Digital Assets Flashcards
Distributed ledger technology
- Tool to secure and validate digital assets
- Provides record of all transactions to participants in market
Advantage of DLT
Accuracy
Transparency
Security
Rapid ownership transfer
Disadvantage of DLT
Data protection
Privacy violation
Large amount of computational power
Consensus mechanism
- Establish common state of ledger
- Validates transactions and updates ledger
Smart contracts
Computer self-executes based on predetermined terms and conditions
Blockchain
Digital ledger that records info sequentially within blocks
- Chained together
- Info secured through cryptography
- Secure link to previous block (hash)
Consensus Protocol
Method of linking blocks together
PoW (Proof of Work)
Miners use computers to solve problem
Verifies transaction
PoS (Proof of Stake)
Participants pledge collateral to guarantee validity of block
Validators use stake to signal to network the transaction is valid
Permissionless networks
Transactions visible to all
Any user can execute transaction
ex) Bitcoin
Permission networks
Users restricted from some activities
Network participants: Add transactions
Regulators: View transaction history
Cryptocurrency
Digital currency issued privately with no backing from central bank
Altcoins
Alternative cryptos based on Bitcoin
Stablecoins
Stable digital currency values - linked to value of another asset such as USD
CBDC
Digital version of a banknote issued by a central bank
