Crypto is a term hardly anyone is unfamiliar with nowadays, especially with the boom Bitcoin has seen in recent years. Over a decade ago, when one heard the term crypto, their first thought went to bitcoin. That is still the case today, but one will find other names thrown around the mix like dodge coin, Ethereum and Tether.
Crypto Assets Definition
In accounting, crypto assets and crypto currency have the same meaning. Crypto Assets are simply digital assets on the balance sheet. Just like physical assets are a benefit on the sheet, digital assets like crypto currency are a benefit instead of the liability owed by a business. For an accurate balance sheet, the total assets have to be equal to the total liability and equity of the business. Crypto assets are intangible assets similar to stocks and bonds. When it comes to assessing crypto assets, one needs to use cryptographic techniques.
How is Crypto currency created?
The creation of Crypto currency is a complex method, but here is a simplified explanation to how a crypto currency is created. First of all, a crypto currency is created by code when a transaction is certified. This process is called ‘mining’, although not every crypto currency uses mining, most in the current market do. Crypto currencies are created by an algorithm that relies on cryptography.
Crypto assets overview
As previously mentioned, when one now asks an individual about crypto currency, there is a possibility that the individual could give out multiple crypto currency names in a flash. These are crypto assets in accounting. Utility coins, security coins, cryptocurrencies, they are all classified as crypto assets and use blockchain technology.
Those who are familiar with the crypto currency know that anytime there could be a seismic shift in the market, both in the upward and downward trajectory. Its ability to disrupt has attracted the attention of various central banks and financial institutions.
What are some characteristics of Crypto Assets?
It is possible for one to get confused between digital assets and crypto assets. It is a common mistake made by individuals as all crypto assets are digital assets, because they are intangible, but not all digital assets are crypto assets.
Following are some characteristics of Crypto Assets that can be used by an individual to distinguish what are crypto assets and what are not.
- Cryptography. A significant difference is that a crypto asset use cryptography.
- Crypto assets depend on the distributed ledger technology.
- One does not require a bank to issue crypto assets.
- Crypto assets are used primarily in three ways. As an investment, as a means of exchange, and to access services and goods.
There has been a significant rise in crypto currency technology investment, making it an opportune place for investments, which is not really a surprise. Between 2014 and 2018, the change in the oil price across the globe was not more than 10% of its value, whereas, for Bitcoin, the most popular of the cryptocurrency in the market, a rise of 65% one day and a fall of 25% has become a norm.
Understanding crypto assets is not at all complicated. This guide might help you understand everything that you should know about crypto assets and how you can make the best use of it.