2 - The Setup of Cryptoasset Schemes

Summary

DLT and cryptoassets are a digital solution to the perennial issue of how to establish a single source of truth. Because digital data entries can easily be altered or copied, we have relied on trusted third parties to keep a master copy of any digital asset registry – until DLT enabled digital equivalents to physical cash and bearer instruments. Instead of a trusted record keeper, DLT relies on a distributed network of nodes that each hold a copy of the ledger. The data are typically stored in a time-stamped sequence of blocks, i.e., a blockchain. Different types of consensus mechanisms exist to keep each copy of the ledger synchronised and to prevent malicious actors from altering the registered information. This technology is democratising the privilege of running a trusted asset registry, thus facilitating new business models in so-called decentralised finance (DeFi) which emulate conventional financial processes with software replacing middlemen, such as banks, depositories, and exchanges. This has resulted in so-called token offerings and more than 10,000 different cryptoassets worth more than USD 1 trillion in aggregate.