Algorithms for Decentralized Finance

Catalog description

The advent of cryptocurrencies, NFTs, and more generally, online financial instruments that are not controlled by large governments or banks, has resulted in many new and innovative mechanisms for decentralized finance. This class studies these new mechanisms from the viewpoint of algorithms, optimization, and market design. While blockchains have been a primary motivation behind many of these new developments, the resulting algorithmic and market design issues are more general, and we abstract away the specifics of blockchains and the underlying cryptographic primitives. Topics include distributed and multi-asset exchanges, liquidity pools, automated market makers, credit networks, and rollups (off-chain transactions). We draw connections between these new market mechanisms and more well-studied directions such as prediction markets and Arrow-Debreu equilibria. Includes a research project and a discussion of open directions. Prerequisites: algorithms at the level of CS 161 and optimization at the level of MS&E 111.