Financial Instrument

 What are financial instruments?  

Generally, financial  instruments refer to  things like cash,  precious metals (gold,  silver, etc.), documents  that confirm ownership  over something (e.g.,  businesses or  resources), or rights to  deliver or receive cash.  

Financial instruments can be really complex, but the basic idea is that  whatever they are or whatever they represent, they can be traded.  

They can be classified depending on their type. One of the classifications  is based on whether they are cash instruments or derivative  instruments. As the name would suggest, derivative instruments derive their value from something else (like a barrel of oil). Financial instruments  may also be classified as debt-based or equity-based. 

But where do cryptocurrencies fall? We could think of them in multiple  ways, and they could fit into more than one category. The simplest  14  classification is that they are digital assets. However, the potential of  cryptocurrencies lies in building an entirely new financial and economic  system.

 In this sense, cryptocurrencies form a completely new category of digital  assets. What's more, as the ecosystem evolves, many new categories may  be established that wouldn't otherwise be possible. Early examples of this  can already be seen in the Decentralized Finance (De Fi) space.