Module 82.1: Distributed Ledger Technology Flashcards
(18 cards)
What are digital assets?
Assets that can be electronically created, stored, and transferred.
Give examples of Digital Assets?
Crypto, tokens and digital collectibles
How are they secured and valididated?
Using Distributed Ledger Technology (called Blockchain Tech)
Cryptocurrency has their own blockchains, whereas tokens are built on already existing block chains
What is a distributed Ledger?
It’s a database shareed among market participants - maintaining a record of all transactions, allowing each participant to have an identical copy of the database
What’s the benefits and disadvantages of DLTs?
Benefits:
Accuracy, Transparency, Security, Rapid ownership and transfer
Disadvantages
Data protection concerns, privacy violations and large amount of computational power needed
What does a DLT network consist of?
Digital Ledger:
Consensus mechanism: Establidshes common state of the ledger, validating transactions and updating the ledger
Network of participants
What is cryptography
How the DLT encrypts data, which prevent unauthoritsed parties from accessing it
What is a smart contract
Self executing programmes implemented by the DLT
automating contingent claims and collateral transfers during defaults are examples of smart contracts
What is blockchain?
A digital ledger that record info sequentially within blocks, that are then linked together and secured using cryptography, a new transaction is only added to the chain once its been validated
What are consensus protocols?
They determine how blocks are chained together. They are structured to protect against market manipulation.
Main types:
Proof of Work Protocol: Miners solve cryptographic problems to verify transactions. Powerful computers validate blocks, consuming significant energy. Miners are rewarded with cryptocurrency. The high resource cost makes manipulation difficult, requiring control of >50% of the network.
Proof of Stake: Network participants (“validators”) pledge collateral (“staking”) to guarantee block validity. Validators signal transaction readiness, and others verify authenticity. Validators are rewarded with a return on their stake. This protects against malicious attacks.
What’s the difference between permissionless and permissioned DLT networks?
Permissionless: Open, all users can execute transactions and perform network functions. Transactions are confirmed via consensus, not a central authority. Bitcoin is an example. Parties do not need to trust each other
nPermissioned: Users may have restricted network access. Permissions control ledger accessibility. More cost-effective than permissionless networks.
List the main types of digital assets.
Cryptocurrencies (Bitcoin, altcoins, stablecoins, meme coins, CBDCs), Tokens (NFTs, security tokens, utility tokens, governance tokens), Initial Coin Offerings (ICOs).
What are cryptocurrencies?
Privately issued digital currencies with no central bank backing. Enable near-real-time transactions without intermediaries. Often have supply limits to maintain value, but can be highly volatile.
Briefly describe Altcoins, Stablecoins, and Meme Coins.
Altcoins: Alternative cryptocurrencies based on Bitcoin’s technology (e.g., Ether).
Stablecoins: Aim for stable value, pegged to another asset (e.g., USD).
Meme Coins: Launched for entertainment, often experiencing rapid price fluctuations (e.g., Dogecoin)
What are CBDCs?
Digital versions of banknotes or coins issued by a central bank.
Explain tokenization and NFTs.
Tokenization uses DLT to track ownership of assets digitally. NFTs (Non-Fungible Tokens) are unique digital assets linked to certificates of authenticity (e.g., digital art).
What are security tokens and ICOs?
Digitally track ownership of publicly traded securities.
ICOs (Initial Coin Offerings): Unregulated offerings of crypto tokens in exchange for funds; an alternative to IPOs, but with potential for fraud.
Describe utility and governance tokens.
Utility Tokens: Provide network services (e.g., payments, fees).
Governance Tokens: Offer voting rights on network operations in permissionless networks.
