The digital era is characterized by new technologies being introduced mainstream while existing technologies are developing to meet digitization standards. As the digital space is booming, the trend of owning digital assets has also evolved.
What are digital assets?
Digital assets exist in a digital form and include the right to use such assets. Like physical assets, a person can own and monetize a digital asset. When we talk about digital assets, some of the few most popular examples that come to mind are cryptocurrency and NFTs. Another example of owning digital assets is purchasing virtual real estate on the metaverse.
How digital assets benefit investors
Most digital assets use blockchain technology to operate. Blockchain is a decentralized, autonomous and transparent system that stores transactions. The primary features of blockchain are what make it one of the most adopted technologies to exist.
Thus, using blockchain to run digital assets allows investors to store and transfer funds without needing a central authority. In addition, digital assets, though volatile, are pretty profitable and could be cost-effective.
Also Read; Digital Asset 101 – What are they and why do they matter
Why digital assets are growing in popularity
The popularity of digital assets has grown exponentially in the last few years. We could accord the reason for the growing popularity of digital assets to the following reasons:
1. Assets appreciation:
One driving force in digital assets is the opportunity to make profitable returns. Furthermore, the digital space is expected to boom in the years ahead. By investing in digital assets now, the potential for higher returns in the next few years is anticipated.
2. Protection of value:
Like gold, many investors believe that digital assets provide a form of hedge against inflation. Thus, when inflation and monetary policies might be affecting a fiat currency, digital assets can protect the value of money over time. In addition, digital assets provide an avenue to make passive income.
3. Cost efficiency:
As it exists in the digital space, investing in digital assets cuts the need for a central governing body. Investing through financial institutions usually comes with a myriad of fees and costs. On the flip side, investments through digital platforms cut out the need for bureaucracy more often than not.
4. Diversification:
A rule of thumb for savvy investors is to have different investment portfolios. There are already traditional investment streams like stocks and equity. A digital asset portfolio alongside other asset classes might be created to diversify risk effectively.
However, with the seeming benefits of digital assets, it is still essential to know that, as an industry, digital trading is volatile and highly susceptible to risks. Investors who hope to venture into the digital asset space need to understand the pros and cons that accompany it.
Looking ahead
Digital assets growing popularity is not set to ease down anytime soon. Instead, we should recognize that this digital era will keep bringing new developments our way. Thus, it becomes essential that regulations centered on digital asset trading are implemented. With such appropriate rules in place, investors and enthusiasts of digital assets can venture more confidently into the space.
