Why Do Digital Assets Need Better Classification?

Why Do Digital Assets Need Better Classification?

Key Insights

  • Digital assets have evolved into several use cases.
  • Better structure and classification will pave the way for increased adoption and legitimacy
  • Crypto Structures are needed for uniformity. 

Several people need to grasp the full detail of digital assets. These people narrow down the idea of assets in digital forms to cryptocurrencies. This narrow idea largely boils down to the absence of a structure and formal classification. 

The lack of structure has created a barrier for investors and industry players. Furthermore, there is an urgent need to understand that this technological advancement goes beyond cryptocurrency. 

BTC as part of digital assets
BTC as part of digital assets

Understanding Digital Assets

A couple of years ago, defining digital assets as cryptocurrencies only would have been perfect. Today, however, digital assets include Non-fungible tokens (NFTs) and Decentralized Finance (DeFi) protocols. 

While you can define digital assets as being stored online and existing in digital forms, they also come with distinct usage rights. However, in the context of web3, virtual assets are electronic data, information, and files. 

You can own and transfer them and use them as a currency to make transactions. Similarly, they serve as a way of storing intangible content and files. 

The evolution has become robust to contain borrowing, lending, and trading assets via DeFi protocols. It also includes owning or renting virtual lands and real estate in Decentraland

As an owner of virtual assets, records of ownership of digital assets are held securely on a decentralized database. It could also be on an electronic ledger, called a blockchain. 


Therefore, this evolution of digital assets calls for better structure. 

The Need for Digital Asset Structure 

 The foremost reason for the structure and formal classification of digital assets is to push forward the maturation of classes in the ecosystem. 

Since the market is no longer confined to a use case and developers are now introducing new use cases and products— creating structure becomes expedient. 

Standardized structures are necessary for the growth of all asset classes, with no special preference for one. It will lead to new products and allocation methodologies and pave the way for increased adoption cum legitimacy. 

Furthermore, as more developers introduce new forms of virtual assets, they must be classified based on their use cases. The structure brings about uniformity across the industry. 

For instance, the Ether as a token is classified as the network in other platforms. While this may not seem like a big deal to everyday traders, it creates (a sort of) ambiguity. 

Similarly, these minor differences will pose issues to those managing large funds and dealing with many assets and a high volume of trades.

Creating a structure will bring uniformity across the entire industry and give a standard classification.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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