What does the term “digital assets” mean? These are the items you can sell, purchase, or hold online but you can’t physically touch or see them. There are many forms of digital assets.
They may be in the form of the underlying works that are traded using blockchain technology of digital currency itself. The value of digital assets is derived from a claim to ownership. In this article, we are going to talk about types of digital assets, how they work, as well as their pros and cons.
The Basics of Digital Assets
The definition of a digital asset tells us that it’s something that is created and stored digitally, this item is discoverable and identifiable, and provides or has some value.
Lately, digital assets have become even more widespread as technology has advanced and integrated into our professional and personal lives. Examples of digital assets with ownership rights are images, data, written content, or video.
Many digital assets can be assigned a value, intangible or monetary. Thus, thanks to modern technologies, we can make money on what was commonplace.
Instead of looking for places to borrow money we can invest our digital assets based on their market value. Certain items can only present value to one person or the creator, such as your family photo.
Other assets may be valuable to a larger audience. Digital assets used to be owned by companies and organizations to realize value such as scanned documents or data. Cryptocurrency and blockchain were introduced in 2009. This is when digital assets were redefined. Now, anything can be used to create value on a blockchain if it’s in digital form.
How Digital Assets Work
Digital assets can be crafted in different ways and need to be held by a digital wallet. It can also be called a crypto wallet. Each digital wallet has a unique public address and private keys.
Private keys offer you access to your assets if you want to send to another address or sell them while public addresses allow you to get digital assets. Each digital asset is tracked with the help of a large public database called a blockchain.
After that, groups called blocks verify the transactions and keep a history of the ownership of the digital asset. This procedure enables a reliable and safe network where every consumer can take part.
Digital assets are semi-private. Your wallet address remains public and is visible to others. On the other hand, it’s difficult to figure out who owns each wallet unless you share your identity.
Types of Digital Assets
Cryptocurrencies and non-fungible tokens or NFTs are the most common types of digital assets. You can do almost anything with a digital asset. Some physical assets such as real estate titles or shares of stock may later move to a blockchain format of ownership.
- Cryptocurrencies
The first cryptocurrency transaction happened in 2010. Lately, it has grown into a serious monetary asset. The total Bitcoin market is worth over $1 trillion as of 2021.
This infographic demonstrates how the value of some of the more well-known cryptocurrencies has grown significantly from the end of 2020 to 2021.
If you have an active cryptocurrency wallet, you may send money to any other compatible wallet. Bear in mind that not all wallets and cryptocurrencies are compatible. So, make certain you have the right type of address before you send funds.
- NFTs
These assets represent content and artworks presented in digital form. While each Bitcoin is the same, each NFT is a unique asset. You will need to utilize the same technology to sell, purchase and trade NFTs as cryptocurrencies. NFTs can be found for sale in big public marketplaces and sites like Rarible and OpenSea.
There are many other types of digital assets. Here are the most familiar ones:
- Photos
- Books
- Videos
- Documents
- Audio/Music
- Logos
- Animations
- Emails
- Manuscripts
- Illustrations
- Content
- Metadata
- Gaming accounts
- Social media accounts
Advantages and Drawbacks of Digital Assets
Pros:
1. A public system where everyone can take part. If you have an unblocked internet connection, you can take part in the digital asset marketplace. If we compare it with investing in the stock market, there can be some income limits that prevent the median investor from participating.
2. Semi-anonymous asset ownership. Digital assets let people act as their own bank with a certain anonymity.
3. Highly secure if used properly. Depending on your knowledge and preferences, you can securely store your assets offline and online using blockchain technology.
Cons:
1. Unable to fix blockchain errors. You won’t be able to reverse the transaction if you send digital assets to the wrong wallet or address. It is significant that you are precise with the information when you invest in digital assets.
2. Demands some computer knowledge. NFTs and cryptocurrencies are more sophisticated than email. You shouldn’t have problems with cryptocurrency exchanges provided that you have experience with an online stock trading account.
3. Possible losses and fraud. Digital assets can become a target for fraud. These assets are volatile and new, so there is almost no government regulation. You may face risks of investment losses.
Importance of Digital Assets
If you look at the list of the digital assets we’ve mentioned above, you can notice that our lives have become much more digitally based than before. We will most likely turn to digitally hosted data when we plan to learn about something. The reason for that is that it’s easier and faster than visiting the library.
Nowadays, our entertainment, photos, and important papers are mostly in digital form. Governments and businesses store their information and important data, all of which have different values depending on how they may be utilized.
Digital assets took on a completely new meaning in the 2010s when the public and investors learned about blockchain technology. It was the time when cryptocurrencies also became digital assets as consumers placed a value on them.
Among cryptocurrencies, the most popular digital assets today include Bitcoin, Cardano, Ethereum, Solana, and Polkadot.
Are Digital Assets Worth It?
Although there are some risks involved in investing in digital assets, they have already turned many consumers into NFT and cryptocurrency millionaires in the USA. We can’t predict the future of digital assets and where they will be here for long.
You should decide for yourself if they are worth investing in. Consider the risks and discuss this topic with a financial advisor before you make the final choice.
The Bottom Line
Anything that can be stored or transmitted electronically through any digital device can be called a digital asset. NFTs and cryptocurrencies are two widespread samples of digital assets. If you have great computer skills and are prepared to deal with potential risks, you can take part in the digital asset economy.