School of Management & Entrepreneurship

Shiv Nadar University

Session 14
Prof Ankur Mehra, PhD
Spring 2022 Semester
Office: B – 220 F
E: ankur.mehra@snu.edu.in
Agenda
Four view point?
Module 3
• Introduction to Blockchain & Cryptocurrency

• Money, Ledger and Cryptocurrency

• Blockchain Technology Basics

1. Different Blockchain types and common ingredients

2. How user identities are designed and maintained

3. How data is stored and transferred

4. Decentralized consensus protocols

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 2

Do & Don’t – In-person Class
• Be on time – class starts at 9 AM
• Biometric attendance – No attendance if you are late
• Laptops and Mobile Phones – Strictly No
• Class Participation – Raise your hand & Cold Calls
• Wash-room breaks – Its tricky but still be an Adult

Anyone carrying a notebook and a pen?

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 3

 Introduction to Blockchain
Lets Start.

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 4

Session 13
• Role of Money
• What is Money?
• Evolution of Money – Non-metal money, metal money, paper money, private bank notes
• Ledger and its characteristics

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 5

 Fiat Currency ?
• Social & Economic Consensus

• Represented by Central Bank Liabilities – What does it mean?

• Commercial Bank Deposits also a liability of the commercial bank

• Integrated into Fractional Banking System A liability to maintain

the social consensus
• Accepted for Taxes and stability and not
get it devalued
• Notes & Coins are Legal Tender for All Debts Public & Private

• Unique Tax Treatment

Legal Tender ?
• Relies upon System of Ledgers Coins or banknotes that must be
accepted if offered in payment of a debt.

FinTech | Spring 2022 Semester | Shiv Nadar University

NAME OR LOGO 6
Central Banking, Money & Ledgers

Reserve Bank of India

Cash
ICICI Bank HDFC Bank

Raj Neha
Raj Neha Mukesh

International remittances are difficult as you

need to make two closed ledger systems
operable

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 7

 Central Banking, Money & Ledgers

Why currency in
circulation continues to
increase in India?

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 8

Characteristics of Money?

• Durable – Salt bar vs Gold

• Portable – Gold vs Paper Money
• Divisible – Denomination of 10, 20, 50, 100, 500, 2000, 5000
• Acceptable
• Stable - Limited supply - Hard to Counterfeit
• Uniform/Fungible
• If piece of art is stolen and then found, you get it back. Is the same applicable for money?
• Crawfurd (1749) – Lost a note he signed and went to court asking it to be given back to him when
found and cannot be used by anyone else
• Royal Bank of England – We need to make it a medium of exchange and hence it needs to be
fungible
• https://en.wikipedia.org/wiki/Crawfurd_v_The_Royal_Bank

FinTech | Spring 2022 Semester | Shiv Nadar University

NAME OR LOGO 9
Design of Money

• Token vs. Account Based (Gold vs Ledger)

• Physical vs. Digital (Cash vs CBDC)
• Private Sector vs. Central Bank (Bitcoin vs INR)
• Widely Accessible vs. Restricted (INR vs RBI’s Reserves)

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 10

Bitcoin and Money?

• Bitcoin is a decentralized public ledger

• Just like we work in exchange for having an increase in the
numbers in our bank account, people decided that owing entries
on Bitcoin ledger was worth paying/working for

Why Bitcoin should not be the only form of currency?

• If Bitcoin is the only form of currency, then there will be no way
for the central banks to get the economy out of recession quickly
by printing more money

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 11

 Blockchain Basics
Lets Start.

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 13

Learning Goals

Technical:
• Understand the technical underpinning behind Blockchain technology
• Understand how blockchain technology operates

Commercial:
• Understand the strength and weakness of Cryptocurrencies as a
payment mechanism and as an asset class
• Understand the prospects of blockchain as a business solution

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 14

Module Plan –3 & 4
1. Blockchain Technology Basics
1. Different Blockchain types and common ingredients
2. How user identities are designed and maintained
3. How data is stored and transferred
4. Decentralized consensus protocols
2. Specific Blockchain variations
1. Bitcoin and proof-of-work/mining
2. Ethereum and proof-of-stake/smart contracts
3. Ripple and proof-of-correctness/proof-of-majority

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 15

Traditional Centralized Systems
Most of the financial services are offered through a centralized system of financial intermediation

• Like Visa and Master Card for payments

• Issue of currency by RBI

• Multiple version of truth: Each party (trading parties and the trusted third party) maintain their own
electronic records which are not necessarily in sync

• Little transparency: Each party maintains its own ledger. As a result, parties to an exchange do not have
access to the status of transactions as recorded in the ledgers of other parties, the fees being charged,
which institution exerts control, and so forth.

• Slow settlement times: Trading parties spend a lot of time and money in reconciling and settling
truncations to ensure records are synced

• High transaction costs: Transaction costs are high because the parties involved need to monitor each
other’s activities to prevent opportunist behaviour and to ensure agreements are executed as promised

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 16

Before & After Can decentralized
system based on
Organization A Organization B blockchain Organization A Organization B
technology, wherein
the network users Ledger X Ledger X
Ledger A Ledger B
themselves assumes Node A Node B
some intermediation
roles, perform the
task at a lower
Ledger A Trusted third party cost/higher
efficiency?

Ledger X Ledger X
Ledger D Ledger C
Node D Node C

Organization D Organization C Organization D Organization C

Blockchain: Every participating organization has an

Centralised Database: Every organization has its
identical copy of a shared ledger and transactions
own ledger and relies on a trusted third party
directly
Ex: NSE/CDSL
Ex: Bitcoin

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 17

Blockchain

Essentially, a blockchain is a decentralized database

• As a user, upload database and then broadcast it to authorized entities
• A unique ‘chained’ data-structure
• As database is stored in a decentralized network, some form of consensus mechanism
is used to maintain uniformity
• Main distinguishing feature between various blockchain based systems are
• Type of data you can upload in a blockchain
• How consensus is reached between various parties in a network
• Goal of Blockchain is to enhance trust and system integrity in a financial transaction
without involving a centralized institution such as a bank
• Task of bank spread out to various nodes comprising the blockchain
• Efficient transaction verification & easy tracking of ownership
• High data integrity & tamper resistance

FinTech | Spring 2022 Semester | Shiv Nadar University NAME OR LOGO 18

Thank
You
Prof Ankur Mehra

Ankur.Mehra@snu.edu.in
hhttps://www.linkedin.com/in/ankur-
mehra-phd/