#theory ### Crypto Assets are district from traditional Assets We believe that cryptocurrencies and some of their native tokens form a new asset class. In the past, it has been discussed if some cryptocurrencies are securities. It is Xerberus' strong conviction that such a classification would be fundamentally wrong. Traditionally, the financial market has been dominated by a few well-understood asset classes such as: - Cash and Cash Equivalents - Fixed Income (e.g. loans) - Equities (e.g. stocks) - Commodities (e.g. oil) Besides these major asset classes, the market considers alternative asset classes such as art and real estate. The existence of alternative assets demonstrates that assets exist outside of the four major asset classes. ### Crypto Assets A crypto asset, referred to as a coin or token, is an asset issued on or as part of a public distributed ledger. Many terms circulate in the industry, such as utility token, governance token, and payment tokens. However, we consider these terms insufficient as they often fail to distinguish themselves and tend to overlap. There are tokens that call themselves governance tokens, which are used for voting purposes. Then there are tokens referred to as utility tokens, which, in theory, should be exchanged to access a utility by the user. However, the differentiation often does not exist, as some utility tokens can also be used for governance and some governance tokens also carry utility. Additionally, there are governance tokens that provide passive participation in protocol profits, which share more similarities to equity-like instrument. Many terms in crypto emerged from the community but have never been deeply dissected and defined in a quantitative context. This is why we abandon these terms and consider tokens only based on the most fundamental dimension we can observe in the market. When looking at the market, we can see two clearly differentiated types of tokens. The [[Culture Coin]] and the [[Coordination Coin]]. A coordination coin is a utility token because it provides blockspace. Not all utilities are coordination coins. Most utility tokens are used as proxies for payments. There are other token designs floating around, such as tokens used as vouchers or tokens used for payments for services. However, these tokens do not qualify as a new asset class because they are vouchers and payment vehicles; these are not new assets but known to financial markets. Similar to a security token, they represent old assets we know, but on a blockchain network. The same is true for synthetics, which are in most cases a form of derivative. Lastly, there are stablecoins which are either algorithmic or asset-backed. We do not consider any of these other coins as part of our current framework as the value of such assets depends not on the underlying network of holders but on other factors like the availability of assets backing a stablecoin. However, there are other perspectives as well and we will evolve our view on such assets as a consensus is formed. It is important to note that Xerberus is open source and the model described in this paper is just the first iteration of a never-ending public process of consensus forming regarding the new crypto asset class and old assets issued within the crypto paradigm.