How do crypto-assets work?
Cryptocurrencies are forms of value that exist in the digital world. They are based on cryptography, a mathematical science that makes transactions secure and limits the risk of unauthorised access. However, it is important to note that despite these security measures, challenges remain, including the potential risk of cryptojacking and similar threats. These digital assets operate on a technology called blockchainA blockchain is a type of distributed ledger technology. It is a huge database formed by blocks,cryptographically linked to each other, containing information such as transactions. These blocks are addedfollowing, a digital ledger recording all transactions in an open and unalterable way.
Steps in the operation of crypto-assets:
1/ The transaction
A user sends a transaction, which is a proposal to transfer crypto-assets, using their private keyOne of the two components of a crypto wallet, it gives the digital assets’ ownership and must stay
confidential. to sign it securely.
2/ Distribution
The signed transaction is broadcast on the blockchain network and awaits verification.
3/ Verification
Network participants, often called miners or validators, check the legitimacy of the transaction by ensuring that the crypto-assets have not been used twice and that the signature is valid.
4/ Addition to the blockchain
Once the transaction has been verified, it is included in a block with other transactions. For a block to be officially added to the existing chain of blocks, known as the blockchain, all the participants in the network must agree, also known as “consensus”. This consensusTruth admitted by all system participants. This doesn’t imply that it is the absolute truth or that it’sindisputable, it is the truth participants agree on. In crypto, algorithms beginning with is reached through a process called “mining” for some cryptocurrencies. Miners use the computing power of their computers to solve complex mathematical problems, or by “proof of stake”. Validators are chosen according to the number of currencies they hold and are prepared to “freeze” as collateral. These methods are used to confirm transactions securely and maintain the integrity of the blockchain.
5/ Transaction validation
Once a transaction has been approved and added to the blockchain, it is considered confirmed. The crypto-assets involved in the transaction are then transferred from one party to the other. This updated information is then replicated on all the computers participating in the network, known as “nodes”. These nodes act as individual verification points that maintain copies of the blockchain and work together to ensure that all information is accurate and consistent everywhere.
Key features of crypto-assets
Cryptography
Crypto-assets use cryptographic methods, which is a mathematical science that aims to secure transactions and information by converting them into a secret code.
Blockchain
A distributed register that records all transactions transparently and immutably.
Decentralisation
There is no central authority and the network is maintained by a large number of independent participants spread around the world.
Consensus
Consensus rules ensure that all participants agree on the current state of the blockchain.
Transparency with Pseudonymity
All transactions are public, but users are identified by computer addresses rather than their real names.
Cryptocurrencies or digital currencies are terms commonly used in the crypto ecosystem. However, the terminology favored by regulators (ACPR and AMF) is crypto-assets or digital assets. This distinction arises because, although often referred to as cryptocurrencies, these assets do not qualify as currencies in the legal sense. They are virtual resources based on blockchain technology, whose value is determined solely by supply and demand.
None of the information contained in this FAQ constitutes investment advice, tax advice, legal advice, or any other type of advice, nor does it serve as an invitation to engage in any form of financial transaction.
Investing in digital assets carries risks and may not be suitable for all investors. It is the responsibility of investors to educate themselves about the risks associated with different digital assets. In particular, it is noted that digital assets can exhibit significant volatilityPrice variation of an asset on a given period., and investments in digital assets involve a risk of capital loss. Accordingly, it is important to remember that the past performance of digital assets, as might be indicated on Banque Delubac & Cie’s website or in documents provided to investors, is not indicative of future performance. Investors should familiarize themselves with the technologies underlying each digital asset and their associated risks, including vulnerabilities, defects, hacks, errors, protocol failures, or attacks on the protocol. Banque Delubac & Cie cannot be held liable for any misunderstanding of the risks associated with digital assets or for any losses investors may incur due to errors in walletPrice variation of an asset on a given period. addresses attributable to the investor.
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