How Good is Moving Your Investment to Digital Assets?

What the term asset brings to our mind is the notion of a physical asset that we can exert control over, touch, and feel. The exception has been the intangible assets that got ownership rights thanks to the intellectual property laws. The concept of intellectual property rights changed the way we used to look at ownership of any asset.

While intellectual property rights can be said to be the precursor to digital assets, it is the digital revolution that ushered in the concept of digital assets - as we know it today - that enable you to buy, experience, hold, sell, or share them in digital forms. Digital assets can also include digital forms of documents that accord ownership title to the physical assets.

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What is a Digital Asset?

A digital asset is any asset that exists in digital format and is unique so that the holders can realize its value. The emergence of blockchain technology gave birth to cryptocurrency and lately Non Fungible Tokens (NFTs) that include digital formats of documents, audio, videos, logos, slide presentations, spreadsheets, and websites, among others, as the popular forms of digital assets. It is not to say physical assets lost their importance or digital assets replaced physical assets; certain physical assets like real estate, cash, shares, gold, etc., can never be replaced by digital assets through digital documents can be created to denote the ownership of such assets. 

How Have Digital Assets Emerged and Evolved?

The digital asset by its inherent attributes is prone to replication that allows the creation of counterfeits and this has been the major challenge for the concept of digital assets before the emergence of blockchain. Blockchain technology has revolutionalized the way we look at assets. It has made it possible for us to permeate digital assets with properties that closely mirror ownership of physical assets.

In addition, the basic features of the blockchain like its structure of decentralized ledger, and consensus algorithm, mean that we can create markets where the digital assets can be bought, sold, traded, and transferred, safely and quickly. Bitcoin, the original implementation of blockchain technology, demonstrated how an alternative financial system - like cryptocurrencies and NFTs - could be developed by leveraging the blockchain features. 

What Makes a Blockchain Secure? 

A blockchain is a decentralized ledger, in which transactions of digital asset are maintained in blocks of data, which are “chained” together using a complex computer codes called ‘hash’. Each new transaction is verified by a network of computers called nodes before a new block is created for them. The verification process requires the nodes to solve complex mathematical problems by a consensus decision to prove the validity of the transaction. In this system, you can only add new blocks, but cannot alter or revise it thus making it safe.

Advantages of Digital Assets

Digital assets give you ownership title to intangible assets, similar to the ownership of physical assets. You can buy, own, store, and record stocks, funds, and cryptos in a digital format. Digital assets can be quicker to issue than paper-based or physical assets. 

One of the advantages of digital assets is the lower brokerage or commissions that you have to pay while buying and selling them compared to properties or stocks. Digital assets can be bought and sold online with just a few clicks. Common investors can now buy a fraction of a share or a bitcoin on a trading platform, which was previously the privilege of only the large players.

Blockchain’s digital helps reduce administrative and physical storage costs, which prompts central banks of many countries to consider using digital assets and blockchain technologies for banking and financial systems.

Risks of Holding Digital Assets

Blockchain-supported digital assets can pose both investment and security risks. The main investment risk is that digital assets can fluctuate widely in value as they are supported by physical holdings or fiat currencies or the guarantee of a central bank or government. High prices being paid for NFTs -  like the $69m paid for a digital collage by the artist Beeple - look unrealistic and unsustainable. 

The main security risk is that digital asset exchanges where individuals buy and sell cryptocurrencies, and crypto-wallets - used to store cryptocurrencies - can be hacked by criminals.  Talented blockchain experts are in great demand to help work with blockchain platforms, create NFTs, and ensure the security of your digital asset holdings, among others. They can find opportunities and they can be found by clients through on-demand Talent as a Service / Task as a Service (TaaS) platforms like AiDOOS.

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