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BLOCKCHAIN
Lawful Innovative Partnerships
Our Focused Sectors
Aerospace | Agriculture | AI-Ilm | AI Economy | Deep Space
Economy | Education | Energy | Logistics | Manufacturing
Mining | Optical Systems | Technology | Water
Our Blockchain Specific Services
Global Lead Generation | Risk Mitigation | Legal | Technical
Roots of Blockchain Technology
Context
According to United Nations, US$93 trillion would be needed in Sustainable Infrastructure Projects during 2015-2030 to achieve the United Nations' SDGs, with the bulk going to the Energy Sector (US$ 40 trillion or 43%), followed by Transport (US$27 trillion or 29%), Water and Waste (US$ 19 trillion or 20.4%) and Telecommunications (US$ 7 trillion or 7.5%).
The Funding Gap for the period is estimated to be between US$ 39 trillion (under an aggressive Investment Growth Scenario) to US$ 51 trillion (under Conservative Investment Growth assumptions).
Blockchain Use Cases
Blockchain Use Cases
1. Lean Supply Chain Management
1. Lean Supply Chain Management
2. Digital Identity Verification
2. Digital Identity Verification
3. Smart Contracts
3. Smart Contracts
4. Cryptocurrencies
4. Cryptocurrencies
5. Healthcare Record Management
5. Healthcare Record Management
6. Voting Systems
6. Voting Systems
7. Intellectual Property Protection
7. Intellectual Property Protection
8. Cybersecurity
8. Cybersecurity
9. Real Estate
9. Real Estate
10. Cross-Border Payments
10. Cross-Border Payments
20 Blockchain Types
20 Blockchain Types
Each has its own Strengths, Weaknesses, Use Cases
Each has its own Strengths, Weaknesses, Use Cases
1. Public Blockchain
1. Public Blockchain
- Open-source, decentralized, and accessible to anyone
- Open-source, decentralized, and accessible to anyone
- Examples: Bitcoin, Ethereum, Litecoin
- Examples: Bitcoin, Ethereum, Litecoin
- Characteristics: transparent, immutable, censorship-resistant
- Characteristics: transparent, immutable, censorship-resistant
2. Private Blockchain
2. Private Blockchain
- Restricted access, centralized control, and permission-based
- Restricted access, centralized control, and permission-based
- Examples: Enterprise blockchains (e.g., Hyperledger Fabric)
- Examples: Enterprise blockchains (e.g., Hyperledger Fabric)
- Characteristics: secure, scalable, customizable
- Characteristics: secure, scalable, customizable
3. Consortium Blockchain
3. Consortium Blockchain
- Hybrid of public and private blockchains
- Hybrid of public and private blockchains
- Examples: Corda, Quorum
- Examples: Corda, Quorum
- Characteristics: decentralized, yet controlled access
- Characteristics: decentralized, yet controlled access
4. Hybrid Blockchain
4. Hybrid Blockchain
- Combination of public and private blockchains
- Combination of public and private blockchains
- Examples: Polkadot, Cosmos
- Examples: Polkadot, Cosmos
- Characteristics: interoperable, scalable, flexible
- Characteristics: interoperable, scalable, flexible
5. Sidechain
5. Sidechain
- Separate blockchain connected to a main blockchain
- Separate blockchain connected to a main blockchain
- Examples: Liquid, RSK
- Examples: Liquid, RSK
- Characteristics: increased scalability, flexibility
- Characteristics: increased scalability, flexibility
6. Distributed Ledger Technology (DLT)
6. Distributed Ledger Technology (DLT)
- Decentralized, yet not necessarily blockchain-based
- Decentralized, yet not necessarily blockchain-based
- Examples: Hashgraph, IOTA
- Examples: Hashgraph, IOTA
- Characteristics: fast, secure, energy-efficient
- Characteristics: fast, secure, energy-efficient
7. Directed Acyclic Graph (DAG)
7. Directed Acyclic Graph (DAG)
- Alternative to traditional blockchain
- Alternative to traditional blockchain
- Examples: IOTA, Nano
- Examples: IOTA, Nano
- Characteristics: fast, scalable, energy-efficient
- Characteristics: fast, scalable, energy-efficient
8. Blockchain-as-a-Service (BaaS)
8. Blockchain-as-a-Service (BaaS)
- Cloud-based blockchain infrastructure
- Cloud-based blockchain infrastructure
- Examples: AWS Blockchain, Google Cloud Blockchain
- Examples: AWS Blockchain, Google Cloud Blockchain
- Characteristics: scalable, secure, easy to deploy
- Characteristics: scalable, secure, easy to deploy
9. Enterprise Blockchain
9. Enterprise Blockchain
- Customizable, private blockchains for businesses
- Customizable, private blockchains for businesses
- Examples: Hyperledger Fabric, Corda
- Examples: Hyperledger Fabric, Corda
- Characteristics: secure, scalable, regulatory-compliant
- Characteristics: secure, scalable, regulatory-compliant
10. Decentralized Blockchain
10. Decentralized Blockchain
- Fully decentralized, community-driven blockchains
- Fully decentralized, community-driven blockchains
- Examples: Bitcoin, Ethereum (pre-ETH 2.0)
- Examples: Bitcoin, Ethereum (pre-ETH 2.0)
- Characteristics: censorship-resistant, immutable, transparent
- Characteristics: censorship-resistant, immutable, transparent
11. Federated Blockchain
11. Federated Blockchain
- Consortium blockchain with decentralized governance
- Consortium blockchain with decentralized governance
- Examples: Cosmos, Polkadot
- Examples: Cosmos, Polkadot
- Characteristics: scalable, secure, decentralized
- Characteristics: scalable, secure, decentralized
12. Sharded Blockchain
12. Sharded Blockchain
- Horizontal scaling solution for public blockchains
- Horizontal scaling solution for public blockchains
- Examples: Ethereum 2.0, Polkadot
- Examples: Ethereum 2.0, Polkadot
- Characteristics: scalable, secure, energy-efficient
- Characteristics: scalable, secure, energy-efficient
13. Proof-of-Stake (PoS) Blockchain
13. Proof-of-Stake (PoS) Blockchain
- Consensus algorithm based on staking tokens
- Consensus algorithm based on staking tokens
- Examples: Ethereum 2.0, Tezos
- Examples: Ethereum 2.0, Tezos
- Characteristics: energy-efficient, secure, decentralized
- Characteristics: energy-efficient, secure, decentralized
14. Proof-of-Work (PoW) Blockchain
14. Proof-of-Work (PoW) Blockchain
- Consensus algorithm based on mining
- Consensus algorithm based on mining
- Examples: Bitcoin, Litecoin
- Examples: Bitcoin, Litecoin
- Characteristics: secure, decentralized, energy-intensive
- Characteristics: secure, decentralized, energy-intensive
15. Leased Proof-of-Stake (LPoS) Blockchain
15. Leased Proof-of-Stake (LPoS) Blockchain
- Variance of PoS with leasing mechanisms
- Variance of PoS with leasing mechanisms
- Examples: NEO, ONT
- Examples: NEO, ONT
- Characteristics: energy-efficient, secure, decentralized
- Characteristics: energy-efficient, secure, decentralized
16. Delegated Proof-of-Stake (DPoS) Blockchain
16. Delegated Proof-of-Stake (DPoS) Blockchain
- Variance of PoS with voting mechanisms
- Variance of PoS with voting mechanisms
- Examples: EOS, Tron
- Examples: EOS, Tron
- Characteristics: energy-efficient, secure, decentralized
- Characteristics: energy-efficient, secure, decentralized
17. Byzantine Fault Tolerance (BFT) Blockchain
17. Byzantine Fault Tolerance (BFT) Blockchain
- Consensus algorithm for high-performance blockchains
- Consensus algorithm for high-performance blockchains
- Examples: Hyperledger Fabric, Corda
- Examples: Hyperledger Fabric, Corda
- Characteristics: secure, scalable, fault-tolerant
- Characteristics: secure, scalable, fault-tolerant
18. Non-Fungible Token (NFT) Blockchain
18. Non-Fungible Token (NFT) Blockchain
- Blockchain for unique digital assets
- Blockchain for unique digital assets
- Examples: Ethereum, Flow
- Examples: Ethereum, Flow
- Characteristics: secure, decentralized, unique assets
- Characteristics: secure, decentralized, unique assets
19. Central Bank Digital Currency (CBDC) Blockchain
19. Central Bank Digital Currency (CBDC) Blockchain
- Blockchain for national digital currencies
- Blockchain for national digital currencies
- Examples: China's DCEP, Sweden's e-krona
- Examples: China's DCEP, Sweden's e-krona
- Characteristics: secure, centralized, regulated
- Characteristics: secure, centralized, regulated
20. Interplanetary File System (IPFS) Blockchain
20. Interplanetary File System (IPFS) Blockchain
- Decentralized storage solution
- Decentralized storage solution
- Examples: IPFS, Filecoin
- Examples: IPFS, Filecoin
- Characteristics: secure, decentralized, storage-focused
- Characteristics: secure, decentralized, storage-focused
Private Blockchain
Private Blockchain
Private Blockchain is developed and maintained by a private organization who has the authority over the mining process and consensus algorithm. The private organization decides who can join the network and have the access download the nodes.
Private Blockchain is developed and maintained by a private organization who has the authority over the mining process and consensus algorithm. The private organization decides who can join the network and have the access download the nodes.
Blockchain Regulatory Frameworks - USA
Blockchain Regulatory Frameworks - USA
Federal Level
Federal Level
1. Securities and Exchange Commission (SEC): Regulates blockchain-based securities and investments.
1. Securities and Exchange Commission (SEC): Regulates blockchain-based securities and investments.
2. Commodity Futures Trading Commission (CFTC): Oversees derivatives markets, including cryptocurrency futures.
2. Commodity Futures Trading Commission (CFTC): Oversees derivatives markets, including cryptocurrency futures.
3. Financial Crimes Enforcement Network (FinCEN): Regulates anti-money laundering (AML) and know-your-customer (KYC) compliance.
3. Financial Crimes Enforcement Network (FinCEN): Regulates anti-money laundering (AML) and know-your-customer (KYC) compliance.
4. Office of the Comptroller of the Currency (OCC): Regulates banking and financial services, including blockchain-based activities.
4. Office of the Comptroller of the Currency (OCC): Regulates banking and financial services, including blockchain-based activities.
State Level
State Level
1. Wyoming: Passed blockchain-friendly laws, exempting cryptocurrencies from state money transmission regulations.
1. Wyoming: Passed blockchain-friendly laws, exempting cryptocurrencies from state money transmission regulations.
2. Delaware: Implemented blockchain-based corporate governance and record-keeping.
2. Delaware: Implemented blockchain-based corporate governance and record-keeping.
3. New York: Introduced the BitLicense regulatory framework for cryptocurrency businesses.
3. New York: Introduced the BitLicense regulatory framework for cryptocurrency businesses.
4. California: Enacted blockchain-related legislation, including digital asset storage and insurance.
4. California: Enacted blockchain-related legislation, including digital asset storage and insurance.
Key Regulations
Key Regulations
1. Securities Act of 1933: Applies to blockchain-based securities offerings.
1. Securities Act of 1933: Applies to blockchain-based securities offerings.
2. Investment Company Act of 1940: Regulates investment companies, including blockchain-based funds.
2. Investment Company Act of 1940: Regulates investment companies, including blockchain-based funds.
3. Bank Secrecy Act (BSA): Requires AML/KYC compliance for financial institutions.
3. Bank Secrecy Act (BSA): Requires AML/KYC compliance for financial institutions.
4. USA PATRIOT Act: Enhances AML/KYC requirements.
4. USA PATRIOT Act: Enhances AML/KYC requirements.
Blockchain-Specific Regulations
Blockchain-Specific Regulations
1. SEC's "Framework for Investment Contract Analysis of Digital Assets" (2019)
1. SEC's "Framework for Investment Contract Analysis of Digital Assets" (2019)
2. CFTC's "Guidance on Virtual Currency Transactions" (2017)
2. CFTC's "Guidance on Virtual Currency Transactions" (2017)
3. FinCEN's "Guidance on Virtual Currency" (2019)
3. FinCEN's "Guidance on Virtual Currency" (2019)
4. OCC's "Interpretive Letter 1170" (2020) on blockchain-based activities.
4. OCC's "Interpretive Letter 1170" (2020) on blockchain-based activities.
Proposed Legislation
Proposed Legislation
1. Cryptocurrency Act of 2020 (H.R. 6154)
1. Cryptocurrency Act of 2020 (H.R. 6154)
2. Digital Commodity Exchange Act of 2020 (H.R. 6123)
2. Digital Commodity Exchange Act of 2020 (H.R. 6123)
3. Blockchain Promotion Act of 2019 (H.R. 2154)
3. Blockchain Promotion Act of 2019 (H.R. 2154)
Regulatory Bodies
Regulatory Bodies
1. Blockchain Association
1. Blockchain Association
2. Chamber of Digital Commerce
2. Chamber of Digital Commerce
3. Coin Center
3. Coin Center
4. Digital Currency Group
4. Digital Currency Group
Resources
Resources
1. SEC's Blockchain and Distributed Ledger Technology webpage
1. SEC's Blockchain and Distributed Ledger Technology webpage
2. CFTC's Virtual Currency webpage
2. CFTC's Virtual Currency webpage
3. FinCEN's Virtual Currency webpage
3. FinCEN's Virtual Currency webpage
4. National Conference of State Legislatures' Blockchain
4. National Conference of State Legislatures' Blockchain
Blockchain Regulatory Frameworks EU
Blockchain Regulatory Frameworks EU
Blockchain Regulatory Frameworks (BRF) are being developed globally to ensure the technology's secure and decentralized nature is preserved while protecting consumers and maintaining financial stability.
Blockchain Regulatory Frameworks (BRF) are being developed globally to ensure the technology's secure and decentralized nature is preserved while protecting consumers and maintaining financial stability.
The European Union is at the forefront of this effort, with the European Commission proposing a comprehensive package of legislative proposals for the regulation of crypto-assets ¹. This package includes the Markets in Crypto-Assets Regulation (MiCA), which supports innovation while protecting consumers and the integrity of cryptocurrency exchanges ¹. Additionally, the European Central Bank and the European Commission services are jointly reviewing policy, legal, and technical questions related to the possible introduction of a digital Euro.
The European Union is at the forefront of this effort, with the European Commission proposing a comprehensive package of legislative proposals for the regulation of crypto-assets ¹. This package includes the Markets in Crypto-Assets Regulation (MiCA), which supports innovation while protecting consumers and the integrity of cryptocurrency exchanges ¹. Additionally, the European Central Bank and the European Commission services are jointly reviewing policy, legal, and technical questions related to the possible introduction of a digital Euro.
Global Regulatory Framework for Crypto-asset Activities
Global Regulatory Framework for Crypto-asset Activities
The Financial Stability Board (FSB) has finalized a global regulatory framework for crypto-asset activities, promoting comprehensive and internationally consistent regulatory and supervisory approaches ² ³. This framework is based on the principle of "same activity, same risk, same regulation" and addresses risks to financial stability ² ³. The FSB has developed two sets of recommendations: high-level recommendations for crypto-asset activities and markets, and revised high-level recommendations for global stablecoin arrangements.
The Financial Stability Board (FSB) has finalized a global regulatory framework for crypto-asset activities, promoting comprehensive and internationally consistent regulatory and supervisory approaches ² ³. This framework is based on the principle of "same activity, same risk, same regulation" and addresses risks to financial stability ² ³. The FSB has developed two sets of recommendations: high-level recommendations for crypto-asset activities and markets, and revised high-level recommendations for global stablecoin arrangements.
Key Components of Blockchain Regulatory Frameworks
Key Components of Blockchain Regulatory Frameworks
Some key components of blockchain regulatory frameworks include:
Some key components of blockchain regulatory frameworks include:
- Regulatory Sandboxes: Facilities that bring together regulators, companies, and tech experts to test innovative solutions and identify obstacles.
- Regulatory Sandboxes: Facilities that bring together regulators, companies, and tech experts to test innovative solutions and identify obstacles.
- Crypto-asset Classification: Clear guidelines on classifying crypto-assets as financial instruments, utility tokens, or payment tokens.
- Crypto-asset Classification: Clear guidelines on classifying crypto-assets as financial instruments, utility tokens, or payment tokens.
- Consumer Protection: Measures to protect consumers from fraud, market manipulation, and other risks.
- Consumer Protection: Measures to protect consumers from fraud, market manipulation, and other risks.
- Financial Stability: Regulations to prevent crypto-asset market volatility from affecting traditional financial systems.
- Financial Stability: Regulations to prevent crypto-asset market volatility from affecting traditional financial systems.
What is Blockchain Technology
What is Blockchain Technology
Definition: A decentralized, digital ledger that records transactions, data, or events across a network of computers in a secure and transparent manner.
Definition: A decentralized, digital ledger that records transactions, data, or events across a network of computers in a secure and transparent manner.
Key Components
Key Components
Key Features
Key Features
1. Decentralization: No single entity controls the network.
1. Decentralization: No single entity controls the network.
2. Immutable: Transactions are tamper-proof and permanent.
2. Immutable: Transactions are tamper-proof and permanent.
3. Transparency: All transactions are publicly visible.
3. Transparency: All transactions are publicly visible.
4. Consensus: Network nodes verify transactions through complex algorithms.
4. Consensus: Network nodes verify transactions through complex algorithms.
5. Cryptography: Secure data transmission and storage.
5. Cryptography: Secure data transmission and storage.
How it Works
How it Works
1. Network nodes create and verify blocks of transactions.
1. Network nodes create and verify blocks of transactions.
2. Each block contains a unique code (hash) and reference to the previous block.
2. Each block contains a unique code (hash) and reference to the previous block.
3. Blocks are linked together, forming a chain (blockchain).
3. Blocks are linked together, forming a chain (blockchain).
4. Network nodes update their copies of the blockchain.
4. Network nodes update their copies of the blockchain.
Types of Blockchain
Types of Blockchain
1. Public (e.g., Bitcoin, Ethereum)
1. Public (e.g., Bitcoin, Ethereum)
2. Private (e.g., enterprise blockchains)
2. Private (e.g., enterprise blockchains)
3. Consortium (e.g., hybrid public-private blockchains)
3. Consortium (e.g., hybrid public-private blockchains)
4. Hybrid (e.g., combination of public and private blockchains)
4. Hybrid (e.g., combination of public and private blockchains)
Use Cases
Use Cases
1. Cryptocurrencies (e.g., Bitcoin, Ethereum)
1. Cryptocurrencies (e.g., Bitcoin, Ethereum)
2. Supply Chain Management
2. Supply Chain Management
3. Smart Contracts
3. Smart Contracts
4. Identity Verification
4. Identity Verification
5. Healthcare Record Management
5. Healthcare Record Management
6. Voting Systems
6. Voting Systems
7. Intellectual Property Protection
7. Intellectual Property Protection
8. Cybersecurity
8. Cybersecurity
Benefits
Benefits
1. Security
1. Security
2. Transparency
2. Transparency
3. Efficiency
3. Efficiency
4. Immutable record-keeping
4. Immutable record-keeping
5. Reduced transaction costs
5. Reduced transaction costs
6. Increased trust
6. Increased trust
Challenges
Challenges
1. Scalability
1. Scalability
2. Regulation
2. Regulation
3. Interoperability
3. Interoperability
4. Energy consumption
4. Energy consumption
5. Security vulnerabilities
5. Security vulnerabilities
Blockchain Platforms
Blockchain Platforms
1. Ethereum
1. Ethereum
2. Hyperledger Fabric
2. Hyperledger Fabric
3. Corda
3. Corda
4. Polkadot
4. Polkadot
5. Solana
5. Solana
Programming Languages
Programming Languages
1. Solidity (Ethereum)
1. Solidity (Ethereum)
2. Chaincode (Hyperledger Fabric)
2. Chaincode (Hyperledger Fabric)
3. Rust (Solana)
3. Rust (Solana)
4. JavaScript ( blockchain.js)
4. JavaScript ( blockchain.js)
5. Python
5. Python
Resources
Resources
1. Blockchain Council
1. Blockchain Council
2. Coindesk
2. Coindesk
3. Blockchain News
3. Blockchain News
4. IEEE Blockchain Initiative
4. IEEE Blockchain Initiative
5. World Economic Forum Blockchain Reports
5. World Economic Forum Blockchain Reports
Case Study
Case Study
Companies like Alibaba, Amazon, IBM, Microsoft, Siemens, Toyota etc. are heavily investing in Blockchain
Companies like Alibaba, Amazon, IBM, Microsoft, Siemens, Toyota etc. are heavily investing in Blockchain
Blockchain is a shared, Immutable Ledger (i.e., a ledger that uses (1) cryptographic techniques to verify transactions and (2) many computers, or peers, sharing copies of the transaction) that facilitates the process of recording transactions and tracking Assets in realtime in a Digital Network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding).
Blockchain is a shared, Immutable Ledger (i.e., a ledger that uses (1) cryptographic techniques to verify transactions and (2) many computers, or peers, sharing copies of the transaction) that facilitates the process of recording transactions and tracking Assets in realtime in a Digital Network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding).
In simple words, blockchain is a Digital Ledger that keeps a record of all transactions or data exchanges within a Decentralized Network. Unlike traditional centralized systems, blockchain operates on a Distributed Ledger Technology (DLT) where multiple computers (or nodes) maintain and validate the transactions1.
In simple words, blockchain is a Digital Ledger that keeps a record of all transactions or data exchanges within a Decentralized Network. Unlike traditional centralized systems, blockchain operates on a Distributed Ledger Technology (DLT) where multiple computers (or nodes) maintain and validate the transactions1.
👉1. Chain of Blocks: As its name suggests, a blockchain is made up of a chain of blocks. Each block stores data related to transactions. When new data is added to the system, it leads to a new block being added and attached to the previous Chain of Blocks2.
👉1. Chain of Blocks: As its name suggests, a blockchain is made up of a chain of blocks. Each block stores data related to transactions. When new data is added to the system, it leads to a new block being added and attached to the previous Chain of Blocks2.
👉 2. Decentralization: Unlike centralized databases controlled by a single entity, a blockchain is decentralized. No single person or group has control; instead, all users collectively retain control. This decentralization enhances security and transparency.
👉 2. Decentralization: Unlike centralized databases controlled by a single entity, a blockchain is decentralized. No single person or group has control; instead, all users collectively retain control. This decentralization enhances security and transparency.
👉3. Immutable and Secure: Once data is entered into a blockchain, it becomes immutable—irreversible. For example, in Bitcoin’s blockchain, transactions are permanently recorded and viewable by anyone. The use of cryptography ensures the security of the data.
👉3. Immutable and Secure: Once data is entered into a blockchain, it becomes immutable—irreversible. For example, in Bitcoin’s blockchain, transactions are permanently recorded and viewable by anyone. The use of cryptography ensures the security of the data.
👉4. Beyond Cryptocurrency: While blockchains are best known for their role in cryptocurrencies, they are not limited to that. They can be used for various purposes, including Decentralized Finance (DeFi) applications, Non-Fungible Tokens (NFTs), and Smart Contracts3.
👉4. Beyond Cryptocurrency: While blockchains are best known for their role in cryptocurrencies, they are not limited to that. They can be used for various purposes, including Decentralized Finance (DeFi) applications, Non-Fungible Tokens (NFTs), and Smart Contracts3.
In summary, blockchain technology provides a secure, transparent, and decentralized way to record and manage data across a network. It’s like a digital ledger that everyone can access and trust.
In summary, blockchain technology provides a secure, transparent, and decentralized way to record and manage data across a network. It’s like a digital ledger that everyone can access and trust.
Distributed Ledger Technology (DLT)
Distributed Ledger Technology (DLT)
Distributed Ledger Technology (DLT) basically implies a new and rapidly evolving approach for recording and sharing information across multiple data stores.
Distributed Ledger Technology (DLT) basically implies a new and rapidly evolving approach for recording and sharing information across multiple data stores.
Each of the data stores (i.e., ledgers) has the same data records, subject to maintenance and control through a distributed network of computer servers, referred to as nodes. You can thus think of DLT as a distributed database with certain unique properties.
Each of the data stores (i.e., ledgers) has the same data records, subject to maintenance and control through a distributed network of computer servers, referred to as nodes. You can thus think of DLT as a distributed database with certain unique properties.
👉Blockchain is just a variant of DLT that uses Cryptographic and algorithmic approaches to create and verify a continuously expanding, append-only data structure that gradually turns into a chain of transaction blocks that serve the role of a ledger. Diving into the working of DLT can also help in further refining your knowledge of DLT.
👉Blockchain is just a variant of DLT that uses Cryptographic and algorithmic approaches to create and verify a continuously expanding, append-only data structure that gradually turns into a chain of transaction blocks that serve the role of a ledger. Diving into the working of DLT can also help in further refining your knowledge of DLT.
👉The nodes initiate new additions to the database through the creation of a new data ‘block’ which includes the records of different transactions. Then, the information about the new data ‘block’ is shared across the whole network in the form of encrypted information. As a result, Blockchains ensure that transaction details are not publicly available.
👉The nodes initiate new additions to the database through the creation of a new data ‘block’ which includes the records of different transactions. Then, the information about the new data ‘block’ is shared across the whole network in the form of encrypted information. As a result, Blockchains ensure that transaction details are not publicly available.
👉Then, all the participants in the network evaluate the data block and verify its validity according to the pre-defined Algorithmic Validation Method. The pre-defined algorithmic validation method is also known as the Blockchain Consensus mechanism. When the data block is validated, all participants can add the block to their own ledgers, creating, hence a ‘chain of blocks’: The Blockchain.
👉Then, all the participants in the network evaluate the data block and verify its validity according to the pre-defined Algorithmic Validation Method. The pre-defined algorithmic validation method is also known as the Blockchain Consensus mechanism. When the data block is validated, all participants can add the block to their own ledgers, creating, hence a ‘chain of blocks’: The Blockchain.
👉To summarize, DLT ensures that changes to the ledger are reflected throughout the whole network, and all network members have a detailed, identical copy of the whole ledger at any specific instance. One can clearly notice that the functionalities of DLT are primarily responsible due to two core components
👉To summarize, DLT ensures that changes to the ledger are reflected throughout the whole network, and all network members have a detailed, identical copy of the whole ledger at any specific instance. One can clearly notice that the functionalities of DLT are primarily responsible due to two core components
✋The first core aspect of DLT-based systems or infrastructure is the ability for storage, recording, and exchange of digital information across different, consenting parties without the need for any central trust authority or record-keeper.
✋The first core aspect of DLT-based systems or infrastructure is the ability for storage, recording, and exchange of digital information across different, consenting parties without the need for any central trust authority or record-keeper.
✋The second core component of DLT refers to avoiding double-spending, i.e., sending the same digital asset or token to multiple parties. Without a central controlling authority, the risk of double-spending is quite high, especially between parties that do not know each other.
✋The second core component of DLT refers to avoiding double-spending, i.e., sending the same digital asset or token to multiple parties. Without a central controlling authority, the risk of double-spending is quite high, especially between parties that do not know each other.
Types of Distributed Ledger Technology
Types of Distributed Ledger Technology
There are two general categories of distributed ledgers, such as Permissioned and Permissionless variants.
There are two general categories of distributed ledgers, such as Permissioned and Permissionless variants.
The permissioned distributed ledger involves the requirement of permission for nodes from central entities for accessing the network and making modifications in the ledger. The access controls in a permissioned distributed ledger generally include identity verification.
The permissioned distributed ledger involves the requirement of permission for nodes from central entities for accessing the network and making modifications in the ledger. The access controls in a permissioned distributed ledger generally include identity verification.
On the other hand, in the case of permissionless distributed ledgers, every node in the network contains (or can access) a full and updated copy of the entire ledger. All the proposed local additions to the ledger by network participants are communicated to all nodes throughout the network.
On the other hand, in the case of permissionless distributed ledgers, every node in the network contains (or can access) a full and updated copy of the entire ledger. All the proposed local additions to the ledger by network participants are communicated to all nodes throughout the network.
In either category, nodes are collectively responsible for validating the modification through a consensus mechanism based on a pre-defined algorithm.
In either category, nodes are collectively responsible for validating the modification through a consensus mechanism based on a pre-defined algorithm.
Hybrid DLT is another type of DLT that combines both permissionless and permissioned networks and offers a network that benefits from both of them.
Hybrid DLT is another type of DLT that combines both permissionless and permissioned networks and offers a network that benefits from both of them.
After the validation process, the new addition to all the respective ledgers can help in ensuring the consistency of data throughout the entire network. Considering the flexibility of DLT, many projects are opting for implementations of DLT variants.
After the validation process, the new addition to all the respective ledgers can help in ensuring the consistency of data throughout the entire network. Considering the flexibility of DLT, many projects are opting for implementations of DLT variants.
Permissionless Blockchains?
Permissionless Blockchains?
Permissionless blockchains are blockchains that require no permission to join and interact with. They are also known as public blockchains. Most of the time, permissionless blockchain is ideal for running and managing digital currencies.
Permissionless blockchains are blockchains that require no permission to join and interact with. They are also known as public blockchains. Most of the time, permissionless blockchain is ideal for running and managing digital currencies.
In a permissionless blockchain, a user can create a personal address and then interact with the network by either helping the network to validate transactions or simply send transactions to another user on the network.
In a permissionless blockchain, a user can create a personal address and then interact with the network by either helping the network to validate transactions or simply send transactions to another user on the network.
The very first type of permissionless blockchain is Bitcoin. It enabled users to transfer digital currencies among themselves. Also, users can interact with the network by participating in the mining process. It is a process of solving complex mathematical equations and then using it to validate transactions. The consensus algorithm used by bitcoin is Proof-of-Work (PoW).
The very first type of permissionless blockchain is Bitcoin. It enabled users to transfer digital currencies among themselves. Also, users can interact with the network by participating in the mining process. It is a process of solving complex mathematical equations and then using it to validate transactions. The consensus algorithm used by bitcoin is Proof-of-Work (PoW).
There are also other blockchains that are permissionless. Ethereum(ETH) is another popular public permissionless type that utilizes another consensus method Proof-of-Stake(PoS). It also introduces other concepts such as smart contracts.
There are also other blockchains that are permissionless. Ethereum(ETH) is another popular public permissionless type that utilizes another consensus method Proof-of-Stake(PoS). It also introduces other concepts such as smart contracts.
Characteristics of Permissionless Blockchains
Characteristics of Permissionless Blockchains
Permissionless blockchains have some interesting characteristics. Let’s list them below.
Permissionless blockchains have some interesting characteristics. Let’s list them below.
- Truly decentralized → Permissionless blockchain technology is truly decentralized. But, what do we mean by truly decentralized? Well, there are some platforms that aren’t truly decentralized. We will talk about them shortly.
- Anonymity → Permissionless blockchain is open to everyone. However, that doesn’t mean that it is not anonymous. Anyone who joins the network can remain anonymous as you won’t need a KYC to join and navigate the network.
- Transparency → Public nodes can see the transactions, making the network transparent.
- Trust → You can trace or read the transactions. Thus, you can trust these permissionless blockchains more than a closed or permissioned blockchain.
- Immutable → Every single data on the platform is immutable that means you can’t change them anytime.
- Enhanced security → Cryptography and other security parameters make permissionless blockchains more secure.
Apart from these, another big characteristic of permissionless blockchains is that anyone can join the network if they want. Permissionless blockchains are also very good when it comes to incentivizing the users in the network. They can be used for the betterment of the participants as it brings transparency and trust to the whole network.
Apart from these, another big characteristic of permissionless blockchains is that anyone can join the network if they want. Permissionless blockchains are also very good when it comes to incentivizing the users in the network. They can be used for the betterment of the participants as it brings transparency and trust to the whole network.
Most Popular DeFi Protocols
Most Popular DeFi Protocols
The definition of decentralized finance is the most basic information you need to understand DeFi protocols. Decentralized Finance, or DeFi, basically points out the transition from conventional, centralized financial systems towards a peer-to-peer finance model. The DeFi ecosystem has been successful in establishing lending and borrowing platforms alongside tokenized digital currency and Stablecoins. Over the course of time, the DeFi landscape has developed into a massive network with integrated financial instruments and protocols. Did someone read ‘protocol’?
The definition of decentralized finance is the most basic information you need to understand DeFi protocols. Decentralized Finance, or DeFi, basically points out the transition from conventional, centralized financial systems towards a peer-to-peer finance model. The DeFi ecosystem has been successful in establishing lending and borrowing platforms alongside tokenized digital currency and Stablecoins. Over the course of time, the DeFi landscape has developed into a massive network with integrated financial instruments and protocols. Did someone read ‘protocol’?
What are DeFi Protocols?
What are DeFi Protocols?
The best DeFi protocols have witnessed profound levels of growth in the recent two years. The year 2020 proved to be quite a promising one for DeFi as the total value locked in DeFi assets crossed the $12 billion mark. DeFi protocols are basically autonomous programs that have been tailored for addressing specific setbacks in the traditional finance sector. More than half of the world’s population does not have access to a bank account, and DeFi protocols aim to change it.
The best DeFi protocols have witnessed profound levels of growth in the recent two years. The year 2020 proved to be quite a promising one for DeFi as the total value locked in DeFi assets crossed the $12 billion mark. DeFi protocols are basically autonomous programs that have been tailored for addressing specific setbacks in the traditional finance sector. More than half of the world’s population does not have access to a bank account, and DeFi protocols aim to change it.
The evolution of DeFi protocols will open the way for introducing more financial instruments. As of now, many DeFi protocols have become integral parts of a complex ecosystem with many notable tokens and projects. With the substantially soaring values of DeFi protocols, the opportunities for startups in the DeFi space become clearly evident.
The evolution of DeFi protocols will open the way for introducing more financial instruments. As of now, many DeFi protocols have become integral parts of a complex ecosystem with many notable tokens and projects. With the substantially soaring values of DeFi protocols, the opportunities for startups in the DeFi space become clearly evident.
What is Decentralized Finance (DeFi)?
What is Decentralized Finance (DeFi)?
Decentralized Finance (DeFi) is all about monetary systems using public blockchains. It is a new monetary system and hence is one of the hot topics among the industrialists, blockchain experts, and learners like you!
Decentralized Finance (DeFi) is all about monetary systems using public blockchains. It is a new monetary system and hence is one of the hot topics among the industrialists, blockchain experts, and learners like you!
At the core, the term “public” is important here. It can be equated to similar to that of Ethereum public blockchain. In the public blockchain, there is no place for centralized authority.
At the core, the term “public” is important here. It can be equated to similar to that of Ethereum public blockchain. In the public blockchain, there is no place for centralized authority.
Our Mission
Our Mission
Level Playing Field for Islamic Monetary System
Level Playing Field for Islamic Monetary System
Our Focus
Our Focus
Policies, Regulatory Frameworks, Institutions
Policies, Regulatory Frameworks, Institutions
Constitution, Statutes, Regulations, Court Decisions, and International Treaties
Constitution, Statutes, Regulations, Court Decisions, and International Treaties
Context
Context
According to United Nations, US$93 trillion would be needed in Sustainable Infrastructure Projects during 2015-2030 to achieve the United Nations' SDGs, with the bulk going to the Energy Sector (US$ 40 trillion or 43%), followed by Transport (US$27 trillion or 29%), Water and Waste (US$ 19 trillion or 20.4%) and Telecommunications (US$ 7 trillion or 7.5%).
According to United Nations, US$93 trillion would be needed in Sustainable Infrastructure Projects during 2015-2030 to achieve the United Nations' SDGs, with the bulk going to the Energy Sector (US$ 40 trillion or 43%), followed by Transport (US$27 trillion or 29%), Water and Waste (US$ 19 trillion or 20.4%) and Telecommunications (US$ 7 trillion or 7.5%).
The Funding Gap for the period is estimated to be between US$ 39 trillion (under an aggressive Investment Growth Scenario) to US$ 51 trillion (under Conservative Investment Growth assumptions).
The Funding Gap for the period is estimated to be between US$ 39 trillion (under an aggressive Investment Growth Scenario) to US$ 51 trillion (under Conservative Investment Growth assumptions).
Global Problems Root Cause: Economic Inequality is the Largest, Constantly Growing, Super-Complexed Phenomenon[1]
Global Problems Root Cause: Economic Inequality is the Largest, Constantly Growing, Super-Complexed Phenomenon[1]
Historical Money Supply Mechanisms: Circulation of Wealth (Devine; Islamic); Concentration of Wealth (Non-Divine; Manmade)
Historical Money Supply Mechanisms: Circulation of Wealth (Devine; Islamic); Concentration of Wealth (Non-Divine; Manmade)
Root Cause of Concentration of Wealth: Disparity; Fractional Prosperity
Root Cause of Concentration of Wealth: Disparity; Fractional Prosperity
Solution: Divine Justice based Shared Prosperity
Solution: Divine Justice based Shared Prosperity
Our Strategic Approach: Develop and Implement Quantum Compatible Digital Infrastructure Interoperable Interfaces (Commercial Cybersecurity Solutions) Using NIST Post-Quantum Cryptography Standardized Algorithms
Our Strategic Approach: Develop and Implement Quantum Compatible Digital Infrastructure Interoperable Interfaces (Commercial Cybersecurity Solutions) Using NIST Post-Quantum Cryptography Standardized Algorithms
Preferred Methodology
Preferred Methodology
Legal Frameworks
Legal Frameworks
Our Research Focus: Global Regulatory Policies and Reforms to Strengthen Oversight of the Sharia Acquiescent Monetary System (SAMS).
Our Research Focus: Global Regulatory Policies and Reforms to Strengthen Oversight of the Sharia Acquiescent Monetary System (SAMS).
Methodology: Based on the selected country experiences, a number of important lessons and policy options can be drawn that have implications for the stable and sound development of Global Islamic Financial System (GIFS).
Methodology: Based on the selected country experiences, a number of important lessons and policy options can be drawn that have implications for the stable and sound development of Global Islamic Financial System (GIFS).
An enabling regulatory and institutional framework and a level playing field for Conventional and Islamic Banks is critical for the sound and stable growth of the Islamic banking industry. The country experiences also underscore the importance of providing an enabling framework while letting market forces determine the size of the industry1.
An enabling regulatory and institutional framework and a level playing field for Conventional and Islamic Banks is critical for the sound and stable growth of the Islamic banking industry. The country experiences also underscore the importance of providing an enabling framework while letting market forces determine the size of the industry1.
A Monetary System components include a set of Policies, Regulatory Frameworks, and Institutions by which a Government Creates Money in an economy. Such institutions include the Mint, the Central Bank, Treasury, and other Financial Institutions.
A Monetary System components include a set of Policies, Regulatory Frameworks, and Institutions by which a Government Creates Money in an economy. Such institutions include the Mint, the Central Bank, Treasury, and other Financial Institutions.
There are Three Common Types of Monetary Systems;
There are Three Common Types of Monetary Systems;
1. Commodity Money
1. Commodity Money
2. Commodity-based Money
2. Commodity-based Money
3. Fiat Money
3. Fiat Money
Country Case Study
USA Monetary System
Major Regulatory Agencies
DoT: Department of the Treasury
FCA: Farm Credit Administration
FDIC: Federal Deposit Insurance Corporation
FHFA: Federal Housing Finance Agency
NCUA: National Credit Union Administration
A Monetary System is defined as a set of policies, frameworks, and institutions by which the government creates money in an economy. Such institutions include the mint, the Central Bank, treasury, and other Financial Institutions. There are three common types of monetary systems – commodity money, commodity-based money, and fiat money.
A Monetary System is defined as a set of policies, frameworks, and institutions by which the government creates money in an economy. Such institutions include the mint, the Central Bank, treasury, and other Financial Institutions. There are three common types of monetary systems – commodity money, commodity-based money, and fiat money.
1. Commodity Money
1. Commodity Money
This is made up of precious metals or other commodities that have intrinsic value. In order words, the monetary system uses the commodity physically in terms of currency. This form of money retains its value even if it’s melted down. For example, gold and silver coins have been commonly used throughout history as a form of money.
This is made up of precious metals or other commodities that have intrinsic value. In order words, the monetary system uses the commodity physically in terms of currency. This form of money retains its value even if it’s melted down. For example, gold and silver coins have been commonly used throughout history as a form of money.
2. Commodity-based Money
2. Commodity-based Money
This draws its value from a commodity but doesn’t involve handling the commodity regularly. The notes don’t have tangible value but can be exchanged for the commodity it is backed by. For example, the US Dollar used to draw its value on gold. This was known as the Gold Standard.
This draws its value from a commodity but doesn’t involve handling the commodity regularly. The notes don’t have tangible value but can be exchanged for the commodity it is backed by. For example, the US Dollar used to draw its value on gold. This was known as the Gold Standard.
3. Fiat Money
3. Fiat Money
In this monetary system the currency, which by government decree is legal tender, i.e., that the government guarantees the value of the currency. Today, most of Fiat Money is in the form of bank balances and records of credit or debit card purchases.
In this monetary system the currency, which by government decree is legal tender, i.e., that the government guarantees the value of the currency. Today, most of Fiat Money is in the form of bank balances and records of credit or debit card purchases.
Key Components:
Key Components:
👉 Mint: The mint is responsible for physically producing currency. It manufactures coins and banknotes that circulate as legal tender.
👉 Mint: The mint is responsible for physically producing currency. It manufactures coins and banknotes that circulate as legal tender.
👉 Central Bank: The central bank plays a crucial role in the monetary system. Its functions include:
👉 Central Bank: The central bank plays a crucial role in the monetary system. Its functions include:
👉 Issuing Currency: The central bank has the authority to create and distribute currency.
👉 Issuing Currency: The central bank has the authority to create and distribute currency.
👉 Monetary Policy: It formulates and implements policies to regulate money supply, interest rates, and inflation.
👉 Monetary Policy: It formulates and implements policies to regulate money supply, interest rates, and inflation.
👉 Central Bank Banker to Commercial Banks: Commercial banks maintain accounts with the central bank, which acts as their banker.
👉 Central Bank Banker to Commercial Banks: Commercial banks maintain accounts with the central bank, which acts as their banker.
👉 Lender of Last Resort: During financial crises, the central bank provides emergency liquidity to banks.
👉 Lender of Last Resort: During financial crises, the central bank provides emergency liquidity to banks.
👉 Currency Reserves: The central bank holds foreign exchange reserves to stabilize the national currency.
👉 Currency Reserves: The central bank holds foreign exchange reserves to stabilize the national currency.
👉 Treasury: The government’s treasury manages public finances, including revenue collection, expenditure, and debt issuance. It collaborates with the central bank to ensure fiscal and monetary coordination.
👉 Treasury: The government’s treasury manages public finances, including revenue collection, expenditure, and debt issuance. It collaborates with the central bank to ensure fiscal and monetary coordination.
👉 Commercial Banks: These banks serve as intermediaries between the central bank and the public. Their roles include:
👉 Commercial Banks: These banks serve as intermediaries between the central bank and the public. Their roles include:
👉 Depository Institutions: They accept deposits from individuals, businesses, and other entities.
👉 Depository Institutions: They accept deposits from individuals, businesses, and other entities.
👉 Lending and Credit: Commercial banks provide loans and credit to borrowers.
👉 Lending and Credit: Commercial banks provide loans and credit to borrowers.
👉 Money Creation: Through fractional reserve banking, they create money by lending out a portion of the deposits they receive.
👉 Money Creation: Through fractional reserve banking, they create money by lending out a portion of the deposits they receive.
👉 Holders of Money (the Public): Individuals, businesses, and governmental units constitute the public. They use money for transactions, savings, and investment.
👉 Holders of Money (the Public): Individuals, businesses, and governmental units constitute the public. They use money for transactions, savings, and investment.
Uses of Money:
Uses of Money:
👉 Medium of Exchange: Money facilitates transactions, eliminating the challenges of barter systems.
👉 Medium of Exchange: Money facilitates transactions, eliminating the challenges of barter systems.
👉 Unit of Measurement: It standardizes prices and allows comparison of value across goods and services.
👉 Unit of Measurement: It standardizes prices and allows comparison of value across goods and services.
👉 Store of Value: While money can store value, inflation affects its long-term stability.
👉 Store of Value: While money can store value, inflation affects its long-term stability.
Three Levels:
Three Levels:
👉 The Holders of Money (the “Public”), which comprise Individuals, Businesses, and Governmental Units
👉 The Holders of Money (the “Public”), which comprise Individuals, Businesses, and Governmental Units
👉 Commercial Banks (Private or Government-owned), which Borrow from the Public, primarily by taking
👉 Commercial Banks (Private or Government-owned), which Borrow from the Public, primarily by taking
Public Deposits, and making Loans to Individuals, Firms, or Governments.
Public Deposits, and making Loans to Individuals, Firms, or Governments.
👉 Central Banks, which have a monopoly on the issue of certain types of money, serve as the bankers for the central government and the commercial banks, and have the power to determine the quantity of money
👉 Central Banks, which have a monopoly on the issue of certain types of money, serve as the bankers for the central government and the commercial banks, and have the power to determine the quantity of money
(EQUITY INVESTMENT)
Asset-based Economic Development
👉 Asset-based economic development can have many benefits for communities, including:
👉 Long-term, sustained economic growth
👉 Local return on investment
👉 Job Creation and Retention
👉 Increase in Per Capital Income
👉 Increase in Local Tax Base
👉 Strengthening Regional Networks
Intrinsic Value is a measure of what an asset is worth. This measure is arrived at by means of an objective calculation or Complex Financial Model. Intrinsic Value is different from the current market price of an asset. However, comparing it to that current price can give investors an idea of whether the asset is undervalued or overvalued.
Financial analysis uses cash flow to determine the intrinsic, or underlying, value of a company or stock. In options pricing, intrinsic value is the difference between the strike price of the option and the current market price of the underlying asset.
Financial analysis uses cash flow to determine the intrinsic, or underlying, value of a company or stock. In options pricing, intrinsic value is the difference between the strike price of the option and the current market price of the underlying asset.
👉 Intrinsic value refers to some fundamental, objective value contained in an object, asset, or financial contract. (If the market price is below that value it may be a good buy—if above, a good sale.)
👉 Intrinsic value refers to some fundamental, objective value contained in an object, asset, or financial contract. (If the market price is below that value it may be a good buy—if above, a good sale.)
👉 When Evaluating Stocks, there are several methods for arriving at a fair assessment of a share's intrinsic value.
👉 When Evaluating Stocks, there are several methods for arriving at a fair assessment of a share's intrinsic value.
👉 Models utilize factors such as dividend streams, discounted cash flows, and residual income.
👉 Models utilize factors such as dividend streams, discounted cash flows, and residual income.
👉 Each model relies crucially on good assumptions. If the assumptions used are inaccurate or erroneous, then the values estimated by the model will deviate from the true intrinsic value.
👉 Each model relies crucially on good assumptions. If the assumptions used are inaccurate or erroneous, then the values estimated by the model will deviate from the true intrinsic value.
Policy Options
Policy Options
Expansionary Monetary Policy is a form of macroeconomic Monetary Policy that seeks to amplify Economic Growth and Aggregate Demand. In order to do so, regulatory authorities like Central Banks “loosen” monetary policy by increasing the Money Supply and/or lowering Interest Rates. This has the effect of increasing overall economic activity: not only do consumers spend more money, but businesses also make more capital investments.
Expansionary Monetary Policy is a form of macroeconomic Monetary Policy that seeks to amplify Economic Growth and Aggregate Demand. In order to do so, regulatory authorities like Central Banks “loosen” monetary policy by increasing the Money Supply and/or lowering Interest Rates. This has the effect of increasing overall economic activity: not only do consumers spend more money, but businesses also make more capital investments.
Contractionary Monetary Policy is a type of monetary policy that is intended to reduce the rate of monetary expansion to fight inflation.
Contractionary Monetary Policy is a type of monetary policy that is intended to reduce the rate of monetary expansion to fight inflation.
European Economic and Monetary Union (EMU)
European Economic and Monetary Union (EMU)
The European Economic and Monetary Union (EMU) combines several of the European Union (EU) member states into a cohesive economic system. It is the successor to the European Monetary System (EMS). Note that there is a difference between the 19-member European Economic and Monetary Union (EMU), and the larger European Union (EU) which has 27 member states as of 2022.
The European Economic and Monetary Union (EMU) combines several of the European Union (EU) member states into a cohesive economic system. It is the successor to the European Monetary System (EMS). Note that there is a difference between the 19-member European Economic and Monetary Union (EMU), and the larger European Union (EU) which has 27 member states as of 2022.
Also referred to as the Eurozone, the European Economic and Monetary Union (EMU) is quite a broad umbrella, under which a group of policies has been enacted aimed at economic convergence and free trade among European Union member states. The EMU's development occurred through a three-phase process, with the third phase initiating the adoption of the common Euro Currency in place of former national currencies. This has been completed by all initial EU members except for the United Kingdom and Denmark, who have opted out of adopting the euro. The U.K. subsequently left the EMU in 2020 following the Brexit referendum.
Also referred to as the Eurozone, the European Economic and Monetary Union (EMU) is quite a broad umbrella, under which a group of policies has been enacted aimed at economic convergence and free trade among European Union member states. The EMU's development occurred through a three-phase process, with the third phase initiating the adoption of the common Euro Currency in place of former national currencies. This has been completed by all initial EU members except for the United Kingdom and Denmark, who have opted out of adopting the euro. The U.K. subsequently left the EMU in 2020 following the Brexit referendum.
Barter System vs. Currency System: What's the Difference?
Barter System vs. Currency System: What's the Difference?
The primary difference between barter and currency systems is that a currency system uses an agreed-upon form of paper or coin money as an exchange system rather than directly trading goods and services through bartering. Both systems have advantages and disadvantages, although currency systems are more widely used in modern economies.
The primary difference between barter and currency systems is that a currency system uses an agreed-upon form of paper or coin money as an exchange system rather than directly trading goods and services through bartering. Both systems have advantages and disadvantages, although currency systems are more widely used in modern economies.
A mutual company is a private firm that is owned by its customers or policyholders. The company's customers are also its owners. As such, they are entitled to receive a share of the profits generated by the mutual company.
A mutual company is a private firm that is owned by its customers or policyholders. The company's customers are also its owners. As such, they are entitled to receive a share of the profits generated by the mutual company.
The distribution of profits is typically made in the form of dividends paid on a pro rata basis, based on the amount of business each customer conducts with the mutual company. Alternately, some mutual companies choose to use their profits to reduce members' premiums.
The distribution of profits is typically made in the form of dividends paid on a pro rata basis, based on the amount of business each customer conducts with the mutual company. Alternately, some mutual companies choose to use their profits to reduce members' premiums.
A mutual company is sometimes referred to as a cooperative.
A mutual company is sometimes referred to as a cooperative.
Arbitrage Pricing Theory (APT) is a multi-factor asset pricing model based on the idea that an asset's returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk. It is a useful tool for analyzing portfolios from a Value Investing perspective, in order to identify securities that may be temporarily mispriced.
Arbitrage Pricing Theory (APT) is a multi-factor asset pricing model based on the idea that an asset's returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk. It is a useful tool for analyzing portfolios from a Value Investing perspective, in order to identify securities that may be temporarily mispriced.
KEY TAKEAWAYS
KEY TAKEAWAYS
👉 Arbitrage Pricing Theory (APT) is a multi-factor asset pricing model based on the idea that an asset's returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk.
👉 Arbitrage Pricing Theory (APT) is a multi-factor asset pricing model based on the idea that an asset's returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk.
👉 Unlike the CAPM, which assumes markets are perfectly efficient, APT assumes markets sometimes misprice securities, before the market eventually corrects and securities move back to fair value.
👉 Unlike the CAPM, which assumes markets are perfectly efficient, APT assumes markets sometimes misprice securities, before the market eventually corrects and securities move back to fair value.
👉 Using APT, arbitrageurs hope to take advantage of any deviations from fair market value.
👉 Using APT, arbitrageurs hope to take advantage of any deviations from fair market value.
E(R)i=E(R)z+(E(I)−E(R)z)×βn
E(R)i=E(R)z+(E(I)−E(R)z)×βn
where:
where:
E(R)i=Expected return on the asset
E(R)i=Expected return on the asset
Rz=Risk-free rate of return
Rz=Risk-free rate of return
βn=Sensitivity of the asset price to macroeconomicfactor n
βn=Sensitivity of the asset price to macroeconomicfactor n
Ei=Risk premium associated with factor i
Ei=Risk premium associated with factor i
While APT is more flexible than the CAPM, it is more complex. The CAPM only takes into account one factor—market risk—while the APT formula has multiple factors. And it takes a considerable amount of research to determine how sensitive a security is to various macroeconomic risks.
While APT is more flexible than the CAPM, it is more complex. The CAPM only takes into account one factor—market risk—while the APT formula has multiple factors. And it takes a considerable amount of research to determine how sensitive a security is to various macroeconomic risks.
The factors as well as how many of them are used are subjective choices, which means investors will have varying results depending on their choice. However, four or five factors will usually explain most of a security's return. (For more on the differences between the CAPM and APT, read more about how CAPM and arbitrage pricing theory differ.)
The factors as well as how many of them are used are subjective choices, which means investors will have varying results depending on their choice. However, four or five factors will usually explain most of a security's return. (For more on the differences between the CAPM and APT, read more about how CAPM and arbitrage pricing theory differ.)
APT factors are the systematic risk that cannot be reduced by the diversification of an investment portfolio. The macroeconomic factors that have proven most reliable as price predictors include unexpected changes in inflation, Gross National Product (GNP), corporate bond spreads and shifts in the yield curve.
APT factors are the systematic risk that cannot be reduced by the diversification of an investment portfolio. The macroeconomic factors that have proven most reliable as price predictors include unexpected changes in inflation, Gross National Product (GNP), corporate bond spreads and shifts in the yield curve.
Other commonly used factors are Gross Domestic Product (GDP), commodities prices, market indices, and exchange rates.
Other commonly used factors are Gross Domestic Product (GDP), commodities prices, market indices, and exchange rates.
Major USA Regulator Agencies:
DoT: Department of the Treasury
FCA: Farm Credit Administration
FDIC: Federal Deposit Insurance Corporation
FHFA: Federal Housing Finance Agency
NCUA: National Credit Union Administration
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