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Solution To Fintech Chapter 1

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Solution To Fintech Chapter 1

Uploaded by

Safia Khani
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The Digital Triumvirate of Computation, Data, and Connectivity

The past 50 years have seen rapid technological change that has fundamentally shifted the
boundaries of human possibility, enabling radical improvements in productivity, new scientific
advances, and the advent of both new communities and new divisions within society.

 Increasing Computational Power

1. Gordon Moore's Prediction: Back in 1965, Gordon E. Moore, co-founder of Intel,


predicted that the number of transistors in a computer chip would double every two
years. This prediction, known as Moore's Law, turned out to be true and has been the
key driver behind the rapid advancements in technology over the past 50 years.

2. Computational Power Boom: Thanks to Moore's Law, computers have become


incredibly powerful. Between 1980 and 2010, the number of transactions a computer
could do for just one dollar increased by a whopping 10 million times. Now, the average
person carries a device in their pocket that is millions of times more powerful than what
NASA used for the Apollo 11 mission to the Moon.

3. Limits of Moore's Law: However, there's a catch. Moore's Law can't go on forever.
There are physical limits to how small a transistor can be, and we're already approaching
those limits. For example, Intel's super-advanced 'Skylake' transistor is only 100 atoms
across. Going smaller makes things more expensive and complex, hinting that we need
new approaches for continuous growth in computational power.

4. Quantum Computing: Scientists are exploring a completely different way of


computing called quantum computing. This approach uses principles from quantum
mechanics, a complex branch of physics. A quantum computer has the potential to
revolutionize what machines can do. It might enable ultra-secure data encryption and
help predict changes in complex systems like the climate.

5. Challenges with Quantum Computing: Big companies like Google, IBM, and
Microsoft, along with specialized firms like Rigetti, IonQ, and Dwave, are working hard to
develop quantum computers. Unfortunately, building a reliable quantum computer with
enough processing power is a tough nut to crack. The technical challenges are
significant.
In a nutshell, Moore's Law brought us incredible computational power, but we're hitting
physical limits. Quantum computing is a promising frontier, but it comes with its own set
of challenges that researchers are actively working on.

Over the last 50 years, technology has changed a lot, and it has affected how we live
and work. Three big things have played a huge role in this change: computational
power, data, and connectivity.

1. Computational Power:
 In 1965, a person named Gordon E. Moore predicted that the power of
computers would double every two years. This prediction turned out to be
right and is now known as Moore's Law.
 Computers have become much more powerful over the years, making
them able to do really complicated tasks. And the best part is, the cost of
using this computational power has gone down, so more people and
businesses can afford it.
2. The Data Revolution:
 There is a lot of information (data) being created every day, from personal
stuff to business transactions and even things like sensor readings and
social media posts.
 This huge amount of data is like a revolution. People and businesses can
use this data to make better decisions. For example, predicting what
customers might like or improving how products are made and delivered.
3. The Age of Connectivity:
 The world has become more connected through things like the internet
and mobile phones. This connectivity has changed the way we share
information, run businesses, and talk to each other.
 This connection has also led to things like the Internet of Things (IoT),
where everyday things are connected to the internet. This makes our lives
easier, like having smart devices at home or improving how cities work.

Putting It All Together:

 All these changes in computational power, data, and connectivity have brought
us new possibilities. We now have things like self-driving cars, personalized
medicine, and smart machines that learn on their own.
 But, with these cool things comes some challenges. We need to make sure that
we use these technologies in a way that respects privacy, keeps things secure,
and is ethical (doing the right thing).
Computational Power Explosion:

 From 1980 to 2010, the number of things a computer can do in one second with just a dollar
has increased a crazy amount – 10 million times more!
 This means that the little device in your pocket is way more powerful than all the computers
NASA used for the Apollo 11 mission to the Moon. Everything you use, like your toaster or
electric toothbrush, probably has lots of tiny computer chips inside.

The End of Moore's Law:

 There's this thing called Moore's Law, which said that computer power would keep doubling.
But it can't keep going on forever because there's a limit to how small we can make the parts
inside computers.
 Intel, a big company making computer stuff, has a super advanced thing called the 'Skylake'
transistor, and it's only about 100 atoms wide. Going smaller is getting really hard and
expensive, so we need new ideas to keep making computers more powerful.

Quantum Computing:

 Some super smart people are looking at a totally different way of doing computer stuff called
quantum computing. It's like using ideas from a really complex part of physics called
quantum mechanics.
 If we figure out how to make quantum computers, they could do things we can't even
imagine right now. Like, making data super secure and predicting really complicated things,
such as changes in the climate.

So, in simple terms, our computers have become incredibly powerful, but the usual way of making
them better is reaching its limit. Smart folks are now exploring this cool, different way called
quantum computing to take us into a new era of computer awesomeness.

What is Quantum Computing? Quantum computing is like the superhero version of


regular computing. It uses the weird behavior of super tiny particles (that's quantum
mechanics) to do super fast calculations. These particles don't follow the same rules as
everyday things. They can be in many places at once, a trick called 'superposition.'

How's it Different? Normal computers use bits – ones and zeros – to do everything.
Quantum computers also use bits, but these are called qubits. The cool part is that a
qubit can be both one and zero at the same time, thanks to superposition.

Why Does it Matter? Quantum computers can solve really tough problems super
quickly. Imagine a salesperson trying to find the best route to visit many cities – a
regular computer struggles with this, but a quantum computer can nail it much faster.
Potential Applications: Quantum computers could do wonders in finance, like
optimizing big investment plans and spotting good deals. They might even speed up
the complex process of deep learning.

The Catch: There's a challenge. Current encryption methods, which keep our data safe,
might not be safe anymore if a super powerful quantum computer comes around. It
could break through our digital locks in seconds.

When Can We Get One? Don't get too excited yet. Big companies like IBM, Google,
and Microsoft are working on it, but it's not ready for everyday use. Some experts think
it might take until 2030 or 2040 before we see a full-blown quantum computer. Even
then, it's going to be quite specialized and won't fit in your pocket anytime soon.

Big Companies and Quantum Computers: Companies like Google, IBM, and Microsoft,
along with smaller experts like Rigetti, IonQ, and Dwave, are working really hard to make
a quantum computer.

The Tricky Part: But, it's not easy. There are big challenges to make a quantum
computer that's both reliable and powerful enough to be actually useful. It's like solving
a really tough puzzle for them.

 Increasing Data Collection and Availability

 Historical Data Storage: Not too long ago, storing digital data was a real
challenge because it was expensive and took up a lot of space. In 1956, a cutting-
edge storage system by IBM needed the space of two refrigerators just to store
five megabytes, costing a whopping $10,000 per megabyte! Today, a tiny hard
drive with 500 gigabytes – 100,000 times more capacity – fits in your hand and
costs less than a hundred dollars (less than two cents per megabyte).
 Data Storage Explosion: Because storing data has become so cheap, people and
businesses are collecting and keeping a massive amount of data. Unlike in the
past when storage was limited, now it's common for folks to keep everything,
even those not-so-great photos on their phones.
 Rise of Sensors: Thanks to affordable storage and tiny computer chips, devices
are loaded with sensors. Everything from your phone to your car has sensors that
collect data on things like sound, light, and movement. This constant flow of data
gives companies a ton of information to work with.
 Data Boom: The combination of these trends means we're generating an
unbelievable amount of data. According to the former CEO of Google, every two
days, we produce as much new data as all the data recorded from the beginning
of history up to 2003! This data explosion is changing how companies operate,
making data a vital part of their business strategies.
 Data-Driven Business Models: Companies now build their business models
around data. Big names like Dow Jones, Google, and Facebook rely on data for
advertising. Even traditional industries like automotive are shifting – now, car
manufacturers focus on the data coming from sensors in cars rather than just
assembling physical parts.
 Data's Role in Insurance: Take car insurance as an example. Cars today have
sensors that collect data on the driver's behavior. Insurers can use this data to
personalize premiums based on the driver's choices, like how fast they drive or
when they usually drive.
 Data Ownership Challenges: However, the sensitive nature of this data raises
challenges. Who gets to decide who uses this data? The car manufacturer may
want a say because they built the sensors. The driver may also want a say since
it's her personal driving data. It's a bit of a complex issue with different parties
having different perspectives on who should control the data.

Data Concerns for Policymakers: Policymakers worldwide are increasingly worried


about how to protect, control, and own the massive amount of data generated every
day.

GDPR - A Big Example: The European Union introduced a significant set of rules called
the General Data Protection Regulation (GDPR). It's like a big guidebook that sets strict
rules on how data should be used and stored. If a company doesn't follow these rules,
they can face hefty fines, up to 4% of their global revenues.

Balancing Act: These regulations have a tough job - finding a balance between things
like privacy and public safety. They also need to encourage new business models that
use data (called the 'data economy') while making sure customers are treated fairly and
competition stays healthy.

Complex Challenge: Figuring out these rules is not easy. It's like walking on a tightrope
– you need to make sure that the explosion of data is used for the good of the public.
It's a bit like creating a roadmap that ensures data is powerful but used responsibly.
Or
Big Concerns About Data: People in charge worldwide are getting worried about what
to do with the huge amount of data we generate every day. This includes how to protect
it, control it, and decide who really owns it.

European Union's Strict Rules: The European Union (EU) recently made some strict
rules called the General Data Protection Regulation (GDPR). These rules lay out clear
instructions on how data should be used and stored. If companies don't follow these
rules, they can face heavy fines, up to 4% of their total global revenues.

Balancing Act: These rules have to find a delicate balance between different goals, like
protecting people's privacy and ensuring public safety. It's not easy because they also
need to encourage new and innovative ways of doing business with data while making
sure customers are in control and there's fair competition.

Challenges Ahead: Figuring out the right rules is a tricky task. But it's super important
to make sure that all

 Increasing Digital Connectivity


 Early Days of Computing: In the beginning, all a company's data was stored on
one computer, accessible by only one person at a time. As organizations grew,
there was a need to share data between computers and offices. This led to the
creation of digital networks, connecting computers within a location (LAN) and
across the world (WAN).
 Challenges of Data Sharing: Sharing data might sound simple, but it's quite a
process. Data needs to be read, transported, received, and written on a new
device. This involves lots of calculations, especially when transferring large
amounts of data. The first data sent over a digital network in 1969 was just the
two letters 'lo', part of the word 'login', but it crashed the system.
 Evolution of Data Networks: Today, fiber-optic cables stretch over a million
miles globally, forming the backbone of a network that transfers a massive 640
terabytes of data per minute. This network connects almost half of the world's
population and allows data to be shared and combined globally.
 Advancements in Data Transfer: Over the past 50 years, data transfer speed has
dramatically increased, moving from copper wires to fiber optics and wireless
networks. The latest development is the 5G wireless network, aiming to transfer
data at incredible speeds, like downloading a full ultra-high definition movie in
seconds on a mobile phone.
 Impact on Connectivity: 5G networks won't just give us faster downloads; they'll
also enable a new level of connectivity between devices. Our laptops, cars,
fridges, and even toys are becoming part of the Internet of Things (IoT). 5G will
facilitate near-instantaneous data transfer between devices, crucial for
technologies like autonomous vehicles.
 Challenges of Increased Connectivity: However, with increased connectivity
come challenges. Accidents like the cutting of undersea cables in 2010 can
disrupt entire countries' internet access. Also, the movement of data across
borders creates privacy concerns and regulatory challenges. Questions arise
about how data should be treated as it moves between different areas, leading to
varying and sometimes conflicting regulations. This has triggered strict data-
residency requirements, limiting the flow of data across borders, which might
continue to be a hot topic in the future.

 Bringing Computation, Connectivity, and Data Together in


the Cloud

 Rise of Cloud Computing: Cloud computing is like a superpower combining


increased computational power, reduced storage costs, and faster data transfer
speeds. Think of services like Dropbox or Google Docs, allowing you to store and
access data from anywhere.
 Deeper Impact of Cloud Computing: Cloud computing isn't just about storage
or collaboration tools; it's a game-changer for organizations. It lets them scale
their data storage, computational power, and bandwidth dynamically. This is
done by breaking a task into smaller pieces and using a shared pool of servers in
a data center.
 Amazon's Entry into Cloud Computing: Amazon Web Services (AWS), one of
the largest cloud providers, started because Amazon realized they could use their
massive data centers more efficiently. By offering computing power 'as a service,'
they became a leader in cloud infrastructure, with clients like Netflix, Airbnb, and
even the CIA.
 Flexibility for Startups: Cloud computing is a boon for startups. Instead of hefty
upfront costs for servers, they can rent computing power as needed, paying only
for what they use. This flexibility reduces the investment required for new digital
businesses, fostering innovation.
 Advantages of Cloud Computing: Cloud computing not only provides capital
efficiency and scalability but also offers higher security levels compared to in-
house infrastructure. It makes code reuse and data integration easier. Plus, it's an
ideal environment for analyzing large datasets and deploying sophisticated
algorithms like machine learning models.
 Real-Life Example: Evolutionary Algorithms: Evolutionary algorithms,
mimicking natural selection, are used in stock trading to predict stock
movements. These algorithms need massive data and processing power, best
delivered through cloud computing to continuously track variables and identify
patterns.
 Not One-Size-Fits-All: While cloud computing is powerful, it's not suitable for
every task. Sometimes, it makes more sense to analyze data where it's created
rather than transporting it to another location. For tasks needing quick responses,
like in autonomous vehicles, data may be analyzed on-site rather than in the
cloud.

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