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There is a shift underway in the valuation and trade of Digital Assets due to the emergence of blockchain-powered non-fungible tokens (NFTs). Some NFTs—which can represent images, GIFs, songs, videos, or other digital commodities—are fetching huge bids due to their one-of-a-kind nature. Meanwhile, other “fungible” or replaceable virtual goods such as in-game add-ons benefit from a move to distributed ledger technology (DLT). This booming blockchain-powered market is prompting people to think differently about how transactions are validated and verified. Digital representations of value on blockchain open up new possibilities for finance and asset ownership. Digital currency - perhaps the best-known application of blockchain technology - has a wide variety of potential uses. Bitcoin, for example, is viewed by many as a potentially critical store of value; the payments company Square said it invested $50 million in the cryptocurrency in 2020 “as in instrument of economic empowerment,” around the same time that Fidelity Investments launched its first Bitcoin fund. Central Bank Digital Currencies (CBDCs) are meanwhile being explored for everything from consumer payments to inter-bank settlements. It is estimated that more than 40 central banks have or are exploring CBDC issuance, with China’s on track to be the first. One particular form of digital currency, “stablecoins,” is pegged to a fiat currency and is being closely watched not least due to Facebook’s announced plans to issue stablecoins including a “Libra” coin that is a composite of others. In addition, a completely new funding model, initial coin offerings (ICOs), has increased the public visibility of blockchain and digital assets as people have become able to buy into companies via coins representing different entitlements. The intersection of automation and digital assets has enabled a so-called decentralized finance, or “DeFi,” ecosystem - which can potentially automate many of the processes deployed by centralized (and often costly) financial intermediaries for the purposes of lending, exchanges, and derivatives. Blockchain technology can also introduce new asset management models, if and when tangible and movable properties are registered and tokenized - that is, mapped with digital references to valuable or sensitive elements for security purposes. For example, fine art and real estate could each theoretically be tokenized, making the management and ownership of these potentially pricey assets possible “on-chain.” In such a system, professional agencies could be relied upon to oversee the digital management of properties and shape specialized markets for their trading, which could function much like existing financial markets. However, new and sophisticated rules are needed for the next-generation, blockchain-based economy - and they will have to be adequately enforced - in order to help ensure the stability of digital markets and to bolster the legal protection of consumers. Tokenization is a process that converts assets into digital tokens within a blockchain system. The main benefits of tokenization include liquidity, programmability, immutable proof of ownership, safety, privacy, and, most importantly, it is possible to fraction ownership. Tokenization is a process that converts assets into digital tokens on a blockchain system. Some of the main benefits of tokenization include liquidity, programmability, immutable proof of ownership, safety and privacy, and, most importantly, it is possible to fraction ownership —a rising trend throughout all industries. Since tokenization makes it possible to swap sensitive data into a neutral marker, popular tokenized categories include fiat currency, gold, and real estate, which all end up turned into randomized numbers that have no intrinsic value of their own. Different from encryption, tokenization removes sensitive data from a business' system by replacing it with an undecipherable token, while the correlated data is stored in a secure cloud data vault. Besides, tokenization makes it possible for businesses to automate and speed up processes, including the management of investors and their rights. Also, secondary transactions can be closely followed when combined with third-party exchanges, so investors can receive distributions and exercise other rights, such as voting, through the same blockchain-based platform. Finally, since proof of ownership is immutable in tokenization, all transfers leave a secured public trace. One of the current challenges lies in the fewer options of secure digital assets. In order to solve this problem, digital assets banks are starting to appear, such as banks that manage and provide multi-layered insurance for digital contracts and other digital broker services. These services are essential for large-scale institutional adoption of digital tokenization. Although some critics argue that not everything can be tokenized, surely all that can be will be. After surpassing the ICO bubble, it is expected that a new wave of regulatory foundation should provide a greater degree of stability to token markets. This change would likely play a significant role in the management and trade of non-liquid assets in the long term. Furthermore, as the dematerialization of goods become more pervasive, the use of tokenized transactions tends to be the easier and more secure way of trading digital assets and immaterial possessions. As virtual environments evolve, users are increasingly interested in acquiring digital possessions as investments and to enhance their profiles and experiences in the metaverse, and VR stylists have emerged to cater to them. New technologies bestow these virtual items with the same qualities that make physical possessions valuable—uniqueness, scarcity, provenance— and provide a framework for digital ownership. Virtual items, from clothing to furniture, tools, structures, and land, can be created with 3D-rendering platforms, game engines, and other digital design applications, but for the item to exist as a possession in the metaverse, it must retain certain unique qualities beyond its aesthetic design. One Gucci handbag sold for more on Roblox than it costs IRL. Blockchains can be used to track a virtual item over time, authenticating it and logging its history as it changes hands, providing a basis for its valuation. NFTs can provide evidence of ownership for a virtual item or piece of digital content, even if it is easily reproducible with a right-click to save. Virtual possessions are evolving from art, collectibles, fashion, and real estate to items with unique added functionality in the metaverse, like art-related NFTs that pay dividends to the owner when the related real-world work is sold or consumed, or that grant access to exclusive virtual environments. Virtual goods are also pushing the boundaries of fair use. Mason Rothschild’s MetaBirkin NFTs, inspired by Van Gogh, Rothko, and Kusama, sold for up to the equivalent of $42,000. The NFT creator was later sued by Hermès, maker of the real-world Birkin bags, which cited trademark infringement, trademark dilution, and cybersquatting.

Digital Assets