А. А. Kud
Methodology for Determining Whether
a Blockchain Token Corresponds to a Digital Asset
Methodical Manual
Kharkiv
“KRPOCH”
2019
2
UDC 001.891.5:330.47:33.053.22(072)
DOI 10.26697/9786177089079.2019
К 88
Recommended for publication by the scientific and methodological
council of the Research Institute KRPOCH
(Protocol No. 01 dated March 30, 2019)
Reviewers:
Kucheriavenko N. P. – Doctor of Legal Science, Candidate of Economic
Sciences, Professor, Head of the Department of Financial Law of the
Yaroslav Mudryi National Law University, First Vice-President of the
National Academy of Legal Sciences of Ukraine.
Marchenko O. S. – Doctor of Economic Sciences, Professor, Professor
of the Department of Economic Theory of the Yaroslav Mudryi National
Law University.
Makarichev А. V. – Doctor of Physics and Mathematics, Associate
Professor, Professor of the Department of Transport Technologies and
Technical Services of the Institute of Mechanics of NUWEE, Lead
Researcher of the Department of Transport Systems and Logistics of
KNAHU.
К 88
Kud А.A. Methodology for Determining Whether a
Blockchain Token Corresponds to a Digital Asset: methodical
manual / Scientific Research Institute KRPOCH. Kharkiv:
KRPOCH, 2019. 52 p. doi: 10.26697/9786177089079.2019
ISBN 978-617-7089-07-9
The publication provides criteria and indicators of the
characteristics of a blockchain token, presents the methodology for
determination and mathematical processing of data. The methodological
manual has been developed in order to establish whether a blockchain
token is a digital asset based on the results of its research, including the
research of the legal characteristics of a blockchain token, and is intended
for specialists in the fields of information and digital economy, lawyers,
financial organizations and representatives of business communities.
UDC 001.891.5:330.47:33.053.22(072)
© Kud А.A., 2019
ISBN 978-617-7089-07-9 © KRPOCH, 2019
3
CONTENTS
INTRODUCTION
4
SECTION 1. THEORETICAL BASIS
OF A BLOCKCHAIN TOKEN AS A DIGITAL ASSET
1.1. Development of the Blockchain Technology:
Cryptocurrencies, Tokens, Digital Assets
1.2. Complex of Definitions of the Basic Concepts Related to
a Blockchain Token
1.3. Components in the Context of the Definition of the Term
“Digital Asset”
1.4. Characteristics of the Criteria and Indicators of a
Blockchain Token’s Correspondence to a Digital Asset
SECTION 2. ORGANIZING AND CONDUCTING
THE RESEARCH OF CHARACTERISTICS
OF A BLOCKCHAIN TOKEN
2.1. Research of Characteristics of a Blockchain Token
2.2. Analysis of Research Results
2.3. Interpretation of Research Results
SECTION 3. MATHEMATICAL FORMALIZATION
OF METHODOLOGY FOR DIAGNOSING WHETHER
CHARACTERISTICS OF A BLOCKCHAIN TOKEN
CORRESPOND TO THOSE OF A DIGITAL ASSET
3.1. Triple Classification Based on the Results of the
Diagnostics on Whether a Blockchain Token Corresponds to
a Digital Asset
3.2. Reliability of the Methodology for Diagnosing the
Blockchain Token Based on the Number of Points Received
CONCLUSIONS
THESAURUS
REFERENCES
5
5
11
16
21
25
25
28
31
32
32
34
41
43
47
4
INTRODUCTION
The modern global financial system is going through significant
changes, which are caused largely by the formation of its new field –
the information economy based on the blockchain technology.
The implementation and development of the distributed ledger
technology similar to account books, each of which has the same data
records and is jointly supported and controlled by a distributed
network of computer servers, have contributed to the emergence of a
new technology – blockchain.
Today, the blockchain technology is considered by society as a
new mechanism for the dissemination of digital information. In
particular, it attracts financial experts, who first became interested in
blockchain as the technology of an account book, but then realizing its
enormous potential, started creating digital currencies on its basis and
looking for other ways of its application. The active implementation
of the blockchain technology and the revealed advantages of its
application reflect global transformations, which affect political, legal,
socioeconomic and other areas of social life.
Thus, it becomes obvious that the sooner institutions and
organizations, both governmental and non-governmental, can use this
technology to optimize their activities, the more innovative and
competitive their products and services will become. The use of
blockchain tokens for registration and exchange of property rights to
assets and, generally, of any kind of rights, will lead to a drastic
transformation in various fields, comparable in importance to the
replacement of typewriters by computers, not to mention the
optimization of processes related to accounting and information
exchange by means of digital assets.
The main objectives of this manual are: to display the
characteristics of a blockchain token that are laid down in the term
“digital asset”; define criteria and indicators of characteristics of a
blockchain token; present a methodology for diagnosing a blockchain
token for correspondence to a digital asset and a method for
mathematical data processing for such evaluation.
Thus, this methodological manual will allow you to establish
the correspondence of any blockchain token to a digital asset.
5
SECTION 1
THEORETICAL BASIS
OF A BLOCKCHAIN TOKEN AS A DIGITAL ASSET
1.1. Development of the Blockchain Technology:
Cryptocurrencies, Tokens, Digital Assets
The development of the digital economy as a whole, and of
digital technologies in particular, has led to the emergence of a new
term “digital asset” and to the stage-by-stage implementation of
related processes.
The use of the term “digital asset” in the modern understanding
is primarily caused by the emergence of the blockchain technology
and cryptocurrencies.
Blockchain is a particular type or subset of the so-called
distributed ledger technology (DLT). This technology is a mechanism
that employs an encryption method known as cryptography and a set
of specific mathematical algorithms to create and verify a constantly
growing data structure, to which you can add data and from which you
cannot delete the existing data – the form of a chain of “transaction
blocks”, which functions as a distributed ledger.
In simple terms, blockchain can be considered as a distributed
database. Additions to this database are initiated by one of the network
nodes, which creates a new block of data that can contain various types
of information. This new block is transmitted to every party in the
network (using cryptography). Other nodes collectively determine the
block’s validity in accordance with a predefined method of
algorithmic validation, commonly referred to as a “consensus
mechanism”. Once validated, the new block is added to the chain of
blocks of the public distributed ledger (blockchain), which,
essentially, results in an update of the transaction ledger and is
distributed across the network.
One of the key advantages of the blockchain technology is that
it allows simplifying the execution of a wide array of transactions that
usually require third-party intermediaries, i.e. eliminating
intermediaries from the process of interaction between the two parties.
6
Despite the fact that the blockchain technology is often
associated with digital or virtual currency schemes, payments and
financial services, its scope of use is much wider. In practice,
blockchain is already used in various sectors (e.g. trade and
commerce, healthcare, public administration, logistics, banking, etc.).
It should be noted that cryptocurrency is the first well-known
application of the blockchain technology, which formed the basis of
the cryptocurrency market and resulted in the whole variety of
cryptocurrencies. At the same time, it can be noted today that
blockchain has clearly outgrown the cryptocurrency context and, as a
technology, it can be applied in many areas of social life.
Since the emergence of the first virtual currency in 2009, the
topic of cryptocurrencies and blockchain has been studied by various
international organizations and state institutions, each of which
approached it differently. The fundamental documents for clarifying
the essence of the terms under consideration are official publications
of international regulatory and supervisory bodies in this area.
The European Central Bank (ECB) classified cryptocurrencies
as a subgroup of virtual currencies. In its report on virtual currency
schemes in 2012, the ECB defined such currencies as a type of
unregulated, digital money, which is issued and usually controlled by
its developers, and used and accepted among the members of a specific
virtual community.
The ECB further clarified that three types of virtual currencies
can be distinguished depending on the interaction with traditional
currencies and the real economy:
1) virtual currencies, which can only be used in closed virtual
systems, usually in online games;
2) virtual currencies that are unilaterally linked to the real
economy: there is a conversion rate for purchasing currency (with
traditional money), and the purchased currency can subsequently be
used to purchase virtual or real goods and services;
3) virtual currencies that are bilaterally linked to the real
economy: there are conversion rates both for purchasing and selling
such currency; the purchased currency can be used to purchase both
virtual and real goods and services [1, p. 13–19].
7
In a more recent report of 2015, the ECB put forward another,
largely updated, definition of virtual currencies. It defined virtual
currencies as digital representations of value not issued by a central
bank, credit institution or e-money institution, which in some
circumstances can be used as an alternative to money [2, p. 4].
Like the ECB, the International Monetary Fund (IMF) has
categorized cryptocurrencies as a subset of virtual currencies, which it
defines as digital representations of value issued by private developers
and denominated in their own unit of account. [3, p. 7].
According to the IMF, the concept of virtual currencies covers
a wider array of currencies ranging from simple derivative financial
instruments (IOUs) of virtual currencies, which are backed by various
assets such as gold or real property, to electronic money and
cryptocurrencies.
The Committee on Payments and Market Infrastructures
(CPMI), a body of the Bank for International Settlements (BIS), has
defined cryptocurrencies as digital currencies or digital currency
schemes.
These schemes have the following key features:
they are assets whose value is determined by supply and
demand, similar in concept to commodities such as gold, but with zero
intrinsic value;
they use a distributed ledger, which allows remote peer-to-
peer exchange of electronic values in the absence of trust between the
parties and without the need for intermediaries;
they are not operated by any specific individual or institution
[4, p. 4–7].
The European Banking Authority (EBA) has proposed to refer
to cryptocurrencies as virtual currencies, which it defines as digital
representations of value that are neither issued by a central bank or a
public authority, nor necessarily attached to a fiat currency, but are
used by natural or legal persons as a means of exchange and can be
transferred, stored or traded electronically [5, p. 11].
The European Securities and Markets Authority (ESMA) also
refers to cryptocurrencies as virtual currencies in a pan-European
warning issued in cooperation with the European Insurance and
8
Occupational Pensions Authority (EIOPA) and the EBA. Fully in line
with the EBA’s definition, virtual currencies are defined as digital
representations of value that are neither issued nor guaranteed by a
central bank or public authority and do not have the legal status of
currency or money [6, p. 1].
The World Bank has classified cryptocurrencies as a subset of
digital currencies, which it defines as digital representations of value
that are denominated in their own unit of account, distinct from e-
money, which is simply a digital payment mechanism, represented and
denominated in fiat money. The World Bank has also defined
cryptocurrencies as digital currencies that rely on cryptographic
methods to achieve consensus [7].
The Financial Action Task Force (FATF) as an
intergovernmental organization, which sets world standards for
combating money laundering and financing of terrorism, has
approached cryptocurrencies as a subset of virtual currencies, which it
defines as digital representations of value that can be digitally traded
and function as a medium of exchange; and/or a unit of account; and/or
a store of value, but do not have legal tender status in any jurisdiction.
Thus, virtual currencies can be divided into two basic types:
convertible virtual currencies that have an equivalent value in
real currency and can be exchanged back-and-forth for real currency;
these virtual currencies can be of a centralized or a decentralized
nature (i.e. they can either have a central administrative authority that
controls the system or no central oversight at all);
non-convertible virtual currencies that are specific to a
particular virtual domain or world, and under the rules governing its
use, cannot be exchanged for fiat currency [8, p. 4–5].
The properties and functions of some blockchain tokens
resemble the properties and functions of traditional financial
instruments, such as shares or bonds, and are commonly referred to as
“security tokens” or “investment tokens”. Other blockchain tokens
provide their owners with access to specific products or services and
are commonly referred to as “utility tokens”. They can be used to
acquire certain products or services, but they do not constitute a
9
general-purpose medium of exchange, because, as a rule, they can
generally only be used on the token platform itself.
The distinctive feature of the legal regulation of these relations
is associated with the coordination of regulation of virtual currency
circulation at the national and international levels. In these conditions,
regulation of the virtual currency circulation is associated with a
certain duality of coordination. Firstly, we are talking about
combining the regulation of these relations both within the framework
of national legislation and at the international level. Secondly, social
relations that have to do with the circulation of virtual currencies are
complex in nature, providing both their regulation by means of private
and public law, and the allocation of certain aspects of these relations
as the subject of civil, economic and financial law.
The multi-level correlation of regulatory requirements within
one country also adds some complexity. In 2017, the Uniform Law
Commission (ULC) developed the Uniform Regulation of Virtual-
Currency Business Act, a unified act on the regulation of activities
related to virtual currencies. Economic activities related to virtual
currencies and specified in this act are identical to services that are
already subject to licensing and prudential regulation in the status of
“money providers” or “money transfers” in many states. In 2018, this
act was supplemented by the Uniform Supplemental Commercial Law
for the Uniform Regulation of Virtual-Currency Businesses Act, a
unified act on commercial law for the uniform regulation of virtual
currencies.
The peculiarity of such uniform acts is that they are not
automatically included either in the US federal law or in the legislation
of the federal subjects. These acts are guidelines for policy makers in
the process of legislation development in the relevant field.
A significant number of negative aspects of the application of
virtual currencies are associated with the lack of a legal assessment of
this phenomenon and the uncertainty of their legal nature, which
greatly complicates the development of an appropriate regulatory
framework.
Today, there is no single well-established approach to the
content of the term “virtual currency” at either international or national
10
levels. In various circumstances, it is defined as money, electronic
money, currency, financial instrument, means of payment, medium of
exchange, type of digital money, digital representation of value, type
of asset, intangible asset, etc. The lack of clarity in the definition of a
virtual currency is also supplemented by numerous identical concepts.
Along with virtual currency, such concepts as “cryptocurrency”,
“cryptoasset”, and “digital financial asset” are used.
The main conclusion that can be drawn from the foregoing is
that there is no generally accepted definition of the term
“cryptocurrency” available in the regulatory space. Most government
agencies and international organizations have refrained from defining
the term altogether. Among those mentioned above, only the World
Bank and the FATF have proposed a clear-cut definition. However, it
is evident that most of the mentioned institutions and organizations
approach cryptocurrencies as a subset or a form of virtual or digital
currencies.
11
1.2. Complex of Definitions of the Basic Concepts Related to
a Blockchain Token
The research works of scientists in the economic, financial and
legal fields, as well as practitioners in the field of information
technology, who employ various definitions of terms “digital
currency”, “virtual currency”, “cryptocurrency”, “digital asset”,
“virtual asset”, “cryptoasset”, “digital money”, “virtual money”,
“electronic money”, constituted the theoretical value and practical
significance for the development of the conceptual and categorical
apparatus. These terms are not identical and have their own essential
features.
Table 1 presents a complex of definitions of the basic terms
related to a blockchain token.
Table 1
Complex of Definitions
Term
Cryptocurrency
Cryptocurrency
Cryptocurrency
12
Term
Cryptocurrency
Cryptocurrency
Cryptocurrency
Cryptocurrency
Cryptocurrency
Cryptocurrency
13
Term
Virtual
currency
Cryptoasset
Cryptoasset
Virtual asset
Virtual asset
Digital asset
Digital asset
14
Term
Digital asset
Digital asset
Electronic
money
Electronic
money
Virtual money
15
Thus, the modern development of new forms of representing
digital technologies is characterized by such a rapid pace that the
formation of the corresponding theoretical basis and of the concrete
conceptual and categorical apparatus significantly falls behind, which
is why scientific publications equate the above-mentioned categories
or replace some of them with different ones.
By analyzing the above-mentioned definitions, it can be stated
that today there is a substitution of concepts in society, and in most
cases, the term “digital asset” means cryptocurrency. Such tendencies
can be explained by a rather ambiguous status of cryptocurrencies and,
therefore, attempts to minimize the negative attitude towards this
phenomenon.
As practice shows, changes in the field of information
technology and the economy are occurring very quickly, therefore, the
essence and nature of digital assets, which are currently at the stage of
development, are not yet fully understood and accepted by the modern
community. At the same time, it is necessary to take into account the
prospects of using digital assets, since in the future they may become
the universally recognized equivalent of value and have the legal
tender status. Therefore, any classification and systematization of
related concepts is somewhat arbitrary and, in modern rapidly
changing conditions, for obvious reasons, cannot be considered
established yet.
16
1.3. Components in the Context of the Definition of the
Term “Digital Asset”
Digital asset is still a poorly studied phenomenon for the
economy, therefore, the essential distinction from other objects seems
extremely necessary in the conditions of the development of the
market of information resources and services based on the blockchain
technology.
Indeed, based on the foregoing, we can conclude that today the
term “digital asset” is interpreted differently, which greatly
complicates the understanding of many processes related to the use of
digital assets and quite often affects the distortion and
misinterpretation of information laid down in the basis of existence of
digital assets. Such terminological confusion creates stable conditions
for further establishment of the inconsistency and ambiguity not only
of the term “digital asset” itself, but also of the prospects for its use.
Due to the fact that digital assets have great potential for the real sector
of economy, there is a need for their legal regulation and consolidation
of the definition of “digital asset” in the economic and legal aspects
based on the established essential semantic features [29].
DIGITAL ASSET is an information resource derivative of the
right to a value and circulating in the distributed ledger in the form of
a unique identifier.
When clarifying the definition of the term “digital asset”,
certain essential semantic features represented by four components
have been analyzed:
1) economic;
2) legal;
3) information;
4) value.
Taking these elements into account, its structural components
have been emphasized in the definition of “digital asset”.
Economic component in the context of the definition of the
term “digital asset” is represented in the financial field by a unique
identifier.
17
The component “in the form of a unique identifier” indicates the
form of representation of a digital asset and the existence of a unique
name. The alphanumeric code assigned by the system, in which the
digital asset circulates, allows distinguishing a specific digital asset in
the distributed ledger and obtaining the necessary information about
it. The given properties of a unique identifier of a blockchain token
transaction allow individuals and business entities to conduct the
balance accounting of a digital asset, which enables them to calculate
the main economic indicators of activity, including production of
goods, cost of production, profit and profitability.
Digital assets obtained a unique property with the emergence of
the distributed ledger technology, whose structure guarantees safe
information storage and the possibility of asset verification. Any
changes made to the distributed ledger (blockchain) automatically lead
to the generation of a new unique identifier, which eliminates the
possibility of duplication and illegal use of the asset. The information
about a digital asset contains the following characteristics: its location,
registration, legal restrictions and other distinctive features and
properties. Blockchain provides the conditions for identifying a digital
asset by giving it a unique hash code, which allows assigning such an
asset to a specific entity.
Legal component in the context of the definition of the term
“digital asset” is represented in the legal field by a derivative of the
right.
Having analyzed different meanings of the term “derivative”,
we can conclude the following: all these terms have a certain basic
phenomenon, the subject (source), which determines the origin of a
derivative. In other words, “derivative” emerges as a result of the
transformation of the source (basic phenomenon) and is able to retain
basic properties or rely on them. In turn, the properties of derivatives
are predetermined by the properties of sources.
The definition of the term “digital asset” uses the subjective
approach to interpreting right as the type and measure of a person’s
possible behavior, which are governed by legal norms.
According to the analysis of the definitions of the component
“derivative of the right”, we can state that they most fully reflect the
18
essence of the principle laid down in the definition of the term “digital
asset”. A digital asset is not the right to a value in its interpretation,
but it has attributes of a derivative of the right to a value.
Information component in the context of the definition of
the term “digital asset” is represented in the IT field by an
information resource circulating in the distributed ledger.
Information resource is information structured and organized in
a certain way and recorded on a tangible medium. Information can be
stored, transmitted, used, and updated. An information resource has
the properties of practical significance and usefulness as well as the
possibility of multiple use (“inexhaustibility”). Unlike other types of
resources (natural, economic, temporary), the quantity and quality of
information resources increase as they are used. Such a cumulative
effect along with the development of modern technologies contributes
to the rapid increase in the information potential of society as a whole.
Thus, a digital asset is an information resource in the sense that
the information on a value presented in a digital form has such main
properties of an information resource as:
a) information is structured according to certain parameters and
categories;
b) information is recorded on a digital medium;
c) information can be stored, transmitted, exchanged, used, etc.
In addition, a digital asset has an additional property –
information on a value is formed by the owner of this value. It should
also be noted that an information resource in the context of the
definition of the term “digital asset” is deprived of such a characteristic
as the possibility of being copied an unlimited number of times. This
is due to the fact that in the distributed ledger, each such resource is
expressed in the form of a unique identifier, which ensures stable
conditions for the guaranteed conformity of a digital asset to a specific
entity. Thus, the following important conclusion can be reached: the
value of a digital asset lies in its uniqueness and credibility, which are
ensured by circulation of the digital asset in the distributed ledger.
Based on these characteristics, one can also designate the high
practical significance of the digital asset in the economic and legal
aspects.
19
One of the key properties of a digital asset is the ability to
circulate in the digital environment, rather than being copied during
transmission from one email address (storage, wallet, cell) to another.
A circulating object (digital asset) must necessarily have not only its
own circulation environment, but also clearly defined rules and
conditions for its existence in such an environment. To be able to
establish and monitor the implementation of such rules and conditions,
a reliable digital scalable and decentralized ecosystem is needed,
which will allow all participants to be confident that the uniqueness of
information resources will be preserved. That is why the component
“distributed ledger” occupies an important place in the definition of a
digital asset.
The distributed data storage system of such ledgers is one of the
most technologically advanced. It provides the highest possible level
of confidence in the information due to the mandatory procedure of
verifying it for accuracy by all nodes of the distributed environment
through a certain method of building consensus. Thus, the problem of
“double-spending” is also solved. The information contained in such
a ledger cannot be deleted or modified, and the reliability and
mechanism of this storage method allow creating records on the right
to values (assets) in the ledger. This is a necessary procedure in the
process of creating a digital asset, which, in turn, requires recording
information about the assessment (audit) and other data of the owner
of the digitized value in the ledger, including his/her property right to
a value. To understand the nature of a digital asset, it is important to
take into account the mandatory conditions: the possibility of
confirming that a digital asset belongs to a particular entity, as well as
the absence of any means of creating a copy of the same digital asset,
including by duplicating its unique identifier. Such conditions can
only be provided by the distributed ledger technology, which allows
guaranteeing the uniqueness of digital asset identifiers and assigning
specific identifiers to specific objects.
Thus, it can be concluded that the ability to circulate in the
distributed ledger for a digital asset is one of the determining ones.
Therefore, the distributed ledger as an information storage system is
the only possible environment for the existence and circulation of
20
digital assets, which are the numerical expression of the rights and
obligations of the owner of the real asset in the space of the distributed
ledger.
Value component in the context of the definition of the term
“digital asset” is represented in the field of tangible and intangible
assets by the “value” component.
Value is relative worth, utility, or importance, which can also
be expressed by different measurement units depending on the area of
practical use of such a value and the ecosystem in which such a value
exists.
The phrase “derivative of the right to a value” is used in the
definition of the term “digital asset”, since, in essence, digital asset is
a kind of a guaranteed right to claim a certain value inherent in this
digital asset. In other words, a digital asset serves as a digital display
of value. Thus, it is the “value” component that is used in the definition
of “digital asset”, since it conveys most widely and comprehensively
the meaning laid down in the definition.
You can read the full text of the paper: Kud A. A. Substantiation
of the Term “Digital Asset”: Economic and Legal Aspects.
International Journal of Education and Science. 2019. Vol. 2. No. 1.
P. 41–52. doi: 10.26697/ijes.2019.1.06. http://culturehealth.org/ijes_
archive/IJES,Vol.2,No1,2019_(6).pdf.
After the theoretical substantiation of the term “digital asset”, it
is extremely important for practice to determine the criteria and
characteristics of a blockchain token as a digital asset.
21
1.4. Characteristics of the Criteria and Indicators of a
Blockchain Token’s Correspondence to a Digital Asset
In the scientific literature and in articles of information and
analytical nature, you can find a lot of publications that highlight the
advantages of a particular type of cryptocurrency based on certain
characteristics. These publications are quite different in purpose and
content, but they have one thing in common: such publications are
often dedicated to the consideration and popularization of a specific
cryptocurrency. At the same time, the criteria and indicators that
should form the basis of the complex characteristics of a blockchain
token are not given.
We have analyzed numerous scientific publications and made
the following conclusion on their basis: the main problem in the
theoretical and practical field is that the industry of information
technology and economy is developing rapidly, and therefore, the
proposed criteria for determining the characteristics of a blockchain
token should be unified and justified in accordance with existing
international economic and legal standards.
It is obvious that in the absence of criteria (a complex or a
system of criteria) it is impossible to assess an object, identify
problems, determine the degree of its perfection, predict further
development, etc.
Considering this, in order to determine the criteria for a
blockchain token as a digital asset, it is necessary to establish the most
significant features that will allow characterizing the indicators to
determine whether a certain object corresponds to a digital asset.
The conducted research allowed us to determine the criteria for
the optimal characterization of a blockchain token as a digital asset.
The optimality is based on a typology of criteria: global – local;
external – internal; maximizing result – minimizing costs.
A multi-criteria analysis of the mentioned above complex of
definitions and optimal choice of criteria allowed us to solve the
problem of determining the criteria and characteristics of a blockchain
token as a digital asset.
22
The methodology for diagnosing whether a blockchain token
corresponds to a digital asset is based on the principle of equivalence
of categories.
The use of a blockchain token is determined by the need to
observe the mandatory compliance of its characteristics with
fundamental and exhaustive categories for a digital asset in the
economic and legal aspects, which correspond to the components that
produce the definition of a digital asset.
It should be noted that, according to the principle of equivalence
of categories, they are all equal in importance for an objective
determination of the correspondence of a blockchain token to a digital
asset. This means that if a blockchain token does not correspond to at
least one of the categories, then such a blockchain token cannot be
considered as a digital asset.
These categories include the following:
1. Definition of a digital asset as an information resource;
2. Determination of the nature of the digital asset as a derivative
of the right to a value;
3. Circulation of a digital asset in the distributed ledger;
4. Circulation of a digital asset in the form of a unique identifier.
The principle of equivalence of categories is established by:
1) determining a list of criteria that are sufficient for diagnosing
a blockchain token for correspondence to a digital asset;
2) sufficiency of the criteria due to the differentiation of 9
digital asset criteria into four categories depending on the ratio of the
criteria to the categories of a digital asset:
1st category: criteria No. 1; 2; 3; 4;
2nd category: criteria No. 5; 6;
3rd category: criteria No. 7; 8;
4th category: criterion No. 9;
3) two questions correspond to each criterion, the answers to
these questions allow determining whether a blockchain token has an
indicator, which in turn, allows determining whether certain
characteristics of a blockchain token correspond to this criterion;
4) assignment of criteria of equal importance to each of the
categories.
23
Thus, the degree of compliance of the characteristics of a
blockchain token with each category is a necessary condition for
determining the degree of correspondence of a blockchain token to a
digital asset.
Let us consider the criteria in detail.
1. Uniqueness. This criterion indicates the uniqueness of a
blockchain token and is characterized by the following indicator: the
existence of a document that records the issue date of a blockchain
token and determines the number of a blockchain token.
2. Identifiability. This criterion points out the creator of the
document and is characterized by the following indicators: the
existence of an indication of а blockchain token’s creator in the
document; the ability to confirm the legal claim of the creator of a
blockchain token in relation to a value.
3. Regulability. This criterion indicates that the process for
implementing legal claim with respect to a blockchain token is
regulated and is characterized by the following indicator: the existence
of a document that establishes the rules and conditions for using a
blockchain token.
4. Sessionality. This criterion is determined by the period
during which a blockchain token exists and is characterized by the
following indicator: the existence of a document that sets the
circulation period of a blockchain token and determines an event that
affects the validity of the blockchain token.
5. Derivativeness. This criterion indicates the nature of a
blockchain token derivative of the right to a value and is revealed
through the following indicator: whether a blockchain token provides
its holder with access to the complex of rights and obligations of the
owner of value; whether a blockchain token provides its owner with
the right to demand the fulfillment of a set of rights and obligations.
6. Verifiability. This criterion indicates the existence of reliable
evidence of the owner’s property rights to the value and is
characterized by the following indicators: the existence of a document
that contains information that reliably indicates the owner’s property
right to the value, from which the blockchain token derives; the
existence of a document that contains reliable information about the
24
scope of the rights of the value’s owner and third parties to the value,
from which the blockchain token derives.
7. Transparency. This criterion indicates the possibility of
analyzing the history of transactions with a blockchain token based on
existing accounting methods and is characterized by the following
indicators: whether information on the parties to the transaction is
displayed in the history of transactions with a blockchain token;
transaction accounting is based on previous transactions (UTXO) or
on the balance accounting of a blockchain token.
8. Decentralization. This criterion indicates the independence
of the environment, in which the blockchain token circulates, from
centralized decision-making and is characterized by the following
indicators: the existence of documented mechanisms for management
and development of the blockchain token circulation environment by
the community; maintenance of the infrastructure of the blockchain
token circulation environment by the community.
9. Accountability. This criterion indicates the recording of the
transfer of a certain number of blockchain tokens from one identified
party to another and is characterized by the following indicators: the
ability to account the transfer of the number of blockchain tokens
between identified parties in a transaction; the ability to record the
actions of the parties through a transaction identifier.
It should be noted that today the given number of criteria is
optimal and sufficient to obtain reliable indicators for determining the
characteristics of a blockchain token as a digital asset in order to
comply with existing international legal standards.
25
SECTION 2
ORGANIZING AND CONDUCTING THE RESEARCH OF
CHARACTERISTICS OF A BLOCKCHAIN TOKEN
2.1. Research of Characteristics of a Blockchain Token
Blockchain tokens can be studied using various methods: from
a simple observation of its exchange value to complex mathematical
calculations and construction of theoretical models.
The research of characteristics of any blockchain token implies
the use of a special questionnaire developed by us, which does not
require extensive knowledge in the field of information and/or digital
economy and can be completed both individually and collectively. To
conduct the research, the respondent needs to fill in a special form with
a list of questions. After completing the research, i.e. after filling in all
the required fields, the respondent gets an opportunity to analyze the
obtained results using Table 2.
The questionnaire has been developed according to specific
criteria and indicators of a blockchain token, it contains 18 questions,
the answers to which allow specifying the characteristics of a
blockchain token. The respondent must choose only one out of three
answers (A, B, C), which are graded in accordance with the scale in
Table 2.
The information gathered using this methodology allows
determining how much a blockchain token corresponds to a digital
asset and also characterizing a blockchain token as:
- unique/non-unique;
- identifiable/non-identifiable;
- regulated/non-regulated;
- sessional/non-sessional;
- derivative/non-derivative;
- verifiable/non-verifiable;
- transparent/non-transparent;
- decentralized/centralized;
- accountable/non-accountable.
26
In order to get the most precise results, the questions are
arranged in a way that they specify every criterion twice. The analysis
of the correspondence of answers to each criterion allows gathering
information about the randomness of answers and/or mistakes.
QUESTIONNAIRE
Instruction: “You have an opportunity to diagnose a
blockchain token (hereinafter referred to as “BT”). In order to do that,
you need to answer 18 questions, which characterize it. In a special
form, fill in the information about yourself and answer every question
by choosing one of the proposed answers: А – Yes; B – Don’t know;
C – No.
Write the selected answer next to each question in a special
column made for that purpose. There is no time limit for answering”.
_________ __________________ _____________________
Date Surname and initials Higher education degree
________________________ _________________________
Specialty Work experience (years)
Table 2
Questions for Testing the Characteristics of a Blockchain Token
No.
Question
Answer
1.
Is there a document that registers the issue date
of the BT?
2.
Is the creator of the BT specified directly in the
document?
3.
Is there a document that establishes the terms of
using the BT?
4.
Is there a document that sets the BT’s
circulation period?
5.
Does the BT provide its owner with access to a
set of rights and obligations of the value’s
owner?
27
No.
Question
Answer
6.
Is there a document that contains information,
which reliably specifies the owner’s property
right to the value, which the BT derives from?
7.
Does the BT transaction history display
information about the parties involved in the
transaction?
8.
Are there recorded mechanisms of management
and development of the BT’s circulation
environment for the community?
9.
Is the accounting of the BT transfer amount
between the identified parties of the transaction
possible?
10.
Is there a document that determines the number
of BTs?
11.
Does the document allow confirming the legal
claim of the creator of the BT to the value?
12.
Is there a document that establishes the
conditions for using the BT?
13.
Is there a document that determines an event,
which affects the validity period of the BT?
14.
Does the BT provide its owner with the right to
demand the fulfillment of a set of rights and
obligations from the owner of the value?
15.
Is there a document that contains reliable
information about the scope of the rights of the
value’s owner and third parties to the value,
which the BT derives from?
16.
Is the accounting of transactions conducted
based on the previous transactions (UTXO) or
on the balance accounting of the BT?
17.
Does the community support the infrastructure
of the BT’s circulation environment?
18.
Is it possible to record the actions of the
identified parties by using the transaction
identifier BT?
28
2.2. Analysis of Research Results
The questionnaire results are evaluated using Table 3.
The maximum total number of points is: 16 points, minimum:
0 points.
This table is based on one of the aspects of the principle of
equivalence of categories, which means that each criterion has two
questions similar in their nature.
Table 3
Formation of Test Results
Step 1. Determine the value of the answer for each question
1
2
Question
No.
In this column, you need to mark
the answer received for each
question in the questionnaire
In this column, you
need to specify a
value for each
question according
to the following
answer values:
А = 1, B = 0, C = 0
1.
А B C
2.
А B C
3.
А B C
4.
А B C
5.
А B C
6.
А B C
7.
А B C
8.
А B C
9.
А B C
10.
А B C
11.
А B C
12.
А B C
13.
А B C
14.
А B C
15.
А B C
16.
А B C
17.
А B C
18.
А B C
29
Step 2. Determine the values
Criterion
No.
1
2
3
4
Criterion
Numbers
of the
two
questions
corres-
ponding
to each
criterion
Enter
the
values
from
column 2
of Step 1
into the
cell
corres-
ponding
to each
question
In this column,
you need to
specify the value
obtained
through simple
multiplication of
the two values of
answers
corresponding
to each criterion
in column 3
of Step 2
1.
Unique-
ness
1
10
2.
Identifi-
ability
2
11
3.
Regul-
ability
3
12
4.
Session-
ality
4
13
5.
Deriva-
tiveness
5
14
6.
Verifi-
ability
6
15
7.
Trans-
parency
7
16
8.
Decentra-
lization
8
17
9.
Account-
ability
9
18
30
Step 3. Determine whether the results obtained in the
questionnaire correspond to the criteria of a digital asset
No.
1
2
3
Enter the
values from
column 4 of
Step 2 into the
column
Action
In this column, write
down the result after
completing a simple
multiplication of values
specified in columns 1
and 2 of Step 3
1.
× 1
2.
× 1
3.
× 1
4.
× 1
5.
× 2
6.
× 2
7.
× 2
8.
× 2
9.
× 4
Now you simply need to add the values in column 3 of Step 3,
and the obtained result will be the total number of points that you can
use to interpret the results of the research in accordance with Table 4.
Points in total: ______
31
2.3. Interpretation of Research Results
Whether the characteristics of a blockchain token correspond to
those of a digital asset can be determined based on the normal
distribution of indicators presented in Table 4.
Table 4
Grade Scale of the Indicators of a Blockchain Token
Range, points
Results
1–8
BT does not correspond to a digital asset, i.e.
it is not a digital asset.
The obtained result reliably confirms the
absence of the required level of correspondence
of a blockchain token to a digital asset
9–12
BT can theoretically be a digital asset, but in
reality, it is not one.
This conditionally negative result is based on the
fact that the characteristics of a blockchain token
can correspond to all four categories of a digital
asset, but the obtained number of points is not
sufficient to get reliable indicators in order to
define a BT as a digital asset
13–16
BT corresponds to a digital asset, i.e. it is a
digital asset.
This result indicates the required level of
correspondence of a blockchain token to a digital
asset, which means it is a digital asset
32
SECTION 3
MATHEMATICAL FORMALIZATION
OF METHODOLOGY FOR DIAGNOSING WHETHER
CHARACTERISTICS OF A BLOCKCHAIN TOKEN
CORRESPOND TO THOSE OF A DIGITAL ASSET
3.1. Triple Classification Based on the Results of the
Diagnostics on Whether a Blockchain Token Corresponds to a
Digital Asset
The questionnaire of this methodology contains 18 questions
numbered from 1 to 18, which we will denote as b(1), b(2), ..., b(18).
Each question has three possible answers: “Yes”, “No”, “Don’t
know”. The answer to i-th question forms a numeric value a(i)
a(i) = { 1 if the answer to i-th question is “Yes”;
0 if the answer to i-th question is “No”;
0 if the answer to i-th question is “Don’t know”,
i=1, 2, ..., 18.
Depending on the answers to the posed questions, the sum C,
which consists of 9 summands,
С = X(1) + X(2) + ... + X(9)
is formed as follows:
X(1) = a(1)a(10),
X(2) = a(2)a(11),
X(3) = a(3)a(12),
X(4) = a(4)a(13),
X(5) = 2a(5)a(14),
X(6) = 2a(6)a(15),
X(7) = 2a(7)a(16),
X(8) = 2a(8)a(17),
X(9) = 4a(9)a(18).
Based on the test results, the blockchain token can be assigned
to one of three classes.
33
Class 1
BT does not correspond to a digital asset, i.e. it is not a digital
asset if the sum C formed as a result of answering the questions is less
than or equal to 8
BT = NDA if C ≤ 8.
Class 2
BT can theoretically be a digital asset, but in reality, it is not
one if the sum C formed as a result of answering the questions is
between 9 and 12
BT = NDA if 9 ≤ C ≤ 12.
In this case, it is assumed that the blockchain token can
potentially become a digital asset, i.e. it corresponds to the boundaries
of a digital asset, but technically is not one at the time of testing.
Class 3
BT corresponds to a digital asset, i.e. it is a digital asset if the
sum C formed as a result of answering the questions is more than or
equal to 13
BT ∈ DA if C ≥ 13.
As a result of this triple classification, an understanding of the
boundaries of digital assets appears, which has a positive Jordan
measure (length of the interval [9; 12] equals 3 > 0).
34
3.2. Reliability of the Methodology for Diagnosing the
Blockchain Token Based on the Number of Points Received
If the number of points received for answering 18 questions is
c, then we need to find the probability
Δ = P(C ≥ c)
that the total sum will be no less than c {С ≥ с} with randomly
selected answers {“Yes”, “No”, “Don’t know”} to each of the 18
questions. Then we determine the reliability P of the obtained result of
the diagnostic methodology using the formula
P = 1 - δ = 1 - P(С ≥ с).
Probability Structure of the Resulting Sum C with Randomly
Selected Answers
To determine the sought probability, let us study the probability
structure of the sum C
С = X(1) + X(2) + ... + X(9),
where
X(1) = a(1)a(10),
X(2) = a(2)a(11),
X(3) = a(3)a(12),
X(4) = a(4)a(13),
X(5) = 2a(5)a(14),
X(6) = 2a(6)a(15),
X(7) = 2a(7)a(16),
X(8) = 2a(8)a(17),
X(9) = 4a(9)a(18),
assuming that a(1), a(2), ..., a(18) form a set of independent and
identically distributed random variables with a random distribution a
that can have only two values: 1 with the probability of 1/3,
P(a = 1) = 1⁄3,
and 0 with the probability of 2/3,
P(a = 0) = 2⁄3.
35
Technically, this distribution is the Bernoulli distribution for the
number of successful outcomes in one test with the probability of
success of 1/3 (in case the answer to the question is “Yes”).
In this assumption, random variables {X(k), k= 1, 2, ..., 9} are
independent when combined and the first four, i.e. X(1), X(2), X(3),
X(4), have the same Bernoulli distribution as the random variable X:
p = P(X = 1) = 1⁄9 and q = P(X = 0) = 1 - p = 8⁄9. In our assumptions,
for any i ≠ j (can be viewed as 1 ≤ i < j ≤ 18) the product of variables
a(i) and a(j), each being equal to either 0 or 1, can also have only two
values — 0 or 1 and
P[a(i)a(j) = 1] = P[a(i) = 1]P[a(j) = 1] = (1⁄3)(1⁄3) = 1⁄9,
P[a(i)a(j) = 0] = 1 - P[a(i)a(j) = 1] = 1 - 1⁄9 = 8⁄9.
The total sum of the received points can be written down as the
sum of four summands
С = С(1) + С(2) + С(3) + С(4),
of the points received in the four corresponding categories
С(1) = X(1) + X(2) + X(3) + X(4),
С(2) = X(5) + X(6),
С(3) = X(7) + X(8),
С(3) = X(9).
For the first category, the sum of the received points
С(1) = X(1) + X(2) + X(3) + X(4)
represents the number of successful outcomes in four
independent tests with the probability of success of 1/9 (positive
answer to two grouped questions) in each separate test and has a
binomial distribution (Bernoulli formula)
P[C(1) = k] = (n!⁄([k!(n - k)!]))(p^k)(q^(n - k)), k = 0, 1, 2, ..., n,
for the number of successful outcomes in a series of four (n =
4) independent tests with the probability of success p = 1⁄9 in each
separate test and the probability of failure q = 8⁄9.
Example 1. Let us find the probability P[C(1) ≥ 1] that the total
number of points received in the first category is not less than one. It
equals
P[C(1) ≥ 1] = 1 - P[C(1) = 0] = 1 - q^n
36
and after substituting the values n = 4, q = 8⁄9
P[C(1) ≥ 1] = 1 - P[C(1) = 0] = 1 - (8⁄9)^4 = 2465⁄6561 = 0,3757....
Example 2. Let us assume that n = 4, p = 1⁄9. Now let us find
the probability P[C(1) ≥ 3] that the total number of points received in
the first category is not less than three. This probability can be
represented as a sum of two summands, the probability P[C(1) = 3] of
getting 3 points in this category and the probability P[C(1) = 4] of
getting 4 points in the first category. Both probabilities are calculated
using the Bernoulli formula for binomial distribution
P[C(1) = 3] = 4((1⁄9)^3)(8⁄9),
P[C(1) = 4] = (1⁄9)^4,
which helps us to determine the sought probability
P[C(1) ≥ 3] = P[C(1) = 3] + P[C(1) = 4] = 4((1⁄9)^3)(8⁄9) +
(1⁄9)^4 = 33⁄9^4 = 33⁄6561 = 0,005....
For the second category, the sum of the received points
С(2) = X(5) + X(6)
represents the doubled number of successful outcomes in two
independent tests with the probability of success of 1/9 (positive
answer to two grouped questions for the fifth and sixth criteria) in each
separate test and has the distribution of the random variable that has
the values 0, 2 and 4 with probabilities
P[C(2) = 0] = (8⁄9)^2 = 0,79012...,
P[C(2) = 2] = 2(1⁄9)(8⁄9) = 0,19753...,
P[C(2) = 4] = (1⁄9)^2 = 0,01234....
Similarly, for the third category, the sum of the received points
С(3) = X(7) + X(8)
represents the doubled number of successful outcomes in two
independent tests with the probability of success of 1/9 (positive
answer to two grouped questions for the seventh and eighth criteria)
in each separate test and has the distribution of the random variable
that has the values 0, 2 and 4 with probabilities
P[C(3) = 0] = (8⁄9)^2 = 0,79012...,
P[C(3) = 2] = 2(1⁄9)(8⁄9) = 0,19753...,
P[C(3) = 4] = (1⁄9)^2 = 0,01234....
37
For the fourth category, the number of the received points
С(4) = X(9) = 4a(9)a(18)
represents the number of successful outcomes multiplied by
four in one test with the probability of success of 1/9 (positive answer
to two grouped questions for the ninth criterion) in this test and has
the distribution of the random variable that has the values 0 or 4 with
probabilities
P[C(4) = 0] = 8⁄9,
P[C(4) = 4] = 1⁄9.
The probability of getting at least 13 points in sum C
Let us find the exact probability value P[C ≥ 13] in the
assumption of an equally possible selection of answers (randomly
chosen answers) to all 18 questions out of three possible answers
{“Yes”, “No”, “Don’t know”}. Thus, we have
С = С(1) + С(2) + С(3) + С(4)
the total number of points that is the sum of the points received
in all four categories. Meanwhile, the maximum number of points for
each category equals:
max[C(k), k = 1, 2, 3, 4] = 4.
As a result, the maximum possible total number of points
C^(max) is sixteen
C^(max) = max[C(1) + C(2) + C(3) + C(4)] = 4 + 4 + 4 + 4 = 16.
Based on that and the content of a set of integers
С(1) = {0; 1; 2; 3; 4}, С(2) = {0; 2; 4}, С(3) = {0; 2; 4}, С(4)
= {0;4},
13 points or more in total
С = С(1) + С(2) + С(3) + С(4)
can be received only if С(4) = 4 (for С(4) = 0 total sum С ≤ 16
- 4 = 12 < 13 less than thirteen). If С(4) = 4, then the random event {C
≥ 13} is represented as a sum of mutually exclusive random events
(for sum C not less than 13 only the following options are possible):
A = {С(4) = 4, С(3) = 4, С(2) = 4, С(1) ≥ 1},
B = {С(4) = 4, С(3) = 4, С(2) = 2, С(1) ≥ 3},
D = {С(4) = 4, С(3) = 2, С(2) = 4, С(1) ≥ 3}.
38
Due to the independence of random variables {С(1), С(2), С(3),
С(4)}, the probability of each of these three events is calculated as a
product of probabilities of events related to each of these variables.
Meanwhile, we will need the following probabilities calculated
previously as multipliers:
P[С(4) = 4] = 1⁄9,
P[С(3) = 4] = (1⁄9)^2 = 1⁄81,
P[С(2) = 4] = (1⁄9)^2 = 1⁄81,
P[С(1) ≥ 1] = ((9^4 - 8^4))⁄9^4 = 2465⁄6561,
P[С(2) = 2] = 2(1⁄9)(8⁄9) = 16⁄81
P[С(3) = 2] = 2(1⁄9)(8⁄9) = 16⁄81
P[C(1) ≥ 3] = 4((1⁄9)^3)(8⁄9) + (1⁄9)^4 = 33⁄9^4 = 33⁄6561.
Thus,
P[С(4) = 4, С(3) = 4, С(2) = 4, C(1) ≥ 1] = P[С(4) = 4]P[С(3) =
4]P[С(2) = 4]P[C(1) ≥ 1]
After substituting the values of the probabilities calculated
above
P[С(4) = 4, С(3) = 4, С(2) = 4, C(1) ≥ 1] =
(1⁄9)((1⁄9)^2)((1⁄9)^2)[((9^4 - 8^4))⁄9^4] = ((9^4 - 8^4))⁄9^9,
or
P[С(4) = 4, С(3) = 4, С(2) = 4, C(1) ≥ 1] = ((9^4 - 8^4))⁄9^9 =
2465⁄387420489.
Then
P[С(4) = 4, С(3) = 4, С(2) = 2, C(1) ≥ 3] = P[С(4) = 4]P[С(3) =
4]P[С(2) = 2]P[C(1) ≥ 3]
After substituting the values of the probabilities calculated
above
P[С(4) = 4, С(3) = 4, С(2) = 2, C(1) ≥ 3] =
(1⁄9)((1⁄9)^2)(16⁄9^2)(33⁄9^4) = 528⁄9^9,
or
P[С(4) = 4, С(3) = 4, С(2) = 2, C(1) ≥ 3] = 528⁄9^9 =
528⁄387420489.
And finally,
P[С(4) = 4, С(3) = 2, С(2) = 4, C(1) ≥ 3] = P[С(4) = 4]P[С(3) =
2]P[С(2) = 4]P[C(1) ≥ 3]
39
After substituting the values of the probabilities calculated
above
P[С(4) = 4, С(3) = 2, С(2) = 4, C(1) ≥ 3] =
(1⁄9)(16⁄9^2)((1⁄9)^2)(33⁄9^4) = 528⁄9^9,
or
P[С(4) = 4, С(3) = 2, С(2) = 4, C(1)≥3] = 528⁄9^9 =
528⁄387420489.
Due to the third axiom of probability theory, the sought
probability P[C ≥ 13] can be calculated as a sum of probabilities of
three mutually exclusive events
P[C≥13] = P(A) + P(B) + P(D) = 2465⁄9^9 + 528⁄9^9 + 528⁄9^9
= 3521⁄387420489,
or the sought probability equals
δ = P[C ≥ 13] = 3521⁄387420489 = 9,0883.../10^6<1/10^5
Thus, a precise evaluation of reliability of the results of
diagnosing whether a blockchain token corresponds to a digital asset
is
P = 1 - P[C ≥ 13] = 1 - 3521⁄387420489 =
387416968⁄387420489 = 0,9999909...>0,99999.
Thus, the reliability of this methodology for diagnosing
whether a blockchain token corresponds to a digital asset is more
than 0.99999. This means that the probability that randomly selected
answers to 18 questions using this methodology will result in a
positive outcome of diagnosing whether a blockchain token
corresponds to a digital asset is less than 1/10^5.
Based on the above-mentioned information, we can state the
actual mathematical justification of the methodology for diagnosing
whether a blockchain token corresponds to a digital asset. This
methodology, with overwhelming (close to unity) probability, allows
answering the question: is this specific blockchain token a digital asset
or not? If the number of points received as a result of answering 18
questions and calculated using this methodology is more than or equal
to thirteen C ≥ 13, the diagnosed blockchain token corresponds to a
digital asset, i.e. it is a digital asset.
40
If the received sum is C < 13, then the blockchain token does
not correspond to a digital asset, i.e. it is not a digital asset. However,
in this set of sums {C ≤ 12}, there is a subset {9 ≤ C ≤ 12}, and if the
test results of the characteristics of a blockchain token are within this
subset, then this token can theoretically be a digital asset, but
technically it is not one and is more likely to correspond to the
boundaries of a digital asset. It is the so-called boundary set of
conditions (not corresponding to digital assets), but contributing to the
transition of the blockchain token to class 3 — into the multitude of
digital assets (conditionally negative result). And definitely negative
result when the sum is С ≤ 8. This is the essence of the triple
classification (division into three sets of integer values) of a numerical
display of answers to 18 questions using this methodology:
0 ≤ C ≤ 8 — definitely no, not a DA;
9 ≤ C ≤ 12 — no, but there is a possibility of transition to a DA;
C ≥ 13 — yes, DA.
41
CONCLUSIONS
Using modern theoretical, methodological and mathematical
foundations to study the issue of researching a blockchain token in
order to determine the level of its correspondence to a digital asset
allowed reaching the following conclusions.
1. The analysis of literature sources allowed researching the
following terms: “blockchain token”, “digital currency”, “virtual
currency”, “cryptocurrency”, “digital asset”, “virtual asset”,
“cryptoasset”, “digital money”, “virtual money”, “electronic money”
and others. The theoretical analysis of scientific literature indicates
that, in modern economic science and practice, the essence and nature
of digital assets have not been fully recognized and accepted by
modern society due to the high pace of development of new forms of
presenting digital technologies and a significant delay in forming the
corresponding theoretical basis and concrete conceptual and
categorical apparatus. Meanwhile, the most substantiated in the
economic and legal aspects and, therefore, correct present-day
definition is “Digital asset is an information resource derivative of the
right to a value and circulating in the distributed ledger in the form of
a unique identifier”.
2. The features of the main terms of the research, for example,
the term “digital asset” and four structural components in its
definition, as well as the development of the digital and information
economy in the international legal field, allowed establishing:
four categories to objectively determine whether a blockchain
token corresponds to a digital asset;
sufficiency of criteria due to the differentiation of 9 criteria of
a digital asset into four categories depending on the correspondence of
the criteria to the categories of a digital asset;
indicators of the blockchain token’s characterization as a
digital asset, in particular: uniqueness, identifiability, regulability,
sessionality, derivativeness, verifiability, transparency,
decentralization, accountability.
3. According to the criteria and indicators of a blockchain token
determined over the course of the research, a diagnostic methodology
42
has been developed, as well as the questionnaire consisting of 18
questions, the answers to which allow comparing the characteristics of
a blockchain token to those of a digital asset. The results of the
questionnaire are evaluated based on the principle of the equivalence
of categories of a digital asset, particularly the grouping of questions
based on the criteria, and, therefore, allow determining how much
characteristics of a blockchain token correspond to those of a digital
asset.
4. The proposed mathematical formalization of the
methodology for determining whether the characteristics of a
blockchain token correspond to those of a digital asset allows stating
the mathematical justification and reliability of this methodology.
43
THESAURUS
Asset is property and/or (property, non-property) rights of a
natural person and/or business entity, which represent value, including
digital assets, money and various kinds of works, services.
Balance accounting of blockchain tokens is a method for
registering and accounting transactions implemented by the software
of the blockchain network node, which allows determining the
difference between income and expenditure of units of account at a
certain point in time at the address of their accounting.
Balance accounting of digital assets is a method for
determining the difference between income and expenditure of digital
assets at a certain point in time at the address of their accounting,
which is based on the registration and accounting of transactions of a
blockchain token and is implemented by the software of the
blockchain network node.
Bernoulli formula represents a probability distribution for a
number of occurrences of a random event in the final series of
independent tests in the same conditions.
Blockchain is a distributed ledger, which constitutes a
sequential chain of generated transaction blocks built according to
certain rules. At the same time, each subsequent block of the structure
contains information about the previous block, so on the whole, the
chain stores the entire history of completed transactions.
Blockchain token is an accounting unit circulating in the
distributed ledger by means of a transaction with a unique identifier.
Creator of a BT is an entity that directly or indirectly (as a
customer) indicates the value, importance and usefulness of an object
by creating an alphanumeric identifier that is registered in the
blockchain and provides its owner with a certain amount of access
rights to an information resource.
Cryptoasset is digital representations of value made possible
by advances in cryptography and the distributed ledger technology;
cryptoassets are denominated in their own units of account and can be
transferred peer-to-peer without intermediaries.
44
Cryptocurrency is a digital representation of value intended to
create a peer-to-peer alternative to a legal payment instrument issued
by the government; it is used as a general purpose means of exchange
(independent from any central bank); backed by the mechanism
known as cryptography; can be transformed into a legal tender and
vice versa.
Cryptography is the science studying techniques to secure
confidentiality (impossibility of reading information by a third party),
data integrity (impossibility of imperceptible information change),
authentication (verification of the author’s authenticity or other object
properties) as well as non-repudiation.
Currency is any commodity that can perform the function of
money when exchanging goods on the domestic or international
market.
Derivative of the right is a property of the object, giving its
owner the right, which is formed from the right to a value.
Digital asset is an information resource derivative of the
right to a value and circulating in the distributed ledger in the form of
a unique identifier.
Distributed ledger technology is a new approach to recording
and exchanging data among multiple data stores (also known as books
and ledgers). This technology allows recording, sharing and
synchronizing transactions and data in a distributed network of various
network participants.
Document is digitally recorded information that establishes
certain attributes and properties of a digital object, rules and
conditions for its creation and circulation in an information system as
well as the order of its execution. It also exists in an integrated form,
which means that it represents a set of structurally independent digital
documents that establish separate aspects, which, according to their
primary purpose, regulate the document as a whole.
Electronic money is a specialized electronic impulse (file),
which is recorded on a medium containing money characteristics and
a quantitative representation of the value of the money equivalent, is
a prepaid financial product, is issued after the issuer receives funds in
an amount not less than the value of the money equivalent, and is the
45
obligation of the issuer, which receives the right to claim the
repayment by the owner of such money.
Financial system is an organizational form of monetary
relations between all the subjects of the reproduction process of the
distribution and redistribution of the gross national product.
Identifier of a blockchain token transaction (Identifier) is a
unique set of alphanumeric characters of a certain length assigned to
the transaction of a blockchain token in the environment of its
circulation.
Information resource is information structured and organized
in a certain way, recorded on a tangible medium. This information can
be stored, transferred, used and replenished. The information resource
has the properties of practical significance and usefulness, as well as
the possibility of multiple use.
Jordan measure is the simplest and most natural way of
determining the notions of length, area, volume of a set viewed as the
same finite limit of sequences of upper and lower bounds of the sought
value in the process when the positive measuring unit is approaching
zero.
Property law is an absolute subjective civil right that provides
an opportunity for its owner upon performing his/her direct actions to
gain useful properties from the individually-defined thing (thing as
such) for satisfying his/her own interest.
Terms and conditions of using a BT are the data displayed in
an information resource that determine the underlying regularities,
regulations and guiding principles for circulation of an alphanumeric
identifier that is registered in the blockchain and provides its owner
with a certain amount of access rights to an information resource.
Transaction hash is a fixed-length number that is mapped to
data of arbitrary length in such a way that the probability of the
appearance of different data with the same hash would tend to zero,
and it would be hard to recover the data on their hash.
UTXO is an unspent transaction output that can be used as an
input of a new transaction.
Value is worth, utility, or importance, which can also be
expressed by different measurement units depending on the area of
46
practical use of such a value and the ecosystem in which such a value
exists.
Virtual asset is a representation of currency in some
environment or situation. In this context, currency can be defined as
either a medium of exchange or a property that has value in a specific
environment. Monetary virtual assets are often called virtual currency.
Virtual currency is created property, which is accounted
through the use of information and telecommunication technologies;
not denominated in the currency of states, can be used by an indefinite
number of persons to make payments, is not electronic money and
legal tender.
Virtual money is an internal electronic currency of network
communities, the application field of which is limited to the
acquisition and sale of virtual goods within such a community.
47
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Науково-виробниче видання
Методика діагностики токену блокчейну
на відповідність цифровому активу
Методичний посібник
(Англ. мовою)
КУДЬ Александр Александрович
ISBN 978-617-7089-07-9
DOI 10.26697/9786177089079.2019
Видається в авторській редакції
Відповідальний випусковий: І. C. Пипенко
Комп’ютерне складання та верстання: Я. Ю. Свячена
Формат 80х64
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