Topic 2: Digitalizing Finance

Question 1

Blockchain

Answer 1

Database that is consensually shared and replicated. Three components: block, chain, network. No need for a third party

Question 2

Decentralized Autonomy

Answer 2

Codify the rules and decision-making for an organization, no need for governance

Question 3

Open Banking

Answer 3

Users control their own financial data, rather than banks. Can give this data to anyone, like fintechs, to even the playing field.

Question 4

API

Answer 4

application programming interfaces - allows two applications to talk to each other and collaborate (fintech can get banking data from bank)

Question 5

High Frequency Trading

Answer 5

Relies on synthesizing market data faster than other traders. Sees you have made a trade, buys the stock before you and then sells it to you at a slightly higher price.

Question 6

Case: DAO Hack

Answer 6

Decentralized Autonomous organization - Ethereum was hacked and an individual exploited a loophole to get $55 million from the fund. Options to let it go, or cancel the transaction (which is supposed to be impossible with blockchain). They chose to cancel the transaction and Ethereum collapsed because of a lack of confidence.

Question 7

Case: J.P. Morgan and Open Banking

Answer 7

JPMC seemed to support open banking, but also was one of the major resistors. Eventually Financial Data Exchange created APIs to allow data transfer from JPMC to Mint. This helps ensure data transfer is secure, unlike other methods.

Question 8

Case: Disrupting Wall Street

Answer 8

High frequency traders gain advantage due to fiber optics and direct market access. Regulation not caught up with innovation. People were scared of the stock market because of HFT. The EIX platform slows down HFT and makes it an even playing field.