The Banking Executive Magazine - October Issue 2022

Virtual Assets Basics 2. Miner: is the person or entity that participates in a decentralized virtual asset network by running special software to solve complex algorithms in a distributed proof system used to validate transactions in the virtual asset system. 3. Exchanger: is the person or entity engaged in business of virtual asset exchange for real currency, funds, or other forms of virtual asset for a com- mission. The exchangers accept a wide range of payments, such as cash, wires transfers, credit cards, and other virtual assets. Individuals typically use exchangers to deposit and withdraw money from virtual asset accounts. Some of the well- known exchangers are Bitfinex, Coinbase, Bitstamp, Poloniex, Coin- mama, CEX.IO etc. 4. User: is a person/entity who ob- tains virtual asset and uses it to pur- chase real or virtual goods or services or send transfers in a per- sonal use. Users can obtain virtual asset in several ways. For example, they can (1) purchase virtual asset, using real money from an exchanger or directly from the administrator/Miner (2) engage in specific activities that earn virtual asset payments (e.g., respond to a promotion, complete an online sur- vey, provide a real or virtual good or service); (3) self-generate units of the virtual asset currency by "mining" 5. Virtual Asset wallet: is the soft- ware application for holding, storing and transferring bitcoins or other vir- tual assets. 6. Wallet provider: is an entity that provides a virtual asset wallet for holding, storing and transferring bit- coins or other virtual assets. A wallet provider facilitates participation in a virtual asset system by allowing users, exchangers, and merchants to conduct the virtual asset transactions more easily. The wallet provider maintains the customer’s virtual asset balance and generally also provides storage and transaction security. Some of well- known Wallet providers are Bitcoin Core protocol, Electrum, Exodus, Jaxx, Copay, Coin- base, Blockchain etc. TAXONOMY OF VIRTUAL ASSETS Based on the involvement of differ- ent participants from virtual asset sys- tem, virtual assets can be distinguished into centralized and decentralized Virtual assets: ISSUE 166 OCTOBER 2022 the BANKING EXECUTIVE 9 Software Architecture Issuer Exchange Rate Convertibility Participants Examples CRITERION Centralized Administrator Pegged Exchanged for fiat currency Administrator, Exchanger, User E-gold, WebMoney, Linden Dollars CENTRALIZED Distributed (Blockchain) Miner Floating Exchanged for fiat currency Miner, Exchanger, User Bitcoin, Onecoin, Litecoin, Ripple DECENTRALIZED