What Is a Digital Asset?
A digital asset is generally anything created and stored digitally, is identifiable and discoverable, and has or provides value. Digital assets have become more popular and valuable as technological advances integrate into our personal and professional lives. Data, images, video, written content, and more have long been considered digital assets with ownership rights.
Most digital items, like a company's brand, can be assigned a value—monetary or intangible. Some digital items might only be valuable to the creator or one person, such as a family picture on your phone taken at a gathering. Others could be valuable to a much wider audience.
In the past, digital assets such as data or scanned documents were owned and used by organizations to realize value. However, digital assets were again redefined when blockchain and cryptocurrency were introduced in 2009. Anything in digital form became something that could be used to create value via tokenization on a blockchain.
Learn more about digital assets and how they are changing the way we view ownership, value, and our interactions.
Key Takeaways
- A digital asset is anything digital that has value, establishes ownership, and is discoverable.
- Digital assets include photos, manuscripts, documents, data, cryptocurrencies, and much more.
- Digital assets are increasingly important because they are becoming more a part of our professional and personal lives while continuing to be essential for businesses and governments.
Understanding Digital Assets
Digital assets have morphed into more than the words, pictures, videos, audio, and documents we associate with the term. When Bitcoin was introduced in 2009, it brought with it the blockchain—a distributed public ledger secured by a consensus mechanism. The concept was not new because data itself had become a valuable digital asset that required security measures, management, and storage. Distributed ledgers and the information contained in them had been around for some time.
However, it was new to most people who lived and worked outside of data science, data management, data analysis, or any other field requiring large distributed data networks.
For a digital asset to be considered an asset, it must first have the potential to create value in that it can be used in a manner that generates value for the owner. The digital asset should then be able to transfer ownership through purchase, gifting, or other means of giving the rights to someone else, along with the value the item can bring. It must also be discoverable or stored somewhere that it can be found.
Digital assets now encompass everything from words to fractionalized ownership in a corporation or real estate through tokenization.
Types of Digital Assets
There are many different types of digital assets. Here is a list of many of the familiar ones:
- Photos
- Documents
- Videos
- Books
- Audio/Music
- Animations
- Illustrations
- Manuscripts
- Emails and email accounts
- Logos
- Metadata
- Content
- Social media accounts
- Gaming accounts
Newer digital assets are based on blockchain or similar technologies:
- Nonfungible tokens
- Cryptocurrency
- Tokens
- Crypto Assets
- Tokenized Assets
- Security Tokens
- Central Bank Digital Currencies
Importance of Digital Assets
When you look at a list of the digital items that can be considered assets, it becomes clear that our lives are more digitally based than ever. For example, when we want to learn about something, we turn to digitally hosted information because it is quicker and easier than driving to a library, hoping they have the resources you need.
Our photos, entertainment, and important documents are mostly in digital form. Businesses and governments keep and store data and information, all of which have different values depending on how they can be used.
Two popular examples of digital assets are non-fungible tokens (NTFs) and digitally rendered images. Each is digital and has the potential to create value.
When investors, governments, and the general public became aware of blockchain technology and cryptocurrencies in the 2010s, digital assets took on an entirely new meaning. Cryptocurrencies joined the list of digital assets because people placed a value on them, whether they were intended to be used as assets or not.
Example of Digital Asset's Impact
No matter what you do, your life is filled with digital assets. Here is an example of a digital asset enhanced day:
You wake up one morning and see that your favorite runningback has posted a sports video token of his winning touchdown in last year's season, so you purchase it like a trading card from the past. You now own part of that moment.
Digital assets have become significant enough that digital asset management (DAM) service providers have emerged. DAMs provide digital security for businesses, allowing them to securely store, organize, and quickly access their digital assets.
At work, you used a cryptocurrency to buy sales data to analyze a specific market and sent a digital presentation of your findings to your boss, who forwarded it to management. It allowed them to make critical decisions and was filed away in the company's digital storage vault.
On your way home, you were caught in a traffic jam and managed to take a once-in-a-lifetime video on your phone of the eagle that flew in your car window and sat down in your passenger seat. When you get home, you upload the video on an NFT marketplace and sell a few hundred NFTs for $1 a piece.
You then relax before bed by drawing on your graphics tablet. You draw the best stick figure sword fight you've ever seen and upload it to the same NFT marketplace, thinking it will have value someday to someone. Meanwhile, unbeknownst to you, your digital report was leaked to a competing firm, which is planning to use it to develop a competitive advantage over your company.
What Is an Example of a Digital Asset?
A digital asset is anything in digital form that can create value. You can still create something digitally, but it is not a digital asset if it has no value.
How Do Digital Assets Make Money?
Digital assets can make money if there is a demand for what they represent or what they are. You can sell them on an NFT marketplace, trade them on an exchange, or hold them and hope for a market price increase.
What Does the IRS Consider a Digital Asset?
The Internal Revenue Service considers any digital representation of value recorded on a blockchain a digital asset. This includes cryptocurrency, stablecoins, non-fungible tokens, and convertible virtual currencies.
The Bottom Line
Digital assets are digitized items with value. Whether we see and acknowledge them or not, they are everywhere in our lives. The only way to not be exposed to them is to fully disconnect yourself from the internet and power off all of your devices.
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