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GARY GENSLER: Today we're coming back to blockchain and money,

Act Three of this course.

Now that we've done a little of the basics, a little bit

of the economics, and now it's some use cases

through the lens of finance.

And to say something about one, why

I thought it'd be worthwhile to structure the course this way,

and what I'm hoping we all get out

of these next 10 or 11 lectures is

that I thought that it was important after laying

some foundation of what blockchain technology might

or might not be, and cryptocurrencies,

and of course, talking about the economics,

is to use one field that's the most dominant field right now

about potential blockchain technology

use, which is finance.

It's not the only area, but finance is

completely reliant on ledgers.

It's completely reliant on moving property rights

around multiple parties.

And of course, the first use case

was about Bitcoin, which was a peer-to-peer money.

So I thought even if you're thinking

about this in terms of health care,

thinking about it terms of the internet of things,

et cetera, many, many other use cases, why not take finance.

Now it also happens to be my comparative background.

And I've spent the last three or four decades of my life

around finance.

And so I can be most helpful and dig deep,

you know, probably as deep as you

want to get in the mortgage market, the payment markets,

the exchange markets.

I've probably been there at some point in my career,

or still have contacts and networks and have studied it.

But no doubt, with the 80 of you in this room, or 90 or so,

you're going to press me.

And that I like that.

I will say last weekend was really

a joy reading 50-plus papers that it was only about 25

of you that had decided to hand in papers early in classes 2

through 9.

But class 10 was 50-plus of you.

So I really do have a sense of the class

in terms of what you think about finance and blockchain.

Of course, you'll probably do the same.

I think I might design it differently the next time.

But if you all hand in--

if 50 or 60 of you hand in the papers for class 23,

it will be--

and you have that right.

I'm not taking that away from any of you.

But it means I might be delayed getting back all the projects.

I want to say two or three other things overall.

In terms of where we are, we're halfway through the semester.

And Sabrina and Thalita and I did

a good job of just saying, how are we

doing on class participation?

And I've kidded a lot, and I've joked a lot about who's talked

and so forth.

We're down to about 15 of you that have never

talked in this whole 12--

so I want to work with you.

I'm not trying to torture anybody.

And I really want you to all not to worry

too much about your grades.

I want you to worry a little bit,

but not too much about your grades.

But if you've not spoken yet, and you

haven't gone online-- two people have gone online, both of whom

I've responded to.

You know, come see me.

Try to figure out how to be part of this community

and this discussion, whether it's

in class or online in some way.

Cause again, I want this to be a positive learning

experience for everybody.

In terms of the papers and just some overall things,

by and large they were good.

Some were extraordinarily good, which

you'd expect with such a talented group of people.

But some really made me think and challenged me and so forth.

It is a bell-shaped curve.

Some, on the other hand--

not many-- kind of missed the mark.

So I just want to say a couple of things.

One is, it's not about just answering the three study

questions.

The study questions are really to spur the dialogue here.

There's three questions.

Not many of you, but two or three people just sort of just

tried to answer those.

Think about it as a uniform three-page paper.

Five is the limit.

One or two of you that did six or seven pages.

That's fine, but it's just--

you don't need to, and it's more work, in a sense, for us.

Two is, I really did try to give feedback and comments.

And overall what we're trying to get to is,

what are the economics here?

What is there about append-only logs and consensus protocols

amongst multiple parties writing to a shared ledger?

So multiple parties updating some state

of economic-- an economic state, really--

of property rights or something.

And what verification costs, what networking costs,

could be lowered.

And it's unfair, because all of you

are going to try to figure out a final project together.

And I went back over the weekend looking at the final projects.

I think there's some really neat ideas that you're looking at.

But at the core is what verification costs, what

networking costs, can you lower.

Why do append-only logs consensus

amongst multiple parties sharing a ledger, and possibly

a native token.

Because you don't have to do something around

permissionless native tokens.

But I think some of you will get there.

And we'll have some exciting thoughts.

So those were my thoughts.

If I say in the comments to your paper--

and I only did this two or three times--

come see me, don't be scared.

It might just be I want to pursue.

I said this on some really excellent papers,

and I said this on one or two that just

I thought it'd be worthwhile to talk about.

But I'm trying to just get through this all with you

and have you learn.

So there's just some overall thoughts

on where we are halfway through.

Post SIP week.

Today we're going to talk about payments.

And Thursday we have a guest, Alin.

If you want to get mic'd up, I've

got a mic up here somewhere for you,

cause I'm going to call on you.

Or you can speak from there.

ALIN DRAGOS: I'll be loud.

I'll be very loud.

GARY GENSLER: Yeah.

That's not hard, is it?

So what are we going to do?

We're going to talk about just what are we

trying to cover for the rest of this semester?

Sort of call it H2 in blockchain and money.

The readings, payment systems, ledgers, and credit cards.

Just a little bit of history all together.

And that's when you're going to meet Alin.

Not computer science Alin, but payment Alin.

And we're going to talk about mobile payments, which

is a very significant change all the way

around the globe in payments.

Then global and US payments statistics.

Bitcoin and blockchain we're going to come back to.

And then conclusion.

And remember, whether it's this week, next week,

or the following week, this is all just

to sort of say, well, wait.

What are these use cases tell us about blockchain?

What are these use cases tell us about cryptocurrencies?

My goal isn't that everybody here is an expert in payment.

But if your final project is around the payment space,

or if you ultimately want to go along and become

an entrepreneur and do something successful in this space,

hopefully these two lectures today and Thursday will help.

And I can't remember exactly what next week is.

Next week's central bank and commercial banking.

So next week we're going to turn to central bank

digital currency and what's going on in Sweden,

and why the e-krona project's interesting,

but how's Canada looking at it through their Jasper project?

What's China kind of thinking about

and why they're a little worried about this space?

And yes, what's the private sector doing

around stable value tokens?

So you have sort of a similar thing

coming both from central banks and from the private sector.

I just came from a meeting where one of Larry's colleagues--

he's from the Harvard Business School--

a professor at Harvard Business School

came over because he's got a stable value token project.

And so that's kind of next week.

We're then going to go and talk about ICOs.

You couldn't do a course in blockchain and money

if we didn't talk about initial coin offerings

with, of course, $25 or $30 billion that's been raised.

It's an enormous crowdfunding opportunity for any of you

that want to be venture and entrepreneurial

after this course.

But it's an important, also, test.

Are there attributes of certain economies where

native token is appropriate?

It will spur as an incentive function.

I'm not willing to give up.

I know some of you are minimalist.

I'm still thinking of the Skins and the gamers.

Larry, when you weren't here we identified our most avid gamers

in the class.

And so we always refer to Skins, Shields, and Swords

as a form of native token in the gaming sites.

But where there might be economics-- token economics.

So we'll sort of turn to that.

On the 15th of November we've got

a couple of guests in Jeff Sprecher and Kelly Loeffler,

who run the Intercontinental Exchange and the New York Stock

Exchange and others, but have real live payments and crypto

exchange.

We're going to turn--

oh-- I'm sorry.

I got it out of order.

Primary markets, ICOs is before and after Thanksgiving,

I guess.

And then do a little of the back office side.

The back of a side is clearing and settlement.

I mean, why is the Australian stock exchange

using a permissioned system?

Might you use something else?

Why is the international swap and dealer association

using smart contracts now to try to rationalize a lot

of their payment flows?

So we'll get to real live use cases that

are happening around smart contracts

and permissioned clearing systems.

A little bit of trade finance, digital ID.

I know at least one group is doing some--

one of the groups here is doing something on digital ID.

So you'll be out ahead of us.

So that's kind of a review of H2 for us.

So we had a bunch of readings.

Some of them were quite short.

I don't know, because you're on sip week,

whether you were able to go through them.

But maybe I should just ask, does anybody

want to tell me about some of the major trends in payments?

I don't know how sleepy everybody is or whether--

Priya, I saw your hand, or you were scratching your nose.

AUDIENCE: Either ways, I'll go.

GARY GENSLER: All right.