Exam: Digital Assets

Diversification

Enhanced Risk-Adjusted Returns

Systems operated by many users

Not controlled by single / central entity

Shared set of data that recors which entities own which asset

Exists in decentralized networks

Most common type of DLT

Digital ledger where series of data blocks linked chronologically linked using cryptography

Every block contains transaction data

Data in blockchain considered immutable -> permanent & cannot be altered

Using digital keys to encrypt and decrypt information

Operate under consensus mechanism

Avoid double spending problem -> user pledging asset with multiple parties

Avoided by Proof of Work consensus mechanism

Transaction protected with public / private key pair

Network needs to solve a mathematical hashing problem by guessing private key

Massive trial-and-error computing effort -> first to solve earns right to add block & collect reward

Total computing power devoted to solving mathematical puzzles

Mathematical puzzle each node must solve to add a new block to a blockchain

Process of solving the mathematical problem

Network raises/lowers difficulty as computing power joins/leaves