Token-Based Financing -Part 2

(2) Understanding cryptoassets

The concept of ICO started with cryptoassets (digital coins and symbols) in the operation center. Like physical currency, the cryptoasset is scarce, and the control over it is transferable. However, although physical coins are transmitted face-to-face (or through humans and machines), changes in the control of cryptoassets need to be implemented through the carrier of the network (through the transmission of digital keys). A cryptoasset is nothing but an entry on a distributed ledger, which specifies that a specific user identified by a certain “private key” (essentially a specific password) is the only subject who is able to exercise a set of discrete powers associated with the distributed ledger. Although their private keys may be transmitted directly in the physical world, the actual cryptoasset is destined to be only a general ledger, locked in its local protocol forever.

The history of cryptoassets began with Bitcoin and Bitcoin distributed ledgers (also known as “blockchains”). Before the advent of currency, money existed not in physical form (such as coins or paper money), but in the form of a ledger of a centralized intermediary. Bitcoin is the first important digital currency system that does not require a centralized intermediary to maintain proper account books. The key to the design of the distributed ledger and public blockchain system is how it maintains a reliable record of ownership. The Bitcoin ledger is not concentrated in one company but is copied and broadcasted through a computer network with the Internet. These computers are called “nodes”. When a Bitcoin holder broadcasts to a node to transmit Bitcoins to another user, the transaction subject does not need to rely on the credibility of any actor in the system to properly modify its copy of the ledger. Instead, they rely on economic incentives and code-based management to control nodes, ensuring that all copies of the ledger are updated equally.