains, and propose a working model of this solution.

Grade Policies

A student’s ability to pass this class involves a combination of the following factors:

Consistent completion of in-class comprehension checks

Meaningful participation in online discussions about assigned readings

Demonstrated effort during interactive in-class activities

While subject to the discretion of instructors on a case-by-case basis, grades will be calculated according to the following formula:

Comprehension Checks and Attendance (40%)

Weekly Readings and Online Discussions (30%)

Term Project (30%)

Absence Policies

If a student is absent, it is their responsibility to communicate their absence to the

instructors. If a student misses more than four (4) classes without reasonable cause, they will receive a failing grade in the course.

Rice Honor Code

In this course, all students will be held to the standards of the Rice Honor Code, a code that you pledged to honor when you matriculated at this institution. If you are unfamiliar with the details of this code and how it is administered, you should consult the Honor System Handbook at http://honor.rice.edu/honor-system-handbook/. This handbook outlines the University's expectations for the integrity of your academic work, the procedures for resolving alleged violations of those expectations, and the rights and responsibilities of students and faculty members throughout the process.

Disability Resource Center

If you have a documented disability or other condition that may affect academic performance you should: 1) make sure this documentation is on file with the Disability Resource Center (Allen Center, Room 111 / adarice@rice.edu/ x5841) to determine the accommodations you need; and 2) talk with me to discuss your accommodation needs.

Syllabus Change Policy

This syllabus is a framework for the course, and is subject to change with advance notice.

Course Schedule

I: Critical Events in Modern History Tuesday, January 9, 2018

Reading Review

- Syllabus review

- Course objectives

Lecture Outcomes

- How did the 2008 financial crisis spur development of cryptocurrencies?

- How has hyperinflation in Venezuela motivated the adoption of cryptocurrencies?

- How have credit card hacks (Target, Home Depot), data breaches (e.g. Equifax), and voting manipulation (Russian interference) created a needfor more transparent and secure infrastructure?

- How prevalent are vulnerabilities which allow unauthorized access to our personal data and linked accounts?

Tuesday, January 16, 2018

Reading Review:

- Data Abuse Pyramid

- Shifting focus from legal remedies to security practices

Lecture Outcomes

- What are existing approaches to digital currencies? (e.g. PayPal, HashCash)

- Why did these approaches fail? Specifically, what is the double spending problem, and why is it a requirement for a digital currency to solve this problem?

1-3)

II: A Primer on Cryptocurrencies & Blockchains Tuesday, January 23, 2018

Reading Review:

- Bitcoin Whitepaper (part 1)

- Sequence of transactions as an abstraction of bitcoin asset

- Timestamp server as proof of chronology

- Importance of Satoshi’s pseudonym

Lecture Outcomes:

- What are the primitive components of Bitcoin?

- What is a ledger, and what does its immutability (inability to be changed after-the-fact) enable increased trust and transparency?

- What is cryptography, and why is it so central to a discussion of digital currencies?

- What is the incentive structure behind mining cryptocurrencies? How does this help the network run?

- How are digital currencies created (“minted”)? Why do some have fixed supplies, whereas others don’t?

4-6)

Tuesday, January 30, 2018

Reading Review:

- Bitcoin Whitepaper (part 2)

- Proof of Work as computationally impractical to reverse with chronology

- Incentives for miners to compute Proof-of-Work

- Network communication and collective decision making

Lecture Outcomes:

- What does it mean for a network to reach consensus?

- What is the Byzantine’s General Problem? How does Bitcoin approach solving this problem?

- What are consensus algorithms? What is the consensus algorithm used by Bitcoin?

- What is Ethereum? How is Ethereum different from Bitcoin and other cryptocurrencies?

- What is a virtual machine? What is special about the Ethereum virtual machine? What are smart contracts, and how do they enable new applications beyond financial technologies?

- How do smart contracts enable increased transparency?

Reading: The Decentralized Web, A report by the MIT Digital Currency Initiative and the Center for Civic Media

III: Networked Societies: Trust, Security, and Mechanism Design Tuesday, February 6, 2018

Reading Review:

- Challenges decentralized systems face

- User and developer adoption

- Security

- Monetization and incentives

- Market consolidation

Lecture Outcomes:

- What does it mean for a network to be resilient?

- While blockchains are incredibly secure, what are avenues for them to be attacked?

How is resiliency measured?

- Specifically, what is the 51% attack?

- What is decentralization? What does it mean for a network to be “decentralized”? How can we measure “decentralization”?

Reading: The Meaning of Decentralizationby Vitalik Buterin

Tuesday, February 13, 2018

Decentralization: Public, Transparent, Open Source

Reading Review:

- Spectrums of decentralization

- Structural

- Logical

- Political

- Motivations behind decentralization

- Fault tolerance

- Attack resistance

- Collusion resistance

Lecture Outcomes

- How has the concept of “decentralization” inspired a movement towards

increasingly democratized & transparent design of systems across society?

- What are examples of services that would benefit from decentralization?

- When is decentralization appropriate? When is it inappropriate?

- What does it mean for software to be “open-source”? Who benefits from “open-source” software?

- Why are the majority of blockchain projects open-sourced?

Tuesday, February 20, 2018

Reading Review:

- Incentive mechanisms taken from Bitcoin

- Tokens: incentivize actors by assigning them units of a protocol-defined cryptocurrency

- Privileges: incentivize actors by giving them decision-making rights that can be used to extract rent

- Rewards: increase actors’ token balances or give them privileges if they do something good

- Penalties: reduce actors’ token balances or revoke privileges for bad behavior

Lecture Outcomes:

- What are modern examples of incentive design? (e.g. feedback loops used across social media apps, rewards for civic participation in a democratic society, etc.)

- How have societal, social, and financial incentives been designed to allow institutions and corporations to profit from inequities?

- Given a network structure, how can we infer its incentive design?

- How will decentralized applications allow us to restructure networks more democratically using financial incentives?

Reading: The Token Handbook

IV: Blockchain as a Platform: Applications of Smart Contract Systems Tuesday, February 27, 2018

Reading Review:

- Common properties of tokens

- Types of tokens

- Utility

- Security

- Transferable vs Non-transferable

- Fungibility with respect to store of value

Lecture Outcomes:

- What is the concept of “tokenization”? How does this concept relate to the “tokens” we see on blockchain networks?

- What are the different use cases for tokens in a network? (i.e. what are the different means by which financial incentives can influence behavior in a network?)

- How does tokenization allow for value to flow freely in a world of decentralized services?

- What forms of value can a token represent on a blockchain? (e.g. securities, unique physical assets, currency, etc.)

- What is a utility token? What is a security token?

Tuesday, March 6, 2018

Reading Review:

- Tokens shaping entrepreneurship and innovation

- Fundraising

- Investing

- Community building

- Open sourcing

- Introduction to ICOs as an alternative to IPOs

Lecture Outcomes:

- What is an initial coin offering? How does it differ from traditional investing vehicles?

- How are ICO’s an evolution of the crowdfunding paradigm made popular by Kickstarter, GoFundMe, etc.?

- What is the future of the venture capital industry in a world of ICO’s?

- Why are ICO’s under regulation from authorities like the SEC?

- What is a decentralized, autonomous organization (DAO)?

- How do the traditional processes of a [business, organization, government, etc.] translate to components of a DAO?

- How will the creation of DAO’s change political, economic, and social landscapes?

- How do DAO’s solve the tragedy of the commons?

Tuesday, March 13, 2018 - NO CLASS

Tuesday, March 20, 2018

Reading Review:

- Digital signatures

- Self-sovereign identity

- KYC/AML

Lecture Outcomes:

- What is the definition of identity in a decentralized and digital context?

- How can systems be customized with permissions granted on digital characteristics of identity?

- How can our identity being decentralized be dangerous?

- What existing industries exist which serve as attestations to a digital identity?

- How can our identity be extended digitally which enables unique business opportunities?

Tuesday, March 27, 2018

Reading Review:

- Dark Web

- Digital Gold

- Payments (Micro)

- Tokenization

Lecture Outcomes:

- How can tokenization change the way modern society interacts?

- Why are decentralized exchanges important in enabling this new asset class?

- What are the proven uses cases of blockchain in practice?

- How can these characteristics be generalized to other applications?

- What are the paradigm-shifting implications of blockchains at scale?

- How can we prepare ourselves for this transition?

Tuesday, April 3, 2018

Term Project Presentations: Day 1 (Groups 1-4)

Tuesday, April 10, 2018

Term Project Presentations: Day 2 (Groups 5-8)

Tuesday, April 17, 2018

Recap and evaluations.