A digital asset is a unit of data that is created and stored digitally which is identifiable, discoverable, and that is used to realise or represent ownership, value, utility, or other characteristics. What has made digital assets disrupt the traditional financial industry is the key characteristics that define it.
Here are the 5 key elements of digital assets that make it stand out:
Key Elements of Digital Assets
- Transparency
Thanks to blockchain technology and decentralised finance, transactions that are recorded on the digital ledger can be viewed by anyone. While there is still a level 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.
- Security
As the transaction is recorded on the digital legers, tracking transactions and establishing audit trails is relatively efficient and secure. For example, digital assets that are stored on a blockchain are typically immutable, meaning that once a transaction has been recorded on the blockchain, it cannot be changed or deleted. This provides a high level of security and eliminates the risk of fraud or manipulation.
- Decentralised
The adoption of digital ledgers to record asset ownership is a core component to digital assets. Unlike traditional assets that are recorded in a private ledger managed by centralised parties, the digital assets are decentralised and allow consumers to trade digital assets without the need of financial intermediaries.
- Self-contained
Digital assets do not need any other contracts or assets to back its value. They are native coins or tokens of the blockchain network and represent a cryptographically secure digital store of value recorded on a distributed ledger.
- Identifiable
Digital assets identifier is generated when a transaction happens. The volume of transferred digital assets is the volume of transferred the right of access to the information resource. Digital assets are uniquely identifiable, searchable and discoverable as they are created and stored digitally.
Conclusion
Overall, the characteristics and elements of digital assets have contributed to the creation of a transparent, secure, and efficient ecosystem that is transforming the way we interact with financial assets. As more individuals and organisations adopt these technologies, we can expect to see continued innovation and evolution in the world of digital assets.
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