You’ve seen this term mentioned multiple times within the context of cryptocurrencies. But what exactly is a digital asset and how is it different from a cryptocurrency?
What is a digital asset?
A digital asset refers to an intangible asset (or resource) with financial value that is expected to increase in the future. While many digital items are often seen as assets, Bitcoin is one of the few top contenders that has been compared with traditional investment assets such as gold.
How are digital assets different from cryptocurrencies?
To understand how digital assets differ from cryptocurrencies we need to look at the purpose and motivation behind their purchase.
Digital assets, much like traditional assets are only bought in order to sell at a later point. This happens after they achieve a certain appreciation in value.
Cryptocurrencies, on the other hand, have many more functions and utilities.
Of course, valuable cryptocurrencies like Bitcoin are often seen as an asset, but others like Ethereum (ETH), Binance coin (BNB) and Ripple (XRP) are primarily meant to act as exchangeable currencies that act as fuel for a blockchain network. Therefore, comparing cryptocurrencies with digital assets can put the former in a rather limited position.