We are living in a digital world, where everything is stored digitally and has a specific value. The technological advancements and their impacts on our lives have necessitated the need to understand the importance of digital assets. Digital assets can be anything including photos, videos, and content holding a definite value that are created and stored digitally.
What are Digital Assets?
Digital Assets are items owned by individuals or organizations that are created and stored digitally, necessitating the need for permission to access them. Digital assets include photos, videos, audio, written content, graphics, and animations.
In earlier years, digital assets were used for understanding the value of an asset, however, the evolution of crypto and web3 has revolutionized the concept of digital assets that can be used to create value through tokenization on a blockchain.
Key Features of Digital Assets
Not all files are digital assets, for a file to become a digital asset it must own certain features, including,
- The file has to be owned by an individual or an organization.
- The file should provide value to the individual or the organization holding them.
- The file should be searchable and discoverable using the metadata.
Different Types of Digital Asset
Digital Assets can range from traditional digital assets including photos, videos, animations, illustrations, logos, metadata, and content to modern digital assets such as nonfungible tokens, cryptocurrencies, security tokens, etc.
Below we briefly explain some of the important types of digital assets.
1. Cryptocurrencies
Cryptocurrencies are digital currencies that are stored and transmitted through a secure blockchain network. By incorporating the decentralized nature of the blockchain, cryptocurrencies eliminate the need for intermediaries to facilitate transactions. The platform offers secure, transparent, and efficient transactions, providing a reliable alternative to fiat currencies. Since no central authority is involved, these digital assets are free from government interventions.
2. Non-Fungible Tokens (NFT)
Non-fungible tokens are digital tokens that hold unique value. Though they may have certain similarities with one another, all NFTs are unique. They can’t be exchanged or replaced with another identical asset. These tokens act as an ownership right for certain assets, many artists utilize NFTs to sell their artworks to interested buyers.
3. Central Bank Digital Currencies (CBDC)
Central Bank Digital Currencies are currencies that are sanctioned by central banks. It is linked with the value of the currency of the issuing authority. Unlike traditional currencies, central bank digital currencies provide faster and more efficient payments, offering financial inclusion and security.
4. Digital Bonds
Digital bonds are agreements issued by an organization or government to raise capital, which is then lent to the borrower for a certain period of time, the whole process takes place on the blockchain. They are cheaper and faster compared to traditional bonds.
5. Digital Tokens
Digital Tokens or crypto tokens are digital assets that are tokenized on an existing cryptocurrency blockchain. These tokens can be traded on blockchain platforms and staked to earn rewards. Crypto tokens can be transferred across the network in a seamless and trustless manner.
How a Digital Asset Becomes Valuable?
The value of a digital asset is not just the hard cost of the item but involves the time spent and the ability to recreate it.
1. Time and Effort Taken To Produce The Digital Asset
While evaluating the value of a digital asset, the time taken and the effort involved in the production are considered. If an asset has taken a long time and effort for production, the asset is considered a highly valued asset. For example, losing a photo, which is a digital asset can be recovered or re-edited quickly, while a ready-to-distribute eBook is recoverable but takes more time and effort than recovering a photo.
2. Ability To Reproduce The Digital Asset
The value of an asset increases if it can’t be recreated. These cases often happen in one-time games or events. For example, an image of a team winning the World Cup is taken from a different and unique angle that can’t be reproduced. The asset becomes a valuable asset as it can’t be reproduced as it is.
How a Digital Asset Becomes Visible?
A digital asset becomes valuable only if it is discoverable. To make a digital asset discoverable, it must contain metadata and taxonomy.
Metadata
Metadata contains the information of the asset, including technical data and descriptive data. Technical data offers technical information about the asset such as resolution, dimension, and size, while descriptive data comprises a title, keywords, and a brief description of the asset.
Taxonomy
Taxonomy can be used to classify the asset, which helps in the easy navigation and identification of the asset. It allows buyers to categorize the assets they intend to buy.
Final Thoughts
Digital Assets are representations of products, services, and culture. Living in an era of digital platforms, one can’t avoid interactions with digital asset. Utilizing blockchain technology, users can trade their digital assets to earn income. The evolution in blockchain technology opens newer and innovative ways to create digital assets, generating value for enterprises and individuals holding the assets.