- CFA Exams
- 2024 Level I
- Topic 9. Alternative Investments
- Learning Module 7. Introduction to Digital Assets
- Subject 1. Distributed Ledger Technology
Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Subject 1. Distributed Ledger Technology PDF Download
Distributed ledger technology (DLT), commonly known as blockchain, has the potential to revolutionize various financial applications by providing enhanced transparency, security, efficiency, and decentralization. It might offer a new way to store, record, and track digital assets on a secure, distributed basis. It could also bring efficiencies to post-trade and compliance processes through automation, smart contracts, and identity verification.
Here are some financial applications of DLT:
It's important to note that while DLT offers significant potential benefits, there are still challenges and considerations, such as scalability, regulatory frameworks, and interoperability, that need to be addressed for widespread adoption in the financial industry. As the technology continues to evolve, professionals in finance, including CFA candidates, should stay informed about the developments and implications of DLT in various financial applications.
Consensus Protocol
A consensus protocol is a mechanism used in distributed systems, particularly in blockchain networks, to achieve agreement among multiple participants on the validity and order of transactions or events. It ensures that all nodes in the network reach a consensus or agreement on the state of the system, even in the presence of faults or malicious actors. Consensus protocols are crucial for maintaining the integrity and security of decentralized systems.
- Proof of Work (PoW) is the consensus protocol used in the Bitcoin blockchain.
- In Proof of Stake (PoS) consensus, the probability of a participant being chosen to validate the next block is determined by the amount of cryptocurrency they hold or "stake."
Permissioned and Permissionless Networks
They are two different types of blockchain networks based on the level of access and participation they allow.
In a permissioned blockchain network, participants are required to have explicit permission or authorization to access and participate in the network. Permissioned networks often have a predefined set of validators or nodes that are responsible for validating transactions and maintaining the consensus. These networks prioritize privacy and restrict access to sensitive data to authorized participants.
In a permissionless blockchain network, also known as a public blockchain, anyone can join the network, participate in transaction validation, and maintain the blockchain. These networks are open and decentralized, allowing for a greater degree of transparency and inclusivity. Examples of include Bitcoin, Ethereum, and Litecoin.
The choice between permissioned and permissionless networks depends on the specific use case, requirements for privacy and access control, desired level of decentralization, and the target audience of the blockchain application. Both types of networks have their own advantages and are suitable for different scenarios within the broader blockchain ecosystem.
Tokenization is the process of representing ownership rights to physical assets on a blockchain. A single, digital record of ownership is created - it can be used to verify ownership title and authenticity, including all historical activity.
User Contributed Comments 2
User | Comment |
---|---|
MathLoser | This part reminds me of my shietcoins bag . 2019. |
rishavrak | Foresee this section getting larger and larger in the coming years :) |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
My Own Flashcard
No flashcard found. Add a private flashcard for the subject.
Add