What Are Digital Assets: A Thorough Guide

ByG. Dautovic
June 16, 2022

In a world of ever-evolving technology, it's no surprise that the way we invest has changed dramatically. One of the major financial shifts in the digital ecosystem has been the rise of digital assets as an investible asset class. In the years to come, they will only become more mainstream, as they offer investors a number of advantages over traditional financial resources.

Assets in Digital Form: Definition

In the broadest sense, a digital asset represents any type of online asset that can be transferred, stored, or traded electronically. This includes everything from cryptocurrencies to online gaming items and virtual real estate.

Speaking about the financial world and investing, we can define these assets as a type of investable asset that refers to anything that exists in digital form and can be used to generate value. This includes, but is not limited to, cryptocurrencies, tokens, NFTs, and other blockchain-based goods. 

While some digital assets, by definition, may have physical counterparts (e.g., a tokenized piece of art or a digital collectible), many are purely digital in nature.

Tracked and stored using blockchain technology, a digital asset offers a high level of security and transparency. This decentralized system ensures that all transactions are immutable and cannot be tampered with.

Finally, assets in digital form can be used in a variety of ways, such as to purchase goods and services, to trade or exchange for other assets, or simply hold as an investment. 

Types of Digital Assets

So far, the most widely used and accepted assets in digital form have been cryptocurrencies and NFTs. However, a broad range of other asset types are beginning to gain traction in the digital sphere.

Cryptocurrencies

Cryptocurrencies are digital or virtual tokens that verify transactions and limit the creation of new units by using cryptography. The first time a cryptocurrency was used in a real-world transaction was in 2010. Just 11 years after that, Bitcoin market capitalization exceeded $1 trillion.

Digital assets data show that the three largest cryptocurrencies by market cap are Bitcoin (BTC), Ethereum (ETH), and Tether. Cryptocurrencies can be traded on reliable crypto exchange platforms or used to purchase goods and services. They are also becoming increasingly popular as an investment vehicle, owing to their potential for high returns.

NFTs

Non-fungible tokens are a type of digital asset that represents a unique and collectible item. NFTs are stored on a blockchain and can be used to represent anything from digital art to in-game items.

Let’s take a look at some examples of digital assets in the form of NFTs. In the gaming industry, in-game items that are stored as NFTs can be traded or sold on secondary markets, and some games even allow players to earn real money from their gameplay.

NFTs are also being used in the music industry, with artists selling digital art, albums, and even concert tickets as NFTs. The possibilities for this currency are endless, as they stem from the imaginations of those who create them.

How Do They Work?

Assets in digital form are stored and traded on decentralized platforms called blockchains. To better grasp digital asset meaning, you should first become familiar with blockchain technology. It is a digital ledger that records all transactions in a secure and transparent manner.

Each transaction is verified by multiple computers (called "nodes") that are connected to the network. Once a transaction is verified, it is added to the blockchain as a "block."

The data in each block is encrypted, which makes it tamper-proof. This ensures that all transactions are immutable and cannot be altered or deleted.

Assets in digital forms are held in digital wallets. A digital wallet is a software program that stores the private and public keys that are used to access a blockchain. 

While private keys are like a password that gives you access to your digital assets, public keys are like your bank account number, allowing others to send digital assets to your wallet. Blockchains and digital wallets work together to provide a secure and convenient way to store and trade digital assets.

Investing in Cryptocurrency and NFTs

If you're interested in investing in cryptocurrency and NFTs, there are a few things you should keep in mind. The value of these assets can be highly volatile, there isn't a centralized authority or government backing them, and they are not FDIC insured.

If that’s not a problem for you and you’re willing to start, the best idea is to go for one of the many online brokers that have sprung up in recent years. These platforms will allow you to buy, sell, trade, or manage your digital assets without having to set up a digital wallet.

If you're into more traditional options, you can try crypto-friendly banks that are emerging on the market. They will take care of your assets and offer other services like loans.

Finally, if you're interested in investing in NFTs but aren't sure how, there are many popular online NFT marketplaces where you can buy, sell, or trade these assets. They usually offer assistance to first-time buyers and have a wide variety of NFTs to choose from.

Final Thoughts

Digital assets are a new and exciting asset class that is still in its early stages of development. While a lot of growth potential exists, there are also some risks to be aware of before investing.

Cryptocurrencies and NFTs offer investors the potential for high returns, but they are also highly volatile. Before investing, be sure to do your research and understand the risks involved.

In order to keep up with the latest trends in the digital ecosystem, it's important to follow up-to-the-minute news and learn about cutting-edge technologies as they emerge. Who knows, you might be the next early investor in the next big thing.

FAQ

What are digital assets investments?

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A digital asset investment is a type of financial transaction that allows investors to purchase and trade digital assets, such as Bitcoin, Ethereum, Litecoin, or NFT. These investments can be made through online exchanges and platforms, such as Coinbase and Binance.

Is cryptocurrency a digital asset?

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Yes, cryptocurrency is a type of digital asset. Cryptocurrencies are stored on a blockchain and can be used for financial transactions and other purposes. They are often traded on decentralized exchanges and can be bought and sold like other assets but with a higher degree of risk and volatility.

How do I buy digital assets?

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Buying assets in digital form is a fairly simple process. First, you'll need to set up an account with a digital asset exchange or platform. Once you've done this, you'll be able to deposit funds into your account and start buying and selling cryptocurrencies.

If you'd like to buy NFTs, you'll need to use an online marketplace that specializes in selling these types of assets.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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