If you're familiar with the world of cryptocurrency, you've probably heard of the term "digital asset" before. Ever since crypto took the world by storm and continued to dominate headlines, more people have become interested in digital assets and the value they provide.

However, the average person may not understand what a digital asset is or what digital asset security means. Below, you'll learn more about digital assets, their importance, potential risks of investing in digital assets, and digital asset security.

What Is a Digital Asset?

A digital asset is anything that exists in a digital format that has value. The number of digital assets on the internet is rapidly growing because the sheer number of digital devices we use—especially smartphones—is also growing exponentially.

Popular types of digital assets include the following:

• PDFs
• Videos
• Images
• Logos
• Mobile apps
• Spreadsheets
• Emails
• Websites
• Blockchain-based assets

There are three key components that a digital asset must have to be considered a digital asset. Here's what they are:

• It must have value.
• It must be in a digital format.
• It must be accessible, searchable, and distributable.

Companies often use many digital assets for different purposes, such as marketing, legal, sales, and tech initiatives.

The Importance of Digital Assets

Digital assets are important because they provide value to a company or individual. Investors are also becoming more interested in digital assets.

Digital assets are the heart of a company's brand and help them fuel online engagement. They can also be sold independently, meaning that a company can claim expenses and even make tax deductions regarding their digital assets. As the world is becoming more digital, owners of digital assets must treat them how they would treat physical assets.

While digital assets are receiving more attention, there's limited control over them due to a lack of regulation. Well, that's mostly because digital assets are still not widely understood by the government.

Consider this question: what happens to a digital asset when the individual owner passes away?

While some online resources help owners secure their digital assets after death, digital assets are still somewhat loosely defined in the eyes of federal regulators. Still, digital assets are now considered a permanent fixture in the global financial landscape.

Because the future of digital asset regulation remains uncertain, with no clear mandate from the US Comptroller of Currency, many experts recommend people to now include them in their will or work with a wealth manager to ensure their assets are dealt with properly.

Potential Security Threats Regarding Digital Assets

Since digital assets are inherently valuable, they are more attractive in the eyes of a cybercriminal. For example, crypto investors must safeguard their assets, avoid scams, and take other cybersecurity measures to keep hackers at bay.

So, let's look at some potential security risks associated with owning digital assets.

Phishing Attacks

Phishing attacks are a widely used attack method threat actors use to steal user data. These types of attacks have been prevalent for several years, and even though internet users today are more aware of phishing, cybercriminals have learned to target unsuspecting victims.

Phishing starts with a malicious email or email attachment that tricks you into downloading malware onto your device. For example, a cybercriminal may steal your username and password for a digital wallet platform where you store your crypto assets.

Ransomware

Another common cyberattack is a ransomware attack. This type of malware encrypts your data, making it impossible to access it until you pay the cybercriminal a costly fee. A cybercriminal may encrypt one of your digital assets and refuse to give you access to it until you pay up.

Data Breaches

Data breaches are fairly common, and they can target your digital assets. A data breach occurs when an unauthorized individual gains access to your asset, copies it, transmits it, or views it without your knowledge. Ledger, a well-known company that creates wallets for digital assets, once experienced a data breach that impacted roughly one million accounts.

Commonly, software developers will now try to integrate digital asset securities into their projects. However, this is not a guaranteed way to secure digital assets.

Understanding Digital Asset Security

Because of these risks and others, you must take various security measures to protect your digital assets. This is what's known as digital asset security.

However, it may be challenging to understand how digital assets are protected. For example, some digital assets offered and sold as an investment contract are considered a "security," according to the Securities and Exchange Commission (SEC).

When following SEC's statement on its digital asset framework, individuals or companies that own digital assets can determine if the asset falls under the definition of a security, which would make it subject to federal securities laws.

Below are some specific ways you can protect your digital assets:

• Identify Assets: Any digital item with value should be marked as a digital asset and could be subject to a future sale. Ask yourself, "Would this be valuable if I sold it?"
• Establish Ownership/Value: Consult an attorney to help establish overall ownership. You can also contact an appraiser to determine the value of your digital assets.
• Use Protective Agreements: You should make agreements with anyone else who may access your digital asset to prevent theft.
• Register Ownership: Consider using copyright, patents, or trademarks to register your ownership over your digital assets.
• Plan for the Future: Consider what would happen to your assets if something happens to you.
• Have a Backup System: You may want to backup your assets online or on an external hard drive to protect them.

Now is the time to prioritize the protection of your digital assets, as the digital landscape is ever-changing, and new regulations may affect how you manage your investments.

Secure Your Digital Assets Before It's Too Late

No one is immune to experiencing a cyberattack, especially individuals or companies with digital assets. If a threat actor knows that you own digital assets, you could become a more attractive target for an attack. Do your best to keep your digital assets away from the wrong hands.