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  2. ECONOMICS • We have neither the time nor the money to do everything we might want to do. • Economics is the study of how people make these decisions • Incentives and their impact on behavior – either at a • Small scale – individual person or company • Large scale – country, or specific sector – manufacturing, service,
  3. MICROECONOMICS • Micro – Small • Examines “markets” where buyers and sellers transact – products and services • Question – how much of candy would you buy ? • At what price ? • What factors affect the quantity and the price ? • Demand and Supply
  4. DEMAND SUPPLY CURVE Demand goes up, price goes up Supply goes up, price goes down
  5. CURRENCY VALUE • Why is it a currency note valuable? • Because it is trusted – we can exchange it for good or services anywhere • No double spending - once spent, that money is for someone else to spend again • Guaranteed by the central bank of a country
  6. MACROECONOMICS • Macro – Large • Effect on Society on aggregates – sectors like housing, manufacturing or national/global economy • Economic growth, unemployment, interest rates, inflation, Monetary Policy • Monetary policy – how national central banks controls money supply • The Federal Reserve Bank monitors and supervises other banks • It can increase money supply by • Reducing "reserve requirements" for banks allowing them to lend more money out • Purchasing gov. securities or bank assets, • Reducing short-term interest rates • A rise in interest rate, borrowing ( house mortgage, company purchase ) spending slows, and price drops to control inflation • A drop in interest rate, borrowing and economic activity rises in times of recession
  7. HOW FDIC WAS BORN • A bank run – when many customers withdraw cash from the bank simultaneously • If the bank does not have enough cash it has to sell some investments • During great depression there were bank runs – and 9000 banks folded along with $7B deposits • That is $110B in today’s amount • In order to prevent bank run, FDIC was created • It insures deposits up to an amount – $250K in 2023.
  8. 2008 FINANCIAL CRISIS – DOUBLE SPENDING • House prices kept on going up, and mortgage rates getting lower by year • People kept buying them, even if pricey • Banks offered loans to people even with poor credit histories • These “high risk” mortgages were sold as investments – Collateral Debt Obligation / CDO • Property values at different places were considered “independent” i.e. price cannot go down in all places, and these were considered “Low risk” investments. • In reality, housing price dropped nationwide – starting a domino effect
  9. TIMELINE OF 2008 FINANCIAL COLLAPSE • January 11: Bank of America buys the struggling Countrywide. • March 16: Fed forces the sale of Investment Bank (IB) Bear Stearns to JPM • September 15: IB Lehman Brothers files for Chapter 11 bankruptcy. • September 15: BA offers to buy troubled Merrill Lynch at $50B ($29 a stock – 70% premium ) • September 16: Fed bails out American International Group (AIG) for $85 billion. • September 25: Washington Mutual fails. • September 29: Dow Jones fell 777.68 points and the whole system was on the brink of collapse. • October 3: U.S. government authorizes $700 billion for bank bailouts. • November: Bitcoin paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,”
  10. LINGERING EFFECT OF 2008 CRISIS • 2009 Dodd-Frank regulations • 2013 JPM pays $13B to federal regulators for mishandling of CDO, including some of Bear Sterns that it bought in 2008. • WEO report – worst decade of economy since the great depression of 1929 • 2018 – Some of the DF regulations rolled back
  11. HOW NORMAL BANKS OPERATE • Banks may offer some interest to those customer deposits • Part of the deposits is lent as loan to people/businesses at higher interest rates • Banks also invest some of the deposits to purchase assets just like individuals • SVB in 2023 made lot of investments in Government Bonds - long term • As Fed increased interest rates in 2022-23 those bonds were worth less as current rates are higher • Fueled by Social Media frenzy among tech CEOs, SVB had bank run • WAMU in 2008 had $17B withdrawal in 10 days. For SVB in 2023, it was $42B in 2 days • FDIC closed the bank. Fed rescued every depositor even beyond FDIC insurance of $250K. • Government also offered ”loan of cash at face value” for companies that owned bonds. • Since those bonds were worth less now, the difference is “bailout”
  12. 2023 BANK COLLAPSE – SVB, SIGNATURE • Banks have customer deposits ( insured to $250K ) and it loans out to customers and it has its own investments. Some of the investments were in Gov bonds – that lost value with rise in interest rate. • News on CNN – money beyond FDIC insurance $250K was safe – not a bail out ? • How bank operates from 2022 Economics Noble winner Prof. Douglas Diamond • Story on actual FDIC takeover – that happens almost every week • Analysis on why SVB went down – banking 101 mistakes ? • Justice Department and SEC investigation • “Bail out” – government rescuing reckless, irresponsible banks? • There was no sell out SVB to other banks like Bear Sterns to JPM? • No time to wait for Monday? • Feds do not want the big banks to get even bigger as they can be “too big to fail” • Also banks like JPM do not want to buy
  13. In terms of the absolute total size 2008 – Washington Mutual $307B + others, $374B 2023 – SVB, Silicon - $319B 2009 - $171B Bank failures between 2008,2015 – 500 @ roughly 1.4 every week Between 2001-2008 - 25
  14. 2008 NOVEMBER – BITCOIN PAPER • Satoshi Nakamoto’s paper – “Bitcoin a peer-to-peer electronic cash system” • Cryptography and Cryptography Policy Mailing List. • Some had doubts –
  15. DATABASE • Server software to manage and store large volume of data • Concurrent access by many ( thousands of people ) • Different Types • Transactional ( think store transactions ) vs. Analytical ( what was sold most ) • SQL ( Relational – your bank account ) vs NoSQL ( Distributed - Facebook, Twitter ) • Data can be added, changed, deleted by “transaction” . • All databases data kept in central database servers – in cloud ( large data centers ) or private data centers • A fraction of this data can be downloaded locally on our laptop or mobile • But the ”source of truth” or main database is always in cloud/data center
  16. BLOCKCHAIN DATABASE • A block – consists of a cryptographic hash of previous block, transaction data and timestamp • Timestamp proves that the data existed when the block was created. • Each block is ”linked” to previous block
  17. GENESIS BLOCK IN BITCOIN • The first transaction on bitcoin network - Satoshi “mined” at 01/03/2009 06:15:05 GMT • It is the beginning – does not point to previous block • Contains 50 bitcoins – they cannot be spent or awarded • "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." • Referring to a headline on Times, UK on that day
  18. MINING BITCOIN • Central idea of bitcoin protocol • Process to add new bitcoins to the money supply with verified transactions in the distributed network • Computationally intense • As a reward of participation, you get bitcoin rewards
  19. CRYPTOCURRENCY EXCHANGE • Similar to stock exchange, digital marketplace to trade crypto • There are many available – with different feature, fee, security measures, regulation by country • Coinbase, Binance, Kraken, Bitfinex etc • A public website that lists all transactions
  20. CRYPTOGRAPHIC HASH EXAMPLE • Sha256 • “One way” computation from a string to digest • Not possible to decode it back to string • A simple change in string value, hash changes drastically • echo -n Elyria | shasum -a 256 | cut -d " " -f1 • “Elyria” ->b71aadb5be0342434ba414904346ad08702702a1746abd919627eddf380705e4 • “Elyrib” ->9c5572a6951ff87f097b3a2b9fd670a77d5c39749ed4f0910fcb3617e824b93e • Drastically different but both are 64 bits
  21. BITCOIN IS SAFE AND UNBREAKABLE ? News - 03/21/2023
  22. CRYPTO RUN – FTX • Sam Bankman-Fried (SBF) – founder and CEO of FTX, world’s largest crypto exchange • His personal net worth topped at $26B, before a sudden collapse in a week bankruptcy in Nov 2022 • FTX was headquartered in Bahamas • Investigations on, out on $250M jail
  23. ONECOIN FRAUD • FBI Top Wanted Dr. Ruja Ignatova (video) • Co-Founder of “Onecoin” a fake crypto • No blockchain behind it (BBC story) • Was running out of a SQL server database • Missing since Oct 25, 2017
  24. OTHER USE CASES FOR BLOCKCHAINS • Reproducibility in scientific research • Pharmaceutical drug tracking – preventing use of narcotics • Tracking food safety • Medical records of a patient • NFT – own digital art in small fractions, affordable and secured for users • NFT created on blockchain networks and are traded line crypto currency • First tweet by Twitter CEO Jack Dorsey, sold to $2.9M

Notas do Editor

  1. Source - 
  2. Source:
  3. Source: Apress block chain enabled applications, chapter 1
  4. Source: IMF World Economic Outlook 2018 October, Chapter 2 Source :
  5. 72 hours of SVB collapse -
  6. Money Talks: What went wrong to SVB - Douglas-Dybvig paper on bank runs, insurance and liquidity -
  7. Block chain enabled applications by Apress