Theory

Definition ∞ A theory is a system of ideas developed to explain phenomena, often based on general principles independent of specific instances. In the context of digital assets and blockchain, economic and financial theories are applied to analyze market behavior, protocol design, and the valuation of cryptocurrencies. These theoretical frameworks aid in assessing incentives, predicting outcomes, and formulating new models for decentralized systems.
Context ∞ Theoretical frameworks drawn from economics and computer science are continuously adapted and applied to comprehend the novel characteristics and emergent behaviors of blockchain technology and digital assets. Current discourse involves refining models for network effects, consensus mechanisms, and the valuation of utility and governance tokens, aiming to establish a more robust analytical foundation for understanding this dynamic sector.