CS 4970

Cryptocurrency

Introduction

Aaron Bloomfield (aaron@virginia.edu)
@github | ↑ |

Motivation

If you bought Bitcoin…

…in 2010 for $0.25 per BTC
- Let’s say you spent $100
- You would have owned 400 BTC
That would be worth $37 million today!
- (assuming a price of $94k per BTC)
That amount of growth is not likely to ever happen again…

This course will not make you rich

It does not teach you about investing in cryptocurrency
Instead, it will focus on the technical aspects of cryptocurrency
Two rock-solid investing tips:
1. Go back in time to 10 years ago and buy a lot of Bitcoin
2. Be VERY wary of anything cryptocurrency related, as it’s full of scams

Coins Studied

This course will primarily focus on the technical aspects of two coins / networkss:
- Bitcoin (BTC, ₿): the first real viable cryptocurrency and the most valuable; ASIC mineable
- Ethereum (ETH, Ξ): has significant improvements over Bitcoin with much more functionality; no longer ASIC mineable
We’ll also see a bunch more, but in lesser detail…

All the coins we’ll discuss

Cryptocurrency Market Cap

From https://coinmarketcap.com/charts/

Bitcoin dominance

From https://coinmarketcap.com/charts/

Course Structure and Logistics

Instructional Staff

Aaron Bloomfield

Rice Hall, room 402
aaron@virginia.edu

Course TAs

William, Youssef, Abby, and Jonah

Course resources

Contained in the Canvas workspace: landing page of links, Piazza, Gradescope, lecture videos, files download
- And a link to the course email address
External course materials
- Most of the course materials can be found online at
  https://aaronbloomfield.github.io/ccc
- Or via the github repo at
  https://github.com/aaronbloomfield/ccc

Contacting Us

Feel free to chat with me right after any class
- ~~Although I teach another class right after this, so it will have to be quick~~
Please email the course email rather than emailing me
- Linked to from the Canvas landing page
Office hours will start next week
Anonymous feedback through Canvas

Contacting You

The daily announcements slide set
- If you miss lecture, you are responsible for checking it!
Anything else that is “urgent” will be posted to Piazza as an instructor note
VERY few notifications (possibly none!) will be sent out as a course email
- How to do this is non-intuitive in Canvas
Thus, you have to check two places for updates: the daily announcements slide set and Piazza
- But if you log into Piazza via Canvas, then that one action will check two of them

Meetings

Lectures: Tu/Th 11:00-12:15 in Thornton A120
Lectures are required
- There will be surprise pop quizzes and/or attendance taking in lecture
If you have to miss a lecture, there (will be) a Google form for you to fill out
- Linked to from the Canvas landing page
- Please don’t email me or the course email that you are going to miss a lecture!
- These generally have to be in before class starts
  - Reasonable exceptions for unexpected circumstances and emergencies, of course

Expectations

Prerequisites: CS 2150 (PDR) or CS 3100 (DSA2), with a grade of C- or higher
- This is a strict pre-req!
- Reason: you need three semesters of collegiate-level programming courses
- Another programming class, that requires CS 2100 as it’s pre-req, is likely acceptable
  - Chat with me after class

Homeworks

There will be a combination of:
- Larger programming homeworks (about a dozen): the ‘P’ homeworks
- Smaller (‘S’) homeworks, such as tutorials and readings (currently about half a dozen; more may be added)
Often one of each may be assigned at any given time
- But their due dates will be staggered
There will also be random in-class quizzes on the readings; if you are absent that day, you get a zero
- Unless it’s an emergency, you can only be excused if you fill out the excuse form BEFORE lecture with a valid reason

Homeworks

You can see them all on the homeworks page
Please don’t start them early!
- They are all going to have changes made, including some fairly significant changes
- I’ll have them ready a week or so before they are due
- And I will clearly announce when that happens
  - Either in the daily announcements or on Piazza

HW submission: Gradescope

We will be using Gradescope
All assignments will be autograded
The specifications and some test cases will be included in the homework descriptions
- Gradescope will use the same type of tests, but with different data
- You may submit as many (reasonable!) times to Gradescope as you want before the deadline passes
Gradescope submissions will open 3 days (72 hours) before the due date/time

HW Submission: smart contracts

Starting with homework P5, you will have to deploy your code to a private Ethereum blockchain in addition to the Gradescope submission
- You can deploy as many times as you would like
There will be a bunch of other oddball submission requirements
To ensure you submit everything you should, you will have to submit a Python file as well
- We’ll provide the template, such as this one; you just have to fill in the values

Piazza

We all know Piazza
- If the e-mail settings default to “send annoying emails all the time”, you can easily change this
- In Piazza, in the upper-right, click on the gear/settings icon, select “Account/Email Settings”, and then select “Edit Email Notifications” under “Class & Email Settings”
Rules
- Don’t post any code on it, period (that’s an honor violation!)
- Note that you can post anonymously to each other, but the course instructional staff will know who you are
- If you start trolling other students on Piazza, I will permanently ban you from it
  - Please be respectful of your fellow students in the course!

Development environment

You will have to have a (working and recent) notebook computer for this course
- Don’t have one? Speak to me, and the dept can loan you one
You can use any development environment you want (Windows, Mac, Linux; IDEs are okay also)
You will have to use a free development environment that we will provide info on
- Either the Remix IDE or the Truffle Suite or Hardhat

Nothing to buy!

Textbooks: Nope! Too expensive and too much of a scam
Cryptocurrency: also nope; not required for this course
- If you want to buy it on your own, please wait until we discuss the legal and tax implications before doing so

Course syllabus

It is available in the github repo
- Click here to view it
It contains all the information covered so far, plus some more information

Grades

Grades are computed by:
- 10% class participation (in-class quizzes)
- 45% homeworks
- 20% midterm: Thursday, February 27th, in class
- 25% final exam: Friday, May 9th, from 9am - noon

Learning your names…

I am determined to learn each of your (first) names

So if you raise your hand in lecture, and I don’t call on you by name, you have to say your first name before your question

Don’t be offended if it takes me a while – there are 80 students in this course (and 200+ in my other course)…

Course Goals

Understand the theoretical aspects of cryptocurrency
Understand the basics of blockchain in general, and the details of a selected number of blockchains
Understand the uses of cryptocurrency and blockchain beyond that as a form of money
Understand the policy, ethical, legal, and tax implications of cryptocurrency
Be able to develop programs for a specific Blockchain
Implement a fully working modern cryptocurrency

Lecture topics

You can see the slides on the lecture slides page

Course Introduction
Cryptocurrency overview
Encryption
Bitcoin
Mining
Ethereum
Solidity
Tokens
Consensus

Blockchain Applications
Stablecoins
zkSNARKs
Scalability
Algorand
Ethics, Legality, and Policy
The Dark Side of Cryptocurrency
Course Conclusion

Initial assignments

HW S1: Introductory Survey is an online Google survey
- Link on the Canvas landing page
- Due next Tuesday (by midnight)
Soon (but not ready yet!): start on HW P1: Introduction
- You may want to wait until the Cryptocurrency Overview slide set is discussed first
- This is (essentially) the same as what was assigned in my sections of CS 3710: ICS
  - So you can use your code from that course, if you did it in that course
  - But there are a couple of tweaks to the program and output format
- Due the Tuesday, January 21st (the second week of the semester)

Late Policy

There are expected to be 13 assignments this semester (12 P assignments, and 2 S assignments)
- The other few S assignments are readings and surveys
Standard late penalty: 25% off per day (or fraction thereof)
You may submit 6 of them up to 4 days late with no penalty
- You have to fill out a form before the due date for this; it will be on the Canvas landing page
After using your 6 free passes, the late penalty applies
This covers ALL circumstances: sick, busy, travel, dog ate your homework, family emergencies, etc.
- And, generally, SDAC accommodations

Late Policy Rules

There is no penalty for using all of them
There is no bonus for not using some of them
You have to submit the request (via the Google form) BEFORE the due date/time
If you use them all early, and an emergency comes up, then you do not get any more extensions
You can only use one per assignment
After 4 free days, the standard late penalty applies

Programming Homeworks

Introduction & Bitcoin assignments:
- HW P1: Overview
- HW P2: ECDSA
- HW P3: BTC parser
- HW P4: Bitcoin scripting
Ethereum smart contract assignments:
- HW P5: dApp Gradebook
- HW P6: dApp Tokens
- HW P7: dApp Auction
- HW P8: DEX
Web3 assignments:
- HW P9: DAO & web3
- HW P10: Arbitrage trading
- HW P11: MetaMask

Honor Policy

Class Honor Policy

The University of Virginia Honor Policy in effect. In addition to the normal rules, we have additional rules (full details in the course syllabus):

You may not look at the code of another student (past or present) for ANY reason
You may not try to hack my submission system
You may not discuss the midterm details to someone who has not already taken it
You may not release your source code online (including in a public github repo)

Class Honor Policy, continued

The University of Virginia Honor Policy in effect. In addition to the normal rules, we have additional rules (full details in the course syllabus):

We realize we shouldn’t have to say this, but we will not sign more than one conscientious retraction for a given student within one semester.
We thought this was obvious also, but apparently we have to say it: you can’t submit somebody else’s code as the main part of the assignment and claim it is valid because you cited that code. The point of the labs is for you to do the work, not for you to do a Google search.

Generative AI

You may use generative AI, such as ChatGPT, to help you study and understand concepts
All the code you submit must be your own, and cannot come from a generative AI
- It turns out that generative AI is not all that useful for most of our assignments

Class Honor Policy

Any honor violation or cheating will be referred to the honor committee, and will result in immediate failure for the course

We have done this before, and we will do it again. Please don’t test me on this.

Legal Issues

Cryptocurrency mining

“Mining” cryptocurrency is a process by which a computer performs significant comptuations to help the cryptocurrency
The user gets a small amount of the cryptocurrency as a reward for doing so
This uses a lot of electricity, and costs money as a result
We will see mining in great detail this semester

Disclaimer

I am not a lawyer. But I have discussed this with UVA’s lawyers. However, they are lawyers for me (as a UVA employee) but not for you (as a UVA student).

Mining legality

Can you mine cryptocurrency at UVA?
Consider Virginia statute 6.2-1901:

No person shall engage in the business of selling money orders or engage in the business of money transmission, whether or not the person has a location in the Commonwealth, unless the person obtains from the Commission a license issued pursuant to this chapter.

Mining legality

Virginia statute 6.2-1901 requires:
- You get a license if you are in the business of money transmission
Bug if mining is not your business, then you are not directly targetted by that statute
Thus, so far, mining is fine in the state of Virginia. But…

UVA’s acceptable use

UVA has an acceptable use policy – and policy PRM-011:

Students are allowed reasonable use of University equipment when it is related to scholarship, research, and public service, and/or approved extracurricular activities. Such use requires approval of the appropriate equipment supervisor, provided the University incurs no unreasonable costs for materials, supplies, maintenance, and/or repairs.

UVA’s acceptable use

This means you can NOT mine cryptocurrency that:
- Uses UVA equipment
  - Either server-based machines or a loaned notebook
  - This includes a UVA machine mining at your off-grounds apartment
- Uses UVA electricity
  - This means you are not allowed to mine in your dorm room, even on your own machine

Legal permission

But… how to teach cryptocurrency without mining?
This course has received legal permission from UVA’s general counsel to mine cryptocurrency, as long as ALL of the following are true:
- The mining resource use is “reasonable” and necessary in pursuit of the academic goals of this course
- The cryptocurrency mined has zero market value (a “fake” cryptocurrency)
  - This implies that it cannot be traded for any other “real” cryptocurrency (meaning one with a monetary value)

Further permissions

ITS and InfoSec have also approved the use of “fake” cryptocurrency in this course, as long as…
- Any mining that you do must ONLY use mining software or libraries that I approve
  - The reason is that there is a LOT of malware distributed through shady mining software
- Any software linked to from an assignment for this course, or provided on the VirtualBox image, is thus considered approved for your use

Tax implications

The IRS will ask this question on the IRS form 1040:
- “At any time during the past tax year, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
  - The wording tends to change slightly from year to year; previous years used the phrase “virtual currency”
This is why we aren’t making you buy any cryptocurrency for this course
The “fake” cryptocurrency that you mine and trade in this course does not qualify as a ‘yes’ for that question…
- … as there is no “financial interest” with it since it has zero market value

Can (should?) you mine cryptocurrency on your own?

Not on UVA equipment or on grounds!
- ITS scans for this, and can revoke your computing access if they catch you
If you do it on your own off grounds…
- Be sure to understand the tax implications involved
- And the electrical cost versus the reward gained