Some digital tokens represent real-world assets like gold. What risk do users face when holding these tokens?Redemption riskSmart contract riskAvailability riskCounterparty risk

Answered: Some digital tokens represent…

Database System Concepts

7th Edition

ISBN:9780078022159

Author:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan

Publisher:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan

Chapter1: Introduction

Section: Chapter Questions

Problem 1PE

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Some digital tokens represent real-world assets like gold. What risk do users face when holding these tokens?

Redemption risk
Smart contract risk
Availability risk
Counterparty risk

Expert Solution

Step 1

Redemption risk

If the bond is purchased prematurely, the investor will not be able to get the expected return or will have to re-invest the profits and profits in other bonds in the market, often on unfavorable terms. Given this, collateral bonds usually pay higher interest rates than non-collateral bonds.

Smart contract risk

Wise contracts are often the most vulnerable to cyber attacks and technical failures. As with any other software code, smart contracts require strict evaluation and adequate control to minimize potential risks to blockchain-based business processes.

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