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Cryptocurrencies: market study and viewpoints

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Shivangi Mujumdar

CBW -External Analyst

INDIA

Feb, 10 2021

Feb, 10 2021

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Cryptocurrencies are digital financial assets, for which records and transfers of ownership are secured by a cryptographic technology instead of a bank or other trusted third party. They can be viewed as financial assets as they bear some value for cryptocurrency holders, even though they intend no matching obligation of any other party and are not backed by any physical asset of value such as gold, for instance, or the equipment stock of an enterprise. 


As the term cryptocurrency, and the other terminology employing ‘coin’, ‘wallets’ in the original white-paper advising the supporting technology for Bitcoin (Nakamoto 2008) all convey, the original developers consciously tried to grow a digital transfer mechanism that corresponded to direct transfer of physical cash used for payments or other financial assets—such as valuable metals and ‘bearer bonds’—that like cash also modify hands through physical transfer. 


Cryptocurrencies can be seen as a portion of a broader class of financial assets, “crypto-assets” with related peer-to-peer digital exchange of value, without bearing on third party institutions for transaction certification intention. 


What differentiates cryptocurrencies from other crypto assets 


This counts on their aim, i.e. whether they are issued only for movement or whether they also accomplish other functions. Within the whole category of crypto assets, we can result in the distinctions drawn in recent regulatory reports, identifying two further sub-categories of crypto assets, on high of cryptocurrencies:


 

1. Cryptocurrencies: An asset on a Blockchain that can be transferred or exchanged within the network participants and used as a source of payment—but deliver no other benefits. 

Tough, cryptocurrencies it is then manageable to separate those whose measure is fixed and price market discovered (floating cryptocurrencies) and those where a supporting preparation, software or institutional, modify the supply to hold back a fixed price against other assets (stable coins, for illustration- Tether or the preset Facebook Libra). 

2. Crypto securities: An asset on a Blockchain that in other terms supports the prospect of future payments, for instance, a share of profits. 

3. Crypto utility assets: An asset on a Blockchain that can be withdrawn for or give ample to some pre-specified products or services. 


An advanced identifying feature of crypto securities and crypto utility assets is that they are issued directly for a public sale (in named initial coin offerings or ICOs). ICOs have been a considerable source of funding for technology directed start-up companies using Blockchain founded business models. 


This assortment of crypto assets is critical for worldwide regulators since they require to ascertain whether a specific crypto asset should be organized as an e-money, as a security, or as some other sort of financial instrument, peculiarly about actual concerns about investor security in ICOs. 


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Shivangi Mujumdar

CBW - External Analyst

INDIA

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