CFA Level I · CFA Level I Exam · Introduction to Digital Assets
In a distributed ledger, the process by which network participants agree on the valid state of the ledger without relying on a central authority is best described as:
The process is called consensus. A consensus mechanism lets network participants agree on which transactions are valid and on the ledger's current state, without a central authority. Encryption secures data and tokenization creates digital representations of assets, so neither describes this agreement process.
- AconsensusCorrect
- Bencryption
- Ctokenization
Explanation
Consensus mechanisms let nodes agree on which transactions are valid and on the current ledger state. Encryption protects data confidentiality and authentication, and tokenization represents ownership of an asset as a digital token. Neither of those performs the agreement function.
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