Not too long ago, Chinese scientists turned copper into a substance that was almost identical to gold. This process has the potential to replace gold, silver, and platinum as materials used in tech manufacturing. These types of advancements in technology are changing the landscape of investment.
For eons, the demand for scarce materials has been the measuring stick that humans used to decide value in the marketplace. But when you can manufacture one of these materials cheaply, that material loses one of the key criteria for its investment value. It loses its scarcity.
Global loss of scarcity value is on the horizon for precious metals. It’s why some people have been turning to digital assets as an investment vehicle. Digital assets meet the same criteria held by precious metals previously. Digital assets are scarce, they’re in high demand, and some of them are holding their value quite well over time.
What’s a Digital Asset?
A digital asset is a non-reproducible digital representation of value. That “value” can be totally digital (like a cryptocurrency) or a symbol of something tangible in the physical world (like a digital deed to property). Digital assets don’t follow the previous rules of currencies and assets and securities, however. They’re a different animal altogether. Regulators that try to apply old laws to new systems are going to inhibit the ability of that country to compete in the global economy. Digital assets require people to think differently, and those countries that embrace this new thinking will do very well moving forward.
Very few people understand the nature of digital assets such as Bitcoin. Bitcoin is an example of a digital representation of value on its own. It doesn’t represent something tangible in the physical world. It’s encrypted software that produces a function. Its encryption creates non-reproducible, digitally documented actions that happen within a planned, limited environment (creating scarcity), and large numbers of people want to use this software (creating demand). This makes Bitcoin a digital asset.
“It’s an error to call Bitcoin ‘nothing’ because Bitcoin is a very specific and unique software that supports a new form of human interaction. Bitcoin is emphatically something, and that something has value not unlike a precious metal.”
These mineable, decentralized, encrypted, open source software platforms like Bitcoin (and especially DigiByte) can be used for other things, as well. Tokens, for example, can be created on these platforms that represent tangible goods, services, and information in the physical world. You can tokenize a business, a business transaction, or information, for example. Because these tokens are built on the same encrypted, non-reproducible software protocols, if they have demand, they become digital assets.
Many people view digital assets as the precious metals of the modern age, but I believe that their ability to hold value is not what makes them important. What makes these vehicles of investment important is their ability to facilitate more efficient forms of human interaction. Efficient, horizontal systems are necessary for the technology-oriented world that’s being built, and digital assets are going to play a key role as we move into that world.