I&E 550: Innovation and Cryptoventures

Campbell R. Harvey
Professor, Fuqua School of Business, Duke University, Durham, NC USA
Research Associate, National Bureau of Economic Research, Cambridge, MA USA
Investment Strategy Advisor, Man Group PLC, London, UK

Spring Term 1 and 2, 2015

[Draft] Course Description

The way that we exchange property is ripe for disruption over the next few years. Current methods are expensive (e.g. credit cards have 3% transaction charges and many other fees) and they are not secure (e.g. Target "lost" private information for 40 million customers). This course analyzes peer-to-peer methods of exchanging and identifying ownership that are highly secure, involve minimal trust between transacting parties, and have extremely low transactions costs.

This is not simply a course exploring transactions in bitcoin. The idea of the course is to understand a disruptive technology and to assess its implications on how business is conducted in the future. Much of our focus is on the network behind bitcoin and the many ventures that have already begun to capitalize this innovation. This network, which includes the blockchain, provides a secure way to verify ownership of anything. The security is established by the massive computing power necessary to add to the blockchain. Think of the blockchain as a secure repository of common knowledge. A wide range of items can be attached to the blockchain from ownership of a car or access to cloud computing to medical records. Indeed, it is possible to create algorithmic contracts within this network. This leads to the possibility of disruptions not just in finance (stocks, bonds, etc.) but also in law (simple contracts) and other fields. It is even possible to create what is known as a distributed autonomous corporation – essentially an autonomous computer program that employs people and conducts business as a corporation would.

The course is available to Law students, MBA students, graduate students, and undergraduates (with the expectation that undergraduate students will demonstrate a strong set of technical skills). Permission of the instructor is required for enrollment. This university-wide course is offered through Duke's Innovation & Entrepreneurship initiative (hence, the "I&E").

Who Am I?

To get to know me, go to my homepage and follow some of the links, for example my Media page or my most recent research papers.

In addition to my job at Duke University, I am Investment Strategy Advisor to the Man Group, PLC. The Man Group is the second largest hedge fund group in the world.


There are no prerequisites.

Class Schedule

We meet once a week on Thursdays from 3:20pm to 5:35pm. The first class meeting is on January 15. A full schedule of the class meetings is found below.


There is a single deliverable. This course is a challenge to grade because everyone has their own expertise. Hence, the course grade is determined by a single entrepreneurial group project that is presented near the end of the course. The ideal group size is four with representation from law, business, computer science and other. I will form the groups. At the end of the term, group members score the contributions of each member to avoid free-riding. The project is to pitch a new venture idea linked to blockchain. Each group comes up with an idea and hopefully the distribution of expertise within the group makes the ideas very high quality.

Outside Class Contact

E-mail me at cam.harvey@duke.edu. At odd hours, you can text me at 919-271-8156 (if I am not available, I simply turn it off, so don't hesitate to text) You can also call me. Again, when I am busy or sleeping, my phone is on do not disturb.

NDAs and Other Legal

NDAs may be required for outside presentations. In addition, we (yes, including me) will need to sign documents to minimize the chance that any group ideas are poached after the course ends.


There are no required texts in I&E 550. There is a reading list below.

Pre-Class Reading

Read whatever you can on bitcoin to start with. It is easy to find material and some of that material is listed below. You should look at the original Satoshi Nakamoto paper (it is difficult to read). There are now plenty of sites that have introductions to bitcoin -- even the Khan Academy.

Guest Appearances

We will have a number of guest appearances both from within Duke University and outside. We will frequently engage guests by video conference. In class experts include, David T. Robinson, J. Rex Fuqua Professor of International Management, Fuqua School of Business who lectures on venture capital. James D. Cox, Brainerd Currie Professor of Law, Duke Law School, who will talk about the risk of cryptocurrencies being classified as securities. Will update soon...

Class Topics

Here is a tentative list of topics. The schedule is somewhat fluid in that I may spend longer on some topics and spillover to the next class. I might add or delete topics. I will also be interested in your input for topics.

1. Thursday January 15 15:20ET

1. Course introduction. Bitcoin Myths and Facts.

High level introduction. We explore some of the common misunderstandings about bitcoin. The strengths and weakness of the current implementation are also introduced.

2. Thursday January 22 15:20ET

2. Cryptofinance

We circle back and explore in greater details how transactions occur on the blockchain. Mining is also examined.

3. Thursday January 29 15:20ET

3. Cryptofinance

The history and mechanics of digital currencies. We detail the pros and cons of digital currencies. We introduce some alternative currencies.

4. Thursday February 5 15:20ET

4. The blockchain innovation

We first discuss the problem the blockchain solves. This involves a discussion of Byzantine General's Problem. We also spend time on recent developments of businesses using blockchain technology. This includes an introduction to counterparty, bitshares, coloredcoins, and side-chains

5. Thursday February 12 15:20ET

5. Risks

Discussion of all of the risks that the new technology faces. The list includes 51% problem, scalability, other technology concerns and illiquidity

6. Thursday February 19 15:20ET

Understanding and forecasting disruption

Examples of disruption include: medical radiology, media, mail, education, the share economy (taxis, accommodations, food), and others. There is an open discussion on the next targets for disruption.

7. Thursday March 19 15:20ET

Introduction to venture capital

Objective will be to help students understand why VC's are interested in investing in bitcoin-related technologies. Topics include walking students through some of the mechanics surrounding how VC's take ownership stakes in private companies, how these stakes are diluted through subsequent rounds of investing, and how their returns are realized through exits. Some simple math helps to illustrate why VC's naturally gravitate towards highly right-skewed payoff distributions. Then, coordinating with the law faculty, students are taken through the contours of a VC term sheet.

8. Thursday March 26 15:20ET

8. Money and the Law

An explaination, legally, what money means and how—and functionally, why—bitcoins fit within that definition..

9. April 2 15:20ET

9. Regulatory environment

The legal environment is explored with attention paid to Anti-Money Laundering (AML) laws, and Know Your Customer (KYC). The regulatory environment is also assessed. Case: E-gold

10. April 9 15:20ET

10. Cryptography 101

Introduction of the science of communication the presence of an adversary. Topics include: common keys, Diffie-Hellman key exchange, RSA, and ECDSA. While we only provide an overview of each method, this is a challenging but important lecture.

11. April 16 15:20ET

Class Presentations I

The time allotment depends on the enrollement. Presentations need to allow time for questions.

12. April 23 15:20ET

Class Presentations II

The time allotment depends on the enrollement. Presentations need to allow time for questions. Last half hour for course summary.


Useful Resources

Protocol definitions and history:
https://en.bitcoin.it/wiki/Main_Page  (bitcoin wiki)
http://historyofbitcoin.org/ (general information, history of bitcoin)
https://bitcoin.org/bitcoin.pdf Original Satoshi Nakamoto Whitepaper

Cryptofinance in education:
http://www.coindesk.com/top-us-colleges-begin-offering-bitcoin-courses/ (info on courses)
http://ssrn.com/abstract=2438299 (Duke course)
http://pages.stern.nyu.edu/~dyermack/courses/BitcoinCourse.pdf (NYU course)
http://www.cryptolina.com/  (conference, Raleigh August 2014)

Network Status and Adoption Trends:
https://blockchain.info/charts (Historic trade prices, transactions, mining hash rate, block sizes)
http://www.bitcoinpulse.com/ (Adoption and usage metrics)

Bitcoin Storage:
Select Web Hosted Wallets
                https://blockchain.info/wallet (Wallet)
                https://www.coinbase.com (Wallet/exchange services/payment processor)
                https://www.circle.com (Wallet / exchange services)

Select client side software
                https://bitcoin.org/en/ (core protocol implementation)
                https://bitcoinarmory.com/ (wallet software / cold storage)
                https://multibit.org/ (light, non-full node wallet)

Hardware Wallet

Bitcoin 2.0:
https://www.counterparty.co/about/ (Counterparty)
http://www.infoworld.com/t/encryption/bitcoin-finally-pays-in-secure-cloud-storage-240386 (general information, Storj.io to use blockchain as basis for cloud storage)

Buying/Spending/Trading Bitcoin:
Exchanges and ATMs
                http://planetbtc.com/complete-list-of-bitcoin-exchanges/ (list of current Bitcoin exchanges)
                http://www.coindesk.com/3-forces-shaping-next-generation-bitcoin-exchanges/ (information on exchanges)
                http://www.coindesk.com/7-charts-show-year-growth-bitcoin-atms/ (info ATM growth)
                http://www.coindesk.com/margin-trading-blame-bitcoins-price-decline/ (discussion of price fluctuations)

Payment processors for retailers
                https://bitpay.com (payment solution)
                https://coinbase.com (payment solution and wallet)
                https://bips.me/ (payment solution)
                https://www.gocoin.com/ (payment solution)

Bitcoin legal, accounting, and regulatory status:
http://cooklaw.co/blog/irs-bitcoin-is-property-not-currency (general information, blog)
http://bitcoinmagazine.com/11984/data-series-interview-patrick-murck-general-council-bitcoin-foundation/ (general information, legal)
http://www.dfs.ny.gov/about/press2014/pr1407171.html (Bitlicence proposal by NY DFS)

Bitcoin risks and critiques:
http://www.positivemoney.org/2014/04/bitcoins-fatal-design-flaws/ (details potential design flaws)
https://econsultancy.com/blog/64542-bitcoin-or-bitcon-the-challenges-facing-the-crypto-currency-sector#i.171o56551icz2x (details potential security flaws)
http://www.businessinsider.com/why-it-takes-so-long-to-buy-bitcon-2014-7 (length of time to buy a bitcoin)
https://www.surfeasy.com/will-bitcoin-ever-be-truly-secure/ (questions security of bitcoin)

Mining, Security, and Network Scalability:
https://bitcoinfoundation.org/2014/10/a-scalability-roadmap/  (Discussion on future protocol changes)
https://bitcoinfoundation.org/2014/10/blocksize-economics/ (Discussion on future protocol changes)
https://bitcointalk.org/index.php?topic=157141.0;all ​(proposal to fund mining through assurance contracts)​
http://www.topbitcoinmininghardware.com/top-bitcoin-asic-miners-comparison-chart/ (comparison of mining hardware manufacturers)

Bitcoins and Venture Capital:
http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/?_php=true&_type=blogs&_r=0 (Marc Andreessen in the New York Times).