Money, financial crises,

cryptocurrencies

Cours 9 – Les cryptomonnaies

Part II: Ethereum, smart contracts and blockchain technology applications
 Plan
1. Some statistics and useful websites
2. Ethereum
3. Other cryptos and the proof-of-stake
algorithm
4. Blockchain technology applications
5. A beginner’s guide to playing with crypto
6. Conclusion
1/ Some statistics and useful websites
Market capitalization
Bitcoin dominance (market share)
 Basic useful websites
• Market and prices
– https://coinmarketcap.com/
– https://www.coingecko.com/
• News
– https://www.coindesk.com/
• Finance decentralisée (Defi)
– https://defillama.com/
– https://tokenterminal.com/terminal
2/ Ethereum
• Ethereum is a decentralized, open-source blockchain with smart
contract functionality.
– 2nd crypto in terms of market cap, live since 2015. Created by Vitalik
Buterin & team.

• Smart contracts refer to small applications stored on a

blockchain and executed in parallel by a large set of validators.
– The code and the agreements are executed on a distributed,
decentralized blockchain network.
– Actions in the contract are executed when pre-determined conditions
are met.
– The code controls the execution, and transactions are traceable on the
blockchain and irreversible.
• Smart contracts permit trusted transactions and
agreements to be carried out among disparate,
anonymous parties without the need for a central
authority, legal system, or external enforcement
mechanism.
– Ex: These actions could include releasing funds to the
appropriate parties, registering a vehicle, sending notifications, or
issuing a ticket.
• Smart contracts are coded in a language called Solidity.
– Similarities with JavaScript.
– It is compiled and deployed on blockchains that understand the
Ethereum Virtual Machine (EVM).
• Explaining smart contract with an example:
– https://www.youtube.com/watch?v=pyaIppMhuic
• Ethereum is then a blockchain on which smart
contracts/applications can be deployed.
– Gas fees for validators are paid in Ethereum (ETH).
• ETH is the native token
– Transactions are signed with your private key.
• The more complex the transaction/the more
congested the blockchain, the higher the gas fees.
– https://ethereumprice.org/gas/
– https://dune.com/hildobby/ethereum
• 2 types of contracts:
– External Accounts (User Accounts): Controlled by
private keys, sends messages and transactions,
contains balance.
– Contract Accounts : contract code is executed if
this account receives a message, can then create
new contracts or write messages depending on
the code.
• Blockchain transactions visualizer
– https://txstreet.com/
3/ Other cryptos and the proof-of-stake
algorithm
• Bitcoin (2009) and Ethereum (2015) are the
oldest cryptocurrencies.
• Bitcoin operates using a proof-of-work
algorithm.
• Ethereum switched to a proof-of-stake
mechanism in 2022.
Proof of stake
 A different consensus mechanism
Proof of stake
• https://www.youtube.com/watch?v=YudpU58
uYuM
 Proof-of-work vs Proof-of-stake

Currently cryptocurrencies running on a proof-of-stake algorithm are typically less

decentralized than Bitcoin.
 The Scalability Trilemma
• The Scalability Trilemma claims that there is a
trade-off between three important DLT
(distributed ledger technologies) properties:
decentralization, scalability, and security.
Main proof-of-stake blockchains

- For instance Avax is the

native currency of the
Avalanche blockchain,
just like ETH is the native
currency of the
Ethereum blockchain.

- There are many other

cryptocurrencies that
are not blockchain-
native tokens, but run
on one or several
blockchains.

Ex 1: Exchange-reward
token like CRV (Curve).

Ex 2: Game tokens like

AXS.
 The case of stable coins
• Definition: A stablecoin is a cryptocurrency whose value is pegged to another
asset, such as a fiat currency, gold or bitcoin, to maintain a stable price.
– In particular strong demand for a stablecoin pegged to the US dollar.

1. Off-chain collateralized stable coins

– The stablecoin is collateralized by off-chain real assets (dollars, bonds, etc.).
– USDT, USDC
2. On-chain collateralized stable coins
– The stablecoin is collateralized by on-chain real assets (bitcoin, ETH, etc.).
3. Algorithmic stablecoins
– Ex: The supply of the stablecoin is adjusted to demand (rebasing algorithm)
• AMPL
– On algorithmic stablecoins and the collapse of UST
• https://www.nuant.com/crypto-insights-research/algorithmic-stablecoins-what-are-th
ey-and-how-do-they-work

4. Hybrid cases
– FRAX, DAI
4/ Blockchain technology applications
Other applications

Other applications
• Arts (NFTs)
• Video games
• Paiements internationaux et
remittances
• Law enforcement (integrity
of evidence)
• Privacy with payments
• Insurance
• Etc.
NFTs
NFTs
Decentralized finance (Defi)
 Defi
• Defi applications
– Lending/borrowing
• Ex: using bitcoin as collateral
– Swapping currencies
• Ex: Trade BTC for ETH
– Providing liquidity to swap pools.
• Buy BTC and ETH and bond them into a liquidity pool that people use to
trade BTC for ETH and vice versa.
– Trading
• Buying, selling, shorting, longing
– Investing in a project (e.g. ICOs)
– Asset tokenization (NFTs)
– Etc.
 A regarder chez vous.

• https://www.youtube.com/watch?v=H-O3r2Y
MWJ4
The case of central banks digital currencies
(CBDC)
• Two types
– Non blockchain based: It would simply consist in
making regular electronic base money accessible
to households and not only commercial banks and
financial institutions as is currently the case.
– Blockchain based: If the blockchain is run by the
central bank, then it is pointless.
The case of central banks digital currencies
(CBDC)
5/ A beginner’s guide to playing with crypto
 A how-to guide
• Open an account with a centralized exchange (CEX)
– Binance, Coinbase, Gate.io, Kucoin, Crypto.com, etc.
– Do KYC (24-48h)
• Follow instructions to wire money from your bank
account to the selected platform.
– Friendly French banks: SG, Bourso, N26
• Buy any crypto you want that is offered by the
platform
– Lend, stake, trade, etc.
Top CEX by volume (24h)
• These are centralized platforms
– Not exactly the spirit of crypto…
– “Not your keys, not your crypto”
– Risk of hacks
• To make the most of crypto, you need to have a non-
custodial wallet that you and only you has access to.
– Metamask
• https://metamask.io/
– Trustwallet
• https://trustwallet.com/
 Accessing Defi
• Once your Metamask wallet is set up, transfer
crypto from the centralized exchange (CEX) to
your Metamask wallet.
– First transfer some native token (e.g. AVAX on
Avalanche blockchain) to be able to pay the
transaction fees.
– Make sure that the token you transfer matches
the blockchain you are sending it to.
 What to do in Defi?
• https://defillama.com/chains
 Miscellanous
• Hot and cold wallets.
• Add a blockchain to your Metamask
– To be able to find your coins on one particular
blockchain, you need to add that blockchain to your
wallet.
– https://chainlist.org/
• Bridges
– Bridges allow you to move funds from one blockchain
[e.g. Ethereum] to another [e.g. Celo].
– https://app.multichain.org/#/router
 Conclusions
• Lots of ressources on Youtube.
• La monnaie comme information dans une
société de plus en plus tertiarisée.
– Impossible to stop.
• Le caractère proprement révolutionnaire de
cette technologie.
 Annex: Web 1.0, 2.0 and 3.0
• Web 1: Web 1.0 is the term used for the earliest
version of the Internet.