Reading 82: Introduction to Digital Assets

Book 4: Alternative Investments

Digital Assets

assets that can be electronically created, stored, and transferred

Distributed Ledger Technology (DLT)

secures and validates digital asset transactions using blockchain technology

True or False: crypto has its own blockchain.

true

True or False—tokens have their own blockchain

false

they are traded on a crypto blockchain

Distributed Ledger

a database shared among market participants

What does a DLT Network consist of?

digital ledger

consensus mechanism

network of participants

Smart Contracts

computer program self-executes a contract based on predetermined terms and conditions

Blockchain

a digital ledger that records information sequentially within blocks

Consensus Protocols

determines how blocks are chained together

Proof-Of-Work (PoW)

when a transaction takes place, miners use computers to solve a cryptographic problem which then verifies the transaction

Proof-Of-Stake (PoS)

certain network participants pledge (staking) collateral to guarantee the validity of a block

Permissionless Networks

transactions are visible to all users within the network and any user can execute a transaction

Permissioned Networks

users may be restricted from network activities

What’s more cost effective—Permissioned networks or Permissionless networks

permissioned networks

Central Bank Digital Currencies (CBDC)

digital version of a banknote or coin issued by a central bank

Nonfungible Tokens (NFTs)

a digital asset is linked to a certificate of authenticity

Security Token

digitally tracks ownership rights in publicly traded securities

Initial Coin Offerings (ICOs)

companies offer tokens in exchange for money or other cryptocurrencies

Utility Tokens

provide network services

Governance Tokens

offered on permissionless networks and act as voting rights to determine how networks should be operated

Tokenization

verifying ownership using DLT to digitally track the historical record of ownership

How are digital assets priced?

based on projected asset growth and the transfer value in the future

Centralized Exchange

privately held and offer trading platforms for price transparency and volume information

Decentralized Exchange

implement decentralized blockchain principles where there is no central authority

Cryptocurrency Coin Trusts

offer shares in a trust that holds large amounts of crypto

trades OTC

Asset-Backed Tokens

digital ownership of physical assets

Decentralized Finance (DeFi)

the movement toward the decentralization of markets and finance