What Crypto Assets Are

A shared ledger

A blockchain is a ledger — a list of transactions — copied across many independent computers. New transactions are grouped into blocks and appended in order, with each block cryptographically linked to the one before it.

On a large, widely distributed network, participants must agree on the next block under a consensus mechanism (proof of work or proof of stake), so altering old history is extremely difficult and expensive.

What problem it solves

Normally a trusted institution keeps the record. A blockchain replaces that single record-keeper with rules and incentives, so participants who do not trust each other can still agree on who owns what.

What it does not solve

That protection is bounded, not absolute. It rests on assumptions: that no single group controls most of the mining power or staked value, that the software has no critical bug, and that the network is large enough. Small networks have had their recent history rewritten.

An accurate transaction record also establishes very little else. It does not make a token valuable, does not make a project honest, does not make a smart contract safe, and cannot reverse a transaction you were tricked into sending.

Kinds of crypto assets and what you own

The ledger is the technology. The assets recorded on it come in different kinds, and each gives its holder different things. Unlike a share, most tokens give no legal claim on a company's profits or assets.

• Native coins (for example bitcoin, ether): used to pay fees and secure their own network. Holders own the coin itself, not a share of any business.
• Stablecoins: tokens meant to track a currency, usually backed by reserves held by an issuer. Holders rely on that issuer's reserves and redemption terms, and some issuers can freeze tokens.
• Other tokens: may grant voting on a project's rules (governance), access to a service, or nothing enforceable at all. Read what the token actually entitles you to.
• Holding through an exchange means the exchange controls the keys; self-custody means you do, and losing the recovery phrase can mean losing access.