What are Digital Assets and Why Are They Important??

The phrases ‘cryptocurrency’ and ‘non-fungible token (NFTs)’ have become in popularity over the last several years as they have become more widely adopted and used for a variety of purposes. While cryptocurrencies and NFTs may represent different types of investable assets, both areas may very well be ‘digital ascollections’. As more people become aware of digital assets and commence investing in them, it is important to understand what these asmodels are, why they are essential, and exactly how blockchain technology is helping to grow this area.

What are Digital Assets?
In its most basic definition, digital assets can be explained as anything that exists in a digital format. The phrase ‘digital assets’ has historically described media formats which were traditionally physical items, such as photos, videos, and documents, that commenced to being created, stored, and shared in a digital environment.

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However, since the emergence of blockchain technology, the word ‘digital assets’ has expanded to feature investable asset types such as cryptocurrencies, NFTs, asset-backed tokens, and tokenized real estate. As these new blockchain-backed digital ascollections have become more widely adopted, the meaning of the phrase has shifted to being primarily centered on assets that are backed by a distributed ledger, rather than digital media files. Many physical aspackages, such as real estate and commodities, can be tokenized and create a digital asset for trading, opening up new possibilities for digital asplaces marketplaces.

The emergence of investable digital assets within the financial services industry represents a fresh opportunity for investment in a fast-growing area backed by a technology that can be scaled to digitally transform businesses and assets.

Why are Digital Assets Important?
While there are a wide variety of reasons that digital assets are essential, the most notable factors of digital assets include:
• Decentralized Finance (DeFi) – A core component to digital assets is the usage of decentralized, digital ledgers to record asset ownership and exchanges. This contrasts against traditional aspackages that are recorded in a private ledger maintained with a central party. This change is representative of “decentralized finance” or DeFi, which describes a system which allows consumers to trade digital assets with no need of your traditional financial institute
• Transaction Transparency – With blockchain technology and decentralized finance, transactions that are recorded on the digital ledger can be viewed by anyone. While there is still a volume of privacy with the blockchain and digital asset transactions, the transparency of this structure can allow for more visibility and clarification of the parties engaging in a transaction

Digital Asset Trading Examples
There are a wide variety of digital assets available nowadays, including;

Cryptocurrencies
Perhaps the most well-known form of digital assets, cryptocurrencies, such as Bitcoin and Ethereum, are digital currency that are secured by cryptography via the blockchain. Cryptocurrency users can utilize these digital assets for numerous reasons, such as using them as a variety of payment or investing in them.
NFTs
NFTs stand for ‘non-fungible token’, which essentially means that the asset’s token is unique and allows for authentication to prove that that the token is real and specific to its owner. NFTs are being popularly leveraged for things, such as artwork and media recordings, as a way for users to obtain unique assets.
Asset-Backed Tokens
Traditional, physical assets, such as gold and oil, can be tokenized and traded amongst users on the blockchain through the consumption of asset-backed tokens. Tokenization of the assets can help to liquidity difficulties with the assets and get them to more available to a wider selection of investors and users.
Tokenized Commercial Real Estate
Similar to asset-backed tokens, commercial real estate is now able to be tokenized as a digital asset. This process of tokenizing real estate can open up ownership opportunities to more investors through improved liquidity, more transparency for proofs of ownership, and simplification of transactions.
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Understanding Blockchain Technology & Digital Asset Trading Platforms
The blockchain is the underlying technology that allows digital assets to be traded and owned by users. The main reason that the blockchain is important lies with its ability to store and share data and information. Since the blockchain is basically a decentralized ledger, recorded transactions give a degree of transparency which can be found to a wide range of users.

This level of transparency is extremely important for digital asset trading platforms since it can allow for more trust amidst users simply because can verify transactions via the blockchain records. In addition to transparency, blockchain benefits trading platforms through improved security as transactions can’t be altered or deleted. Finally, the blockchain will benefit trading platforms by making the transaction process better and reduces the need for a centralized intermediary.

How to Tokenize Digital Assets for the Marketplace
Marketplaces that are looking to tokenize physical assets into digital ones have a tendency to follow the below process:

Identify and Determine the Value of the Physical Asset that will be Tokenized
Determine the price of digital shares, the asset, like a physical share or a bond certificate, will need to have a defined value for its physical form.
Once this value is determined, the digital version will be divided into several of shares that total up to the real-world value, with each share representing the digital asset’s value. In this step, it is necessary to determine how many available shares there should be.