Blockchain is the driving force behind the digital asset revolution
It was 1975 and he had invented the world’s first digital camera. Steven Sasson was working at Eastman Kodak when he invented the device. It could record 30 shots on a standard cassette tape, each with a 0.01 megapixel resolution. Although not great for family vacations, it had strong future potential.
Nowadays, you only have to whip out your smartphone to take a photo, stick it on Instagram and send it around the world in a fraction of a second.
Digital assets are so easy to create that we take them for granted. They are also not limited to digital photos. Anything that exists in binary data and which is self-contained and uniquely identifiable is a digital asset.
These can be MP3 music files, YouTube videos, PDF documents and now crypto currencies.
Out of all the digital assets that have emerged since the start of this millennium, crypto currencies are set to be the most disruptive. If they establish themselves as a store of value and medium of exchange, they could replace money as we know it and completely transform our banking industry.
Traditional banking is a centralised system, where monetary transactions flow through it. Banks make money from each transaction made and by lending its deposits. By contrast, crypto currencies are a decentralised system for transacting. No banks are needed for either making a transaction or holding money. In the crypto world, money is stored in the cloud using blockchain technology.
Blockchain provides the perfect infrastructure to own digital assets
Blockchain technology creates new efficiencies in the market. Put simply it’s a giant network of computers that simultaneously verify data on a digital ledger. This information is stored, unaltered and confirmed by code. For crypto currencies, this means that you don’t need a bank to verify the transfer of money or where it is stored.
Ownership issues that have long plagued digital assets could finally be resolved with blockchain technology. It will create an unprecedented level of transparency that never existed before.
Ownership, authenticity, transaction history and location can be identified without involving third parties for the first time in digital asset history. Consequently, it will be far easier to trade and purchase digital assets in the future.
Blockchain also removes the middleman from the equation when it comes to digital assets. The rules that define digital assets are enshrined into the code of the blockchain network. Today, advanced integrated protocols, known as smart contracts, can be used to identify the origin and ownership of digital assets, whether it’s a cryptocurrency or a digital photograph.
All assets can be tokenised and made digital
The way we invest in assets could radically change in the future, thanks to the rise of tokenisation. Tokenisation refers to the process of issuing a blockchain token that digitally represents a real tradable asset.
In finance it’s very similar to the process of securitisation, but with a modern twist. There are a number of ways it can be done. The first, is through an initial coin offering (ICO) and the second is through a security token offering (STO). The difference between the two is that an STO is securitised and regulated.
What this means is that all assets have the potential to become digital assets. The reason why this is significant is because there are many benefits from taking real assets and making them digital. Through the tokenisation process you can create greater liquidity, faster and cheaper transactions, greater transparency and more accessibility.
In the future, it’s therefore possible that all assets will become digital and tradable using a commonly accepted crypto currency.
Blockchain will create an explosion in digital assets
We are at the dawn of a digital age. Consequently, the amount of data created is growing exponentially. In the past year, we’ve created more data than in the past 5,000 years. The increasingly data rich digital assets that we’ve been creating has been a driving force behind this trend.
However, this is just the beginning. We’re set to see an explosion in the creation of digital assets in the future thanks to blockchain technology.
Traceability and authenticity provided by blockchain technology will make digital assets more secure than ever and allow this trend to accelerate. The emergence of crypto currencies will be the biggest driver of this growth. They themselves are a digital assets, plus they help facilitate the sales and purchase of all other digital assets. Their potential to replace traditional banking with a more efficient system will increase the dynamism of our global economy.
As crypto currencies emerge, new innovative methods to raise finance will also emerge. The most significant of these is tokenisation, which has the potential to digitalise all assets.
By being able to place assets on a digital system and execute transactions using blockchain technology, new markets will be created from previously illiquid assets. But none of this would be possible without blockchain. It will be the driving force behind the digital asset revolution.