Digital currencies are the only digital asset used in the market

Whilst there are various different types of digital asset, it seems that only digital currencies are able to be used at the moment. At first glance the two might seem one and the same, upon deeper inspection, one can see that they do in fact differ quite substantially.

A definite distinction can be made between digital assets and currencies because there are very few currencies that can be considered as such in terms of the literal meaning of the word. Instead, it is better to put digital assets into categories such as utility tokens, Bitcoin, and security tokens.

The confusion comes when some, such as BTC can be considered as both a payment instrument and a payment network which functions in a completely decentralised manner. Utility tokens are likened to the fuel that powers a service or software, and Ethereum based smart-contracts are different yet again. Security tokens, however, are considered as digital securities that can be likened to a share in a company or the right to future profits from a project. These tokens are the most complex when it comes to regulatory compliance as they can sometimes fall under the same rules as a company IPO.

Due to such regulatory uncertainty, it makes sense that currency-like digital assets are the most useful despite their currently volatile nature in the markets. Many are now considering BTC as a good long-term investment and more and more people and institutions are accepting it as a means of payment.

“Technical stability plays a particularly important role. Priority is given to security and resistance to external influence through conservative technological development … With fees amounting to just a few pennies, Bitcoin can bring significant benefits in terms of costs in the field of international trade, where traditional payment transactions can incur very high transaction fees.”

Of course, as with everything, there is a drawback. Considering the amount of hype surrounding the world of blockchain and crypto, there are of course a number of tricksters and scammers operating amongst legitimate organisations. This is due in part to the high level of failure when it comes to security and utility tokens- even in the case of “above the board” projects.

One could argue however that this is to be expected in what is still the infancy of the technology. The importance of BTC from a sociological, technical, and economic point of view cannot and should not be ignored as features like smart contracts and the tokenisation of products and assets will have a huge impact on business in the future.

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