Capital Markets: Definition, Types, and How They Work
Warren Team
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Key terms
- Capital GainsThe profit realized from selling an asset for more than its purchase price. Capital gains can be short-term (held less than a year) or long-term (held more than a year), with different tax implications.
- Capital LossA loss incurred when selling an asset for less than its purchase price. Capital losses can offset capital gains to reduce tax liability.
- Emerging MarketsEconomies in developing countries with rapid growth potential but higher risk. Examples include China, India, Brazil, and South Africa. Offer higher potential returns with greater volatility.
- Proof of WorkA consensus mechanism that requires miners to solve computationally intensive mathematical puzzles to validate transactions and add new blocks to the blockchain. It was the first consensus method used in blockchain technology and remains the mechanism behind Bitcoin. While highly secure, Proof of Work is criticized for its significant energy consumption and environmental impact.
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