EmFi Presentation to the Scottish Fintech Seminar

Copyright © Cefriel – All rights reserved
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Daniele Marazzina
Associate Professor of Finance
Politecnico di Milano
Department of Mathematics
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Copyright © Cefriel – All rights reserved 2
• EmFi is a research and innovation project by Politecnico di Milano, University of Stirling and Cefriel, in
collaboration with Council of Milano and funded by the Algorand Foundation.
• The goal of the project is to study crypto and digital currencies supported by new generation Digital Ledger
Technology (DLT), in the context of public financial support to citizens in socio-economic crisis scenarios.
• The project aims to experiment with “special-purpose digital money” and “sustainable and inclusive financial
circuits”, addressing both theoretical issues and validation by pilots with final users.

Why EmFi?
EmFi (Emergency Finance) projects was born to develop efficient and trustable financial instruments based on
Algorand technology to support immediate economic interventions in the Covid-19 post-acute scenario of
relaxation of the lock-down.
It aims to address and experiment with desirable properties of financial intervention, such as
• adequate privacy-preserving accountability;
• fraud avoidance;
• efficient identification of targeted beneficiaries;
• validation of the use of resources, connecting funds to goals in a demonstrable way;
• financial inclusion - covering also unregistered workers and the unbanked/unconnected ones.

Emfi
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EmFi is centred on the development of a special-purpose virtual currency, backed by the State, for the
accountable and frictionless exchange of resources, services, assets, claims among institutions, citizens
and companies.
Partners of the project are
• Politecnico di Milano (QFinLab – Mathematics Department) – financial aspects
• Cefriel – innovation management and technological aspects
• Stirling University (Computing Science and Mathematics) – technological aspects
The project is run in partnership with Comune di Milano (Council of Milano), which is interested in
validating innovative financial and payment instruments.

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www.algorand.com
algorand.foundation
• The project is funded by the Algorand Foundation
• Algorand is a blockchain technology. It has been developed by MIT professor and Turing Prize, Silvio
Micali
• It addresses the so-called Blockchain Trilemma, i.e. to combine decentralization, scalability and security.
• Algorand's native cryptocurrency is called Algo.
• Algorand's motto is "sustainable and ethical finance": it is an experiment that was created to overcome
the technological limits of Bitcoin and other similar proposals

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Algorand
• Features an efficient and secure consensus algorithm, based on proof-of-stake principles and a
Byzantine Agreement protocol
• allows quick finality of transactions
• supports on-chain, i.e. under consensus, smart contract functionality, allowing for programmable
applications
• supports native user-defined assets, allowing for tokenization and the development of sustainable
currency and financial systems
• experiments with forms of decentralized governance

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A bit of history
In 2015, an "alternative" protocol to Bitcoin was studied at the MIT LAB. Silvio Micali (Turing Prize)
lead the research group.
The technology is "released" and becomes a spin-off, based in Singapore and branches in London.
The foundation involves economists, finance and cryptography experts. The goal is ambitious;
become "the technology" for decentralized finance tools (in the meantime, everything happens in
the world of Fintech ..)
Algorand is now a laboratory that aims to bring this "technology / protocol" within startups, and
academies to speed up innovation in this field.

Emfi
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EmFi aim is to provide the opportunity to study special-purpose virtual currencies and their
applications to a significant use case, in partnership with an institutional player such as the City of
Milan.
The planned pilot will be a suitable test for the efficiency, security and robustness of blockchain
technology, in particular Algorand, and specific features like management, asset tokenisation, atomic
swaps, smart contracts, and, on the longer term, co-chains with the integration of different special-
purpose local currencies.

USE CASE: BOOK COUPONS FOR PRIMARY SCHOOLS
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● The Public Authority (Municipality of Milan) distributes vouchers to schools as allowance for
primary school books’ purchase. These vouchers are then collected by children’s parents and used
for the actual purchase at the bookshop
● This system is based on a national regulation: each school must select the books from a national
list of eligible ones for each class, all primary school books are paid by the municipality
● This process require many steps in which each actor in the chain is not connected to the other.

USE CASE: BOOK COUPONS FOR PRIMARY SCHOOLS
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Not an emergency, but a valuable use case:
● general issue of unconnected/off-chain interaction
● … from a “minimal disruption” requirement by the customer
● Can I allow Algo operativity to those who do not have access to technology? (not technology savvy,
elder or disadvantaged, …).
Similar issues appear, e.g., when replacing cash with electronic money.

• Based on distinguishing Algorand features, coupons are treated as transaction
authorisations, distributed as (paper) QR codes to families and enacted by bookstores via a
mobile terminal
• Such a complex scenario is particularly interesting for the implications on the inclusion of
the "unconnected" and, in more general terms, unbanked
• The correct connection between off-chain/disconnected/non-tech savvy players and a
distributed/on-line ledger, as a source of trust, is an interesting and relevant open problem.
• A prototype mobile app has been developed based on the Algorand Wallet (screenshot on
the right).
• A real-world testing with third parties will be performed

ADOPTED SOLUTION (based on distinguishing, layer-1, Algorand features):
● Export a “paper” authorisation in the form of a QR that enables an on-chain transaction ...
● … from a proxy account of the unconnected user (student) to the intended recipient (bookshop)
● Use a Delegated Signature and a smart contract that validates requirements of the transactions
● The bookshop acts as a bridge to the blockchain, requesting the transactions.
TRUST MODEL
● Completely transparent to the student and the school - same business process as before (council’s
requirement)
● The Council is custodian of the key of the unconnected student for the specific intervention (realistic
assumption).

B O O K C O U P O N S F O R P R I M A R Y S C H O O L S
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QR Code Validation of Transaction Transaction
The Pilot 1 allows the bookshop to acquire the «cedola libraria» from the student and to receive the amount in EMFI
MVP Pilot 1- Step 1

MVP Pilot 1- Step 2
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Amount
Definition
Transaction
Validation
The Pilot 1 allows the bookshop to close the loop with Comune

EmFi Presentation to the Scottish Fintech Seminar

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EmFi Presentation to the Scottish Fintech Seminar