Preface xvii Acknowledgments xix Acronyms xxi Notations xxiii Introduction xxv Part One Fundamentals of Digital Assets Chapter 1 Overview of Digital Assets 3 1.1 Semantics 3 1.1.1 Digital Assets 3 1.1.2 Blockchain 4 1.1.3 Cryptocurrencies and Tokens 4 1.

2 Brief History 5 1.2.1 Background 5 1.2.2 Bitcoin 6 1.2.3 Ethereum 7 1.2.

4 Tokens and Layer 2 7 1.2.5 dApps and Layer 3 7 1.2.6 Meme Coins 8 1.2.7 NFTs 8 1.2.

8 ETFs 9 1.3 Major Coins 10 Chapter 2 Topology of Networks 11 2.1 Blockchain Networks 11 2.1.1 Ledger 11 2.1.2 Three Pillars of Blockchains 12 2.1.

3 Forks 13 2.2 Sidechains 14 2.3 Technical Characteristics 15 2.3.1 Protocol Layer 15 2.3.2 Consensus Mechanism 17 2.3.

3 Anonymity 19 2.4 Network Indicators 19 2.5 Staking 20 2.5.1 Direct Staking 20 2.5.2 Liquid Staking 21 2.5.

3 Yield Farming 22 Chapter 3 Asset Characteristics 23 3.1 Network Versus Asset 23 3.2 Conventional Asset Classification 24 3.2.1 Financial Instruments and Assets 24 3.2.2 Asset Classes 25 3.2.

3 Cash Products 26 3.2.4 Derivatives 26 3.2.5 Options 33 3.2.6 Hybrids 41 3.2.

7 Claims and Cash Flows 42 Open Problems 44 Part Two Network Valuation Chapter 4 Digital Asset Classification 47 4.1 Prudential Classification 48 4.2 Sector Classification 48 4.2.1 HHR''s Classification 48 4.2.2 Other Sectoral Classifications 49 4.2.

3 Limitations 49 4.3 WWS Market Cap Characterization 50 4.4 Ecosystem Classification 51 4.4.1 Schär''s Classification 51 4.4.2 Linnaean Classification 52 4.5 Functional Classification 53 4.

5.1 FINMA Classification 53 4.5.2 Enhanced Functional Classification 54 Chapter 5 Network Valuation 57 5.1 Market Capitalization Multiple 58 5.2 Business Valuations 59 5.2.1 Peer Comparison 59 5.

2.2 Book Valuation 60 5.2.3 Dividend Valuation 60 5.2.4 Cash Flow Valuation 61 5.3 User-based Network Valuations 62 5.3.

1 Sarnoff''s Law 62 5.3.2 Metcalfe''s Law 62 5.3.3 Reed''s Law 63 5.3.4 ZBOT Law 63 5.4 Discussion on Network Valuations 65 5.

4.1 Comparison of Network Valuations 65 5.4.2 Limitations 65 5.4.3 Beyond User-based Network Valuations 66 5.5 Transaction Volume Pricing 66 5.5.

1 Volume Multiple Valuation 66 5.5.2 Block Time Valuations 67 5.5.3 Cost Accounting 67 5.6 Factor Analysis 70 5.6.1 Fundamental Factor Analysis 70 5.

6.2 Regressions 71 5.6.3 Principal Component Analysis 72 5.6.4 Limitations 72 5.7 Relative Value Pricing and Interchain Basis 73 5.7.

1 Credit Default Swap Basics 73 5.7.2 Interchain Basis 74 5.7.3 Network Default Swaps 74 Open Problems 76 Part Three Market Structure Chapter 6 Carry and Storage 79 6.1 Lending and Margin 79 6.2 Carry and Forward Pricing 81 6.2.

1 Forward Pricing Framework 81 6.2.2 Foreign Exchange Forward Pricing 82 6.3 Cost of Carry and Convenience Yield 83 6.4 Digital Asset Custody 86 6.4.1 Wallet Types 86 6.4.

2 Custodial Models and Exchange Custody 86 6.4.3 Storage Risk and Asset Pricing 88 Chapter 7 Liquidity Interface 89 7.1 Traditional Finance Pathways 89 7.2 Stablecoins 90 7.2.1 Definition and Classification 90 7.2.

2 Market Development and Regulation 91 7.2.3 Economic Characteristics and Pricing 91 7.3 Tokenized Assets 91 7.3.1 Tokenized Bonds 92 7.3.2 CBDCs and Tokenized Deposits 93 7.

3.3 RWA Tokens 93 7.4 Defi Liquidity Interface 94 Chapter 8 Cost of Liquidity 97 8.1 Price Decomposition Framework 97 8.1.1 Order Books and Market Structure 97 8.1.2 Economic Surplus and Market Making 99 8.

1.3 Mathematical Framework 99 8.2 Components of the Spread 100 8.2.1 Settlement and Counterparty Risk 100 8.2.2 Peg Risk 100 8.2.

3 Network and Technical Risk 101 8.2.4 Liquidity Risk 102 8.3 The Blockchain Paradox 103 Chapter 9 Fee Models 107 9.1 Fees 107 9.2 Oscillating Fees Model 108 9.3 Extended Fee Models 112 Open Problems 114 Part Four Price Returns Chapter 10 Price Process 117 10.1 Mathematical Framework for Price Processes 117 10.

2 Price Returns 118 10.3 Empirical Properties of Financial Time Series 119 10.3.1 Stylized Facts 119 10.3.2 Long-range Dependence Analysis 121 Chapter 11 Price Return Models 125 11.1 AR Models 125 11.1.

1 Arma 126 11.1.2 Arima 129 11.1.3 Calibration 130 11.2 Constant Volatility Models 131 11.2.1 Geometric Brownian Motion 131 11.

2.2 Ornstein-Uhlenbeck Process 134 11.2.3 Lévy Process 135 11.3 Stochastic Volatility Models 136 11.3.1 GARCH Model 136 11.3.

2 Heston Model 137 11.3.3 Rough Volatility Models 140 Open Problems 142 Part Five Pricing Theory Chapter 12 Discounting and Staking 145 12.1 Clocks 145 12.1.1 Network Time 145 12.1.2 Market Time 148 12.

2 Pricing Assumptions 149 12.2.1 Axioms 149 12.2.2 Terminology 149 12.2.3 Risk-free Rate 149 12.2.

4 Compounding 154 12.2.5 Time Value of Money 155 Chapter 13 Forward Rate Curve 159 13.1 Rates and Curves 159 13.2 Zero-coupon Bond (ZCB) 161 13.3 Interest Rate Curve 163 13.4 Interest Rate Swap (IRS) 166 Chapter 14 Arbitrage Pricing Theory 171 14.1 Numéraire 171 14.

2 Martingales 172 14.3 Risk-neutral Measure 173 14.4 Money Market Account 176 14.5 Validator Account 177 14.6 Stablecoins 182 Chapter 15 Cross-chain Asset Pricing 183 15.1 On-off-chain Pricing 183 15.1.1 Ex Post Valuation 184 15.

1.2 Ex Ante Valuation 185 15.2 Siegel Paradox 186 15.3 Interchain Valuation 188 Chapter 16 Overview of Interest Rate Models 191 16.1 CIR Model 191 16.2 SABR Model 192 16.3 SVJC Model 193 16.4 HJM Model 194 Open Problems 196 Part Six Staking Contract Chapter 17 Direct Staking Contracts 199 17.

1 Direct Staking 199 17.2 With Accrual 202 17.2.1 Ex Post Valuation 202 17.2.2 Ex Ante Valuation 203 17.3 Non-accrual 204 17.3.

1 Ex Posts Valuation 204 17.3.2 Ex Ante Valuation 206 17.4 Non-accrual with Queue Mechanisms 207 17.4.1 Ex Post Valuation 209 17.4.2 Ex Ante Valuation 211 17.

4.3 Queue Overrun Risk 212 Chapter 18 Other Staking Contracts 215 18.1 Liquid Staking 215 18.1.1 Liquid Staking Rewards 215 18.1.2 Pricing in LST Units 216 18.1.

3 Protocol Value 217 18.1.4 Pricing Under Blockchain Measure 218 18.1.5 Pricing Only with Peg Risk 219 18.1.6 Pricing with Both LST Rate and Peg Risk 221 18.2 Liquid Restaking 222 18.

3 Yield Farming 224 18.3.1 Reward Paid in Native Coin 225 18.3.2 Reward Paid-in-kind 225 Open Problems 227 Afterword 229 Glossary 231 References 235 Disclaimer 253 About the Author 255 Index 257.