Digital Assets 

A digital asset is generally anything that can be created and stored digitally, is digitally identifiable and discoverable, and has some value or provides some value. In today’s era, digital assets have become more popular and valuable than ever as technological advancements have integrated into our personal and professional lives. Data, images, videos, written content, and many other things have long been considered digital assets with property rights.

Most digital items, such as a company’s brand, can be assigned a value (monetary or intangible). Some digital items may only be valuable to the creator or an individual, like a family photo taken at a gathering on your phone, while other digital items can be valuable to a broader audience.

In the past, digital assets such as data or scanned documents were owned by organizations and were used by them recognizing their value. However, when blockchain and cryptocurrency were introduced in 2009, digital assets were redefined to include any digital form that can be used on the blockchain through tokenization to create value. Notable examples of digital assets include Non-Fungible Tokens (NFTs) and digitally represented images, each of which is digital and has the potential to create value.

Today, digital assets have evolved beyond words, images, videos, audios, and documents to other forms we used to associate with this term. When Bitcoin was introduced in 2009, it came with blockchain, a distributed public ledger secured by a consensus mechanism. This concept was not new as data itself had become a valuable digital asset requiring security measures, management, and storage. Distributed ledgers and the information within them have existed for some time.

However, this concept was new to most people outside of data science, management, analysis, or other fields requiring large distributed data networks. To consider a digital asset as an asset, it must first have the potential to create value, meaning it can be used in a way that generates value for the owner. Then, a digital asset must be able to transfer ownership through purchasing, gifting, or other means of rights transfer, along with the value it brings. It must be discoverable or stored somewhere it can be found. Digital assets now cover everything from words in corporations or real estate to fractionalized ownership through tokenization.

7.1 – Types of Digital Assets

There are many different types of digital assets. The following are types that many people are familiar with:

• Images
• Documents
• Videos
• Books
• Audio/Music
• Animations
• Illustrations
• Manuscripts
• Emails and email accounts
• Logos
• Metadata
• Content
• Social media accounts
• Gaming accounts

New digital assets are based on blockchain or other similar technologies, such as:

• Non-Fungible Tokens (NFTs)
• Cryptocurrency tokens
• Crypto assets
• Tokenized assets
• Security tokens
• Central bank digital currencies

7.2 – Importance of Digital Assets

When you look at the list of digital items that can be considered assets, it becomes clear that our lives have become more digital than ever. For example, when we want to know about something, we turn to digitally hosted information because it is a faster and easier process than going to a library, and you hope it will contain the information you need.

Today, our pictures, entertainment, and important documents are mostly found in digital form. Businesses and governments keep and secure data and information digitally, all of which have different values depending on how they will be used. When investors, governments, and the general public became aware of blockchain technology and cryptocurrencies in the 2010s, digital assets took on a whole new meaning. Cryptocurrencies were included in the list of digital assets as people maintained a value for them, whether they were used as assets or not.

No matter what you do, your life is filled with digital assets. You can understand this through an example: Suppose you wake up one morning and see that your favorite running back has posted a sports video of one of his touchdowns from last season, so you buy it like an old-time business trading card. Now you own a part of that moment.

Similarly, at work, you used cryptocurrency to purchase sales data to analyze a specific market and sold a digital representation of your findings to your boss, who then sent it to management. This helped them make important decisions and then it was deposited in the company’s digital storage vault, the “digital vault.”

In another example, suppose you are going home from work, get stuck in a traffic jam, and then manage to take a video on your phone of an eagle landing on the passenger seat of your car for the first time in your life. Now when you get home, you upload that video to an NFT marketplace and sell a few hundred NFTs for $1 apiece.

Digital assets play an important role in an organization’s sales and marketing efforts. On average, companies are now spending between $150 million and $250 million annually on digital content activities.

In today’s era, digital assets have become so important that providers of Digital Asset Management (DAM) services have emerged. DAMs provide digital security for businesses, allowing them to securely store, organize, and quickly access their digital assets.

According to a research report, the digital asset management market was valued at $2,962.2 million in 2020 and is expected to reach $8,158.6 million by 2026, representing a Compound Annual Growth Rate (CAGR) of 18.46% during 2021-2026. For companies, digital assets are an important step for an effective marketing strategy. An organization needs some form of digital asset for every marketing effort, whether it’s images and videos that explain your product and help sell those products, logos and branding for building brand identity, or presentations and spreadsheets for organizing sales or marketing campaigns. Digital assets are essential for any organization in this rapidly advancing world to gain attention and recognition.

7.3 – Are Digital Assets Valuable?

Digital assets have made many people who hold cryptocurrency and NFTs millionaires. However, investing in digital assets also presents many risks. There is no certain future for digital assets, so it’s up to you to decide whether digital assets are a valuable risk for your portfolio. Before investing in digital assets, consider the risks involved or talk to a financial advisor. It is wise to avoid investing more than you can afford to lose.

7.4 – Digital Asset Types

Think of the term digital asset as a broad container that encompasses everything that can be minted and exchanged on the blockchain.

Digital assets are typically categorized into five types:

7.4.1 – Crypto Assets: Any digital store of value or means of exchange (currency) that is secured on the blockchain. Crypto assets can be used for investment and payments, for funding a project, or for creating coins for a specific purpose.

7.4.2 – Stablecoins: A type of cryptocurrency designed for price stability. The prices of stablecoins are linked to fiat currencies, commodities, or other crypto assets. Stablecoins can be used for payments, foreign exchange, and cross-border transfers.

7.4.3 – Non-Fungible Tokens (NFTs): A token that represents ownership of a unique digital item (such as artwork, an official ID, a specific unit of production, etc.). An NFT verifies that the holder owns the underlying digital asset and can sell, trade, or redeem it. NFTs can be used to prove identity and grant access (to virtual or physical spaces), track inventory movement and ownership, and tokenize supply chains for virtual item ownership (in games, avatars, virtual land, etc.).

7.4.4 – Central Bank Digital Currencies (CBDCs): A type of digital asset that represents a country’s fiat currency and is backed by its central bank. Not all countries issue CBDCs. CBDCs can be used for payments and cross-border transfers.

7.4.5 – Security Tokens: Digital assets that meet the definition of a security or financial investment, such as stocks and bonds. Security tokens can be used for tokenized versions of stocks (equity) and bonds, and for tokenized versions of real-world assets (such as real estate, property, plant, and equipment).

7.5 – Digital Asset Storage: Digital assets are stored and recorded on the blockchain ledger where they are issued (in most cases). With your ledger entry, a public and private key is associated, which you can think of like a computer-generated email address and password. Wallets help you securely store your key so that only you can access your digital assets. They provide an easy place for you to view your assets and ledger positions. A digital asset is stored on the blockchain ledger, and the keys that give you access to it are stored in a wallet. Your private key is what you use to prove your ownership of the digital asset when you want to do something with it. For example, if you want to send some cryptocurrency to another person, you will need your private key to sign the transaction so that it can be accepted as a new blockchain entry. Therefore, it is important to protect your keys.

7.6 – How to Evaluate Digital Assets?

The evaluation of digital assets is based on the efforts required to recreate them and the ability to reproduce digital assets. Digital assets that can be easily recreated, such as an image used in marketing, can be quickly reproduced, but suppose you say you lost an entire presentation or an e-book, it would take a significant amount of time to recreate, so it would be more valuable to the organization.

Similarly, a digital asset such as a rare photo of a rare event or a historic shot in sports taken only once in a lifetime would be very valuable to any organization because such assets cannot be recreated. These factors together help in evaluating digital assets. The value of cryptographic assets like Bitcoin is derived from demand and supply dynamics in the world.

7.7 – Ownership of Digital Assets

Generally, any entity that can be stored online on a physical disk (flash drive) can be included in assets assigned for digital ownership. These typically include videos, images, social networking data, domain names, email, and other such information. Recently, there has been a sudden increase in NFTs. In 2021, Twitter founder Jack Dorsey sold his first tweet as an NFT for $2.9 million. Canadian musician Grimes sold her digital art as NFTs for $6 million in 2021. Similarly, in 2021, a digital offering of the Nyan Cat meme was sold as an NFT for $590,000. In 2021, digital artist Winkelmann (known as Beeple) sold his digital art as an NFT at Christie’s auction house for $69 million.

7.8 – The World of Digital Assets

Once you have tokens, what can you do with them? Applications can verify the tokens in your wallet so that users can have special options in games, apps that work with your tokens, and special finance functions for cryptocurrency (i.e., DeFi). Let’s see what the world of digital assets looks like.

7.8.1 – First Layer: This is the basic blockchain architecture where your token resides.

7.8.2 – Second Layer: Second layer scaling solutions work in different ways but their primary function is to stay on top of the main chain and collect data to make transactions faster and cheaper.

7.8.3 – Functional Layer: This layer consists of apps that allow users to view, trade, and spend digital assets. Examples of token uses include marketplaces, DeFi, exchanges, games, and DApps. Let’s briefly look at all of them.

7.8.3.1 – Marketplaces: On marketplaces, users can spend their digital assets on products and services. This can include digital asset products like NFTs but also things outside the blockchain ecosystem, such as tickets for real-world experiences or deeds for real-world assets.

7.8.3.2 – DeFi: Decentralized finance is a comprehensive term used for various financial applications provided through digital assets. Since digital assets live on the blockchain, we can access and modify them through the code present in smart contracts, enabling limitless possibilities for automating complex transactions and financial activities where digital assets are the medium of exchange.

7.8.3.3 – Exchanges: Users can trade digital assets as in a traditional FX or stock market. Users might want to trade to implement speculative investment strategies or to acquire necessary currency to play a new game or use a new DApp.

7.8.3.4 – Games: Games built on blockchain can offer their players tokenized in-game currency. Since the currency is a digital asset, users can truly own the value they earn, including the rights to sell or exchange these digital assets with other players, something traditional game developers never offer.

7.8.3.5 – DApps: Decentralized applications or DApps can include any other applications built on the blockchain. It remains to be seen how the DApp market will evolve and what new services/products will be offered, but currently, we know that DApps will have a unique place over traditional mobile and desktop apps: they will have direct access to user assets due to their blockchain foundation.

7.8.4 – Access Layer: This is the part users see, i.e., how you actually interact with this virtual world in a visual shell.

Putting all these layers together, you can see how the digital world works in the following image:

This is just a starting point. Each of these elements will require its own understanding and strategy for success. Learn more about digital assets and see how they can help your business strategy and stay at the forefront of the latest industry trends in this emerging space.

Evolving Landscape of Digital Assets

As we move forward, the digital asset landscape continues to evolve at a rapid pace, driven by innovation and the increasing integration of blockchain technology across various sectors. Recent developments include the rise of Decentralized Finance (DeFi) platforms that offer more accessible financial services, the expanding use of NFTs beyond art and collectibles into areas like real estate and intellectual property, and the exploration of Digital Identity tokens for secure and efficient identity verification processes.

Environmental Considerations and Sustainability

The digital asset industry is also becoming increasingly aware of its environmental impact, particularly concerning energy consumption associated with blockchain and cryptocurrency operations. In response, there is a growing trend towards the development of more energy-efficient consensus mechanisms, such as Proof of Stake (PoS), and the adoption of sustainable practices by blockchain networks and crypto-related businesses.

Regulatory Developments

As digital assets gain mainstream acceptance, regulatory frameworks around the world are evolving to address the unique challenges they present. Governments and financial authorities are working to establish regulations that ensure security, transparency, and consumer protection while fostering innovation and growth within the digital asset ecosystem.

Technological Advances

Technological advancements, such as the development of Layer 2 scaling solutions and cross-chain interoperability, are enhancing the performance and utility of blockchain networks. These innovations are making digital transactions faster, more cost-effective, and accessible to a broader audience, further integrating digital assets into everyday life.

Future Outlook

Looking ahead, we can anticipate further integration of digital assets into the global economy, with potential advancements including central bank digital currencies (CBDCs) becoming more prevalent, greater adoption of blockchain in supply chain management, and the expansion of tokenization to encompass a wider range of assets and rights. As the digital asset space continues to mature, its impact on industries ranging from finance to entertainment, and beyond, is expected to grow, reshaping how we think about ownership, value, and exchange in the digital age.