Digital Assets

Core Concepts

Blockchain Fundamentals

A distributed ledger maintained by a network of nodes. Transactions are grouped into blocks, cryptographically linked in sequence. Immutability comes from the chain structure — altering any block requires recomputing all subsequent blocks. Consensus mechanisms determine how the network agrees on the valid state of the ledger.

Consensus Mechanisms

Proof of Work (PoW): Miners compete to solve computational puzzles. The winner adds the next block and earns a reward. High energy consumption but battle-tested security (Bitcoin). Security scales with hash rate.

Proof of Stake (PoS): Validators lock up tokens as collateral ("stake"). Block proposers are selected based on stake weight. Slashing penalizes malicious behavior. Far more energy-efficient than PoW. Ethereum transitioned to PoS in September 2022.

Bitcoin

Fixed supply of 21 million coins, enforced by protocol rules. Block reward halves approximately every 4 years (halving cycle), reducing new supply issuance. The block reward is 3.125 BTC following the April 2024 halving (next halving expected ~2028, dropping to 1.5625 BTC). Mining reward = block reward + transaction fees. Scarcity narrative drives the "digital gold" thesis.

Ethereum

The leading smart contract platform. The Ethereum Virtual Machine (EVM) executes arbitrary programs (smart contracts). Gas fees compensate validators for computation. EIP-1559 introduced a base fee that is burned (destroyed), making ETH potentially deflationary when network usage is high. The merge to PoS (Sept 2022) reduced energy usage by ~99.95%.