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5�3 The Crypto-economy coin - are often have very volatile values, making
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As the variations and use cases emerge, many have them impractical for financial inclusion use. 80
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been classed under term Decentralized Finance Volatility of the value in CCs is certainly the
(DeFi) to describe financial systems and product most cogent reason, leading to the introduction of
applications designed to operate without a central- so-called ‘stablecoins’, pegged as there often are to
ized system such as an exchange and often using some fiat currency such as the USD or some other
Decentralized Applications (dApps). DeFi is said to real-world asset. Facebook for example announced
be part of the evolving ‘crypto-economy, stylized the ‘Libra’ stablecoin, – a public and permissioned
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in Figure 2 showing various crypto-assets, actors, blockchain using POS. Touted to be run independent-
users, and technologies, all ‘wrapped’ in applicable ly by the Libra Association, it will act as a P2P solution
laws and regulations. 75 across borders. It has however encountered severe
DeFi is evolving into one of the most active sec- regulatory headwinds Still, a number do remain
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tors of the DLT sector. The core technologies that and crypto-currency-based remittances remain rel-
make up the globally accessible DeFi platforms are atively popular in population segments in develop-
stable coins, decentralized crypto-exchanges, or ing regions such as Ripio in Argentina, SureRemit in
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DEXs (and/or exchanges that do not hold – have cus- Nigeria, and the use of Dash in Venezuela.
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tody of - users’ private keys), multi-currency wallets, Tokens are secured by cryptographic keys and the
and various payment gateways that include lending token themselves are stored in a number of ways,
and insurance platforms, key infrastructural develop- depending on their type and whether the owner of
ment, marketplaces, and investment engines. that token wants to keep them liquid for trading. If
There are also crypto-asset classes using tokens the owner wants to simply store them, they can use
to represent a value or digital asset, again stylized a ‘wallet,’ a medium to store the seeds/passphras-
in Figure 2� Tokens are largely fungible and tradable, es/keys associated to crypto-asset accounts. These
and can serve a multitude of different functions, secrets are required to generate the private keys
from granting holders access to a service to entitling used to sign transactions and spend money. Unlike
them to company dividends, commodities or voting real wallets, a crypto wallet does not directly include
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rights. Most tokens do not operate independently but funds, only the key to spend them. The public keys
may be hosted for trading by a crypto-asset trading and address can be made public but may compro-
platform or exchange. Newer tokens types may act mise anonymity and linkability. 86
to transfer rights or value between two parties inde- There are hot or cold wallets. The former are like
pendent of any third party exchange or technology saving accounts which must be connected to the
platform. Crypto-currency tokens - such as from Bit- internet, but there is a higher risk of theft than cold
wallets which are like saving accounts and can be
Figure 2: The stylized ‘crypto-economy’
The stylized ‘crypto-economy,’ using crypto-assets and ‘wrapped’ in applicable laws and regulations. Actors here are those
involved in any process which generates, values, issues, stores, or trades a crypto-asset. Key: UT = Utility Tokens; ST = Secu-
rity Tokens; CC = Crypto-currencies; ICO = Initial Coin Offering; IEO = Initial Exchange Offering; DLT = Distributed Ledger
Technologies; dApps = Distributed Applications
18 Security Aspects of Distributed Ledger Technologies