Asset is anything somebody owns that has economic value. Things like real estate property, artwork, cash, company shares, etc. These are traditional views of what assets are. However, there is a new kind of asset that has become hot amongst knowledgeable investors: digital assets. Though they are relatively new, their adoption has entered mainstream.
Why are digital assets becoming hot investment options? Why should you invest in them and how do you invest in them? These are the questions this post attempts to answer.
First……..
Digital assets are things that are stored digitally and uniquely identifiable to create value. Thus, you own it for its value but cannot feel or touch it. Unlike physical assets such as real estate, equipment or securities with paper evidence, digital assets have no physical attributes.
They are non-tangible, can created, stored and also traded over the internet.
Digital assets can easily be identified into digital content and the block-chain technology. Digital content comprises of web pages, text files, images, spreadsheets, etc while block-chain based digital assets comprises of currencies and tokens.
Block-chain based assets plays multiple roles, including store of value, medium of exchange, and pass through value.
Now here are the various types of digital assets
Cryptocurrencies or simply, cryptos are virtual money. They are mined on the block chain technology, decentralized, independent of the formal banking system and secures transactions using cryptography.
Satoshi Nickamoto launched the first cryptocurrency in 2009. Today it remains the most popular and, perhaps the most valuable amongs the over 2000 crypto coins in the market.
Other popular and very valuable cryptocurrencies include etherium, litecoing, binance coin, polkadot, and so many money. Investing in cryptocurrencies is now increasingly becoming an easy route for struggling people to achieve financial freedom.
If this is also catching your fancy, here are some of the best cryptocurrencies to invest in now
Digital token is a security that gives one right to the development of block chain, distributed ledger or other digital infrastructure. This digital security is often issued in order to assist developers raise capital at the initial stages of developing a network.
Tokens are not currencies, hence cannot serve as means of payment like cryptocurrencies. However, they are securities of value and this value can rise or fall depending on the performance of the underlying blockchain. Thus, you can call them investment tokens which means that they are asset that can give positive returns to investors. Just like you having shares in a company.
Digital tokens are tradable and fungible. Some examples of digital tokens are: DAI, LINK, COMP and Cryptokities. Others are SUSHI, FTT, etc.
Cryptocurrencies and digital tokens are the two most common block-chain based digital assets.
NFT is a representation of tangible, real word objects such as artworks, music and games. These assets are encoded on block-chain like crypticurrency. They are described as digital shadows of real world assets. This is because NFTs take on the value of the tangible asset and provide a digital record of its ownership.
The NFT market is said to worth about $41 billion and still growing as the technology increasingly become the smart way of buying and selling digital works of art.
NFT provides wonderful opportunities to artists and other types of content creators to profitably monetize their works.
Hybrid tokens are securities developed for the use of a specific platform. A token with two or more crypto derivatives
They are hybrid because services two purposes: to explore the benefits or rights offered by the platform and for speculation. Thus, it benefits participants in the block chain who do so for the purpose of the right it offers them to develop their products and services. And also gives investors the opportunity to speculate with it for profit purposes. The Binance Coin (BNB).
These are tokens that are designed for trading on tangible, physical commodities such as gold, oil, etc on the block chain. Tokenization of these assets help to make them more liquid and accessible to a wide range of users, including investors.
This is similar to asset backed tokens (ABT). Tokenizing commercial real estates is a way of digitizing this valuable asset, enhancing its liquidity and enabling wider range of investors to access the real estate market.
A block chain protocol where the host and client node are combined to create a general network. It streamlines processes by removing third party intermediaries and allowing each node to interact directly with other nodes.
It is monetizable, hence companies are now using their distributed protocols to create internal assets and sell them. They thereafter use the proceeds of sale to implement their platform.
Digital content are assets of great value. As I highlighted earlier, it comprises content that is stored digitally. These content are created online or created offline and taken online. It comprise of the following:
Websites, landing pages and blogs are often referred to as digital real estates. This is because, like real estates, the values of these properties get higher with time. And the longer you hold onto the properties, the more passive income you get out of them.
Now that you know what digital assets are; here are the reasons you should start investing in them if you are not already doing so.
Digital asset is nascent. Thus, the market is growing and largely untapped. The market is not getting any saturated soon because the digital economy is just beginning. So by investing now you will be taking early bird advantage. Aside the fact that it is a growing market, digital asset investment is also a booming sector.
The use case for cryptocurrency keep expanding and with it come variety of tokens and coins that people can invest in. With bitcoin birthing in 2009, today there are over 20,000 cryptos and still growing. That’s a lot to choose from.
Whether it is cryptocurrency, digital token or digital content, investing in any of these digital assets offers high returns on investment.
In 2021, cryptocurrency recorded a five year jump in terms of returns with bitcoin and etherium accounting for about 90% of the profits. The profit potential will become higher as the use case for cryptocurrency expands.
Similarly, websites and other digital content also offer high financial return. There is a variety of option to make good money from your digital content, including advertising, sell of products, etc. These options earns you passive income for life. But apart from these, you can even make very much more by flipping digital assets like websites, landing pages, and blogs.
Website flipping is a business model in which one buys a website, improve on it to make more money, then sell it at a profit. A lot goest into making money from digital asset in this manner, however, the returns is always worth the effort.
Investing in digital assets offers a stream of passive income. Do the all the work needed to put the asset to work and continue to earn from it over time.
You need not have a tonne of cash to start investing in digital assets. Entry point for cryptocurrency investment is so low that any serious retail investor can get in easily. Most exchanges allows users to invest as little as $5 to buy some coins.
Ditto for other type of digital assets like websites.
In finance, liquidity refers to the ease with each an asset can be bought and sold. Liquidity makes it easy for an investor to enter and exit an investment. Digital assets are very liquid because they can easily be bought and sold. For example, cryptocurrency can be transacted through the many exchanges that exist or through peer to peer (p2p)
There are also marketplaces where you can trade digital content. Therefore whatever your time horizon is as an investor, you can enter into any digital asset and exit whenever you want to.
There’s no central authority calling the shots on how you trade or hold your investment. Digital assets are decentralized and under the total control of the investor. You have your private key which gives you access to your investment, allowing you to do whatever you want with it.
Here’re some of the ways to invest in digital assets
When you think of buying cryptocurrency. the first place to look at is a cryptocurrency exchange. Not the bank or investment companies. A cryptocurrency exchange is a digital marketplace that provides a platform for users to buy and sell given or a couple of cryptocurrencies.
On a Exchange, you can exchange one crypto for another or use fiat currency to buy coins of your choise. Using a crypto exchange will require that you open an account on the platform, create a crypto wallet, fund your account, place order and pay and receive your asset into your wallet.
Binance, Remitano, Luno. Quidax, Paxful, etc are some of the popular crypto exchanges you can easily use to invest in cryptocurrencies.
In choosing an Exchange, you must pay attention to certain factors. These include the coins offered on the exchange, accessability, fees, security, liquidity and trading tools available on the exchange.
When it comes to buying and selling of digital assets such as websites, digital market place is where you go to. A digital market place a platform that matches sellers with buyers of a service. Flippa, for example is a market place where you can buy and sell websites, mobile apps and other digital assets. Such market place may provide users with tool to evaluate offers, conduct due diligence and sometimes get financing.
Stock and currency brokers are beginning to offer cryptocurrency and other form of digital assets in their product bouquet to their customers. As digital assets gain popularity and move into the maintstream as an investment vehicle, more and more brokers will join to offer intermediation in the buying and selling of such assets.
At the moment there are a few online brokers that offer platforms for the trading of digital assets alongside traditional assets like stocks, ETF and bonds.
Some payment platforms now offer their users the option to buy, sell and hold cryptocurrencies. Paypal, Paypal, Venmo and Cash App offer such products.
Peer to peer or P2P is a system where the buyer and seller of an item interact directly to conclude a transaction. In digital asset trade, the man who wants to sell, seek and identify another man who wants to buy. The parties agree on terms, the seller transfers the property and the buyer pays the agreed amount.
For trust and transparancy and trust purposes, a third party may be involved to serve as an escrow. In this case the buyer deposits the agreed amount with the escrow and onces seller transfers the asset to the buyer, the third part releases the fund to the buyer.
Some crypto Exchanges also offer P2P services to enable users conclude transactions through this exchange method. The use of P2P is also common in jurisdiction where cryptocurrency transactions are not allowed to be faciliated through the official banking channels.
Some of the P2P platforms include Remitano, Paxful, Binance P2P, HODL, etc. There is usually no KYC or antimoney laundering checks on P2P, hence some class of investors may prefer it for the security and privacy of information that it offers.
Many online brokers now offer cryptocurrency alongside other derivative products traded on their platforms. In CFD trading, you simply speculate on the price of movements of the underlying assets. If you predict movement accurately you win, if otherwise, you lose money.
Generally, CFD trading is speculative, volatile and risky. You can easily lose money and other hand, can also make good money if you understand how it works.
Final Words
There are lot of benefits you get from investing in digital assets. We’ve identified a few of them here. It also provide a profitable way to diversify portfolio. However, like every other asset class, there are also challenges that come with digital asset investment. Some believe that the fact it is a new class of asset makes its future uncertain, hence the need to trade with cautious.
Prices of digital assetrs can also be highly volatile and this increases the risk of losing money. However, like every other investment type, the longer you stay, the better the chance of reaping high returns.
Buchi creates content and leads the Team at Kobotalk Management Services; a business development and investment consultancy firm. He provides strategic advisory to help SME's, small business owners and HNI's grow profitable business and make informed investing decisions.
Buchi creates content and leads the Team at Kobotalk Management Services; a business development and investment consultancy firm. He provides strategic advisory to help SME's, small business owners and HNI's grow profitable business and make informed investing decisions.