We live in the age of technical progress when new things are invented every day, quickly become the standard, and are taken for granted.
Just ten years ago cryptography was used only for data encryption and decryption purposes, and no one could even imagine that this science could become the basis of future money. Now, everyone has accepted crypto currencies as something established and even mainstream. No one is amazed by their functioning principle; the source code is publically available and anyone can learn more about it.
Now that we became familiar with the topic of crypto currencies, digital economy has given us a new concept called “Crypto asset”.
What is a crypto asset?
If we look at it from the global perspective, crypto asset is a digital financial instrument that possesses all features of crypto currency and, naturally, is implemented using the Blockchain technology. Crypto assets are issued by companies and private persons in order to raise funds for implementation of interesting projects and promising ideas. Simply put, crypto assets are real resources evaluated by auditors and designated in digital form. On the other hand, crypto assets can be understood as a digital currency whose value is backed by real assets. For example, Xaurum, Gold, GBG, and Bitbon have become the first in this category of financial instruments.
What is its fundamental difference from crypto currency?
As you know, the main and at the same time controversial benefit of crypto currencies is complete confidentiality of their owners, which has become the source of numerous disputes regarding the possibility of using digital currencies as a medium for illegal activity. Crypto assets make the process of identifying their owners much clearer. If you own a crypto asset, its issuer must pay dividends specifically to you.
Another but equally important feature is backing of a crypto asset. While most existing crypto currencies continue to surprise us due to sharp price rises and falls, crypto assets are not as volatile. Their value is linked to the estimated value of the underlying resource used for backing. If we are talking about crypto assets and crypto currencies as a currency, then crypto assets can be considered a “hard currency”. Is this good or bad? The answer to this question depends on how we want to use crypto assets and for what purposes.
For example, high volatility of crypto currencies makes them attractive for trading or so called speculation. The price of Bitcoin, the most expensive crypto currency in the world, increased from $12,050 to $18,247 during the period from December 6 to December 8, 2017; then, by December 10, 2017, its price was already $14,024.
Crypto assets are also an attractive investment tool; their price is influenced not only by the market value of assets, but also by the factor of supply and demand on crypto exchanges. However, compared to crypto currencies, the price of crypto assets is more stable and predictable, and crypto assets can become a financial instrument that better suits the role of fiat money.
Crypto assets were developed based on three main concepts:
Cryptography is the foundation of crypto currencies. It allowed reaching the required level of protection for transactions data and solved the problem of “double spending”.
Assets are any type of property: divisible, indivisible, as well as any intellectual property. Thus, assets themselves form the basis for backing of crypto assets and represent the defining feature of their value.
Currency is any commodity that can perform the function of money. The possibility of using crypto assets as a currency is one of their main functions.
At the moment, digital crypto assets backed by real assets became real competition for fiat money that is not backed by anything other than faith. It is obvious that crypto assets are constantly gaining popularity, are of interest to the general public, and attract the attention of investors. While we continue to earn money that sooner or later will become history, the more active representatives of the technological community replenish their savings with various types of digital currencies and assets.
Published at Mon, 19 Mar 2018 12:00:04 -0400