Digital Property and Blockchain Technology – What You Need to Know About It

Digital ownership, as a new form of owning and managing resources in the digital space, is a key aspect of the modern technology-based economy. The contemporary development of digital technologies, especially in the area of ​​cryptocurrencies and blockchain, brought with it fundamental changes to the concept of digital property. This redefinition of its meaning, in 2009, began one of the biggest internet changes in history, and the cryptocurrency revolution, although often misunderstood, continues to this day. What's more, it has a promising future.

In this article, we will look at what digital property is, what role blockchain technology plays in establishing it, and how cryptocurrencies and NFT tokens (Non-Fungible Tokens) are creating a new digital economy and why people are investing in the development of the cryptocurrency market.

What is digital property?

Digital ownership is a concept that refers to the possession and control of digital assets, such as files, images, videos, music, software, data, and even virtual items in games. In short, digital ownership refers to the rights and permissions to use, manage, sell, share, and transfer assets that exist in digital form.

Unlike physical objects, digital assets can be easily copied, transferred, and stored electronically. A key challenge with digital property is ensuring that rights to these assets are clearly defined and cannot be easily challenged or misused.

Digital property as defined by law

Traditionally, property law has covered physical assets such as real estate or movable goods. In a digital context, property law becomes more complicated because digital assets can be easily copied and distributed almost without restriction. As digital technology has advanced, the law has adapted to the new realities to protect intellectual property rights and ensure that owners of digital assets have control over their use. This has led to the creation of copyrights, patents, and various forms of licenses that govern how digital assets can be used, copied, and distributed.

Digital Property Enabled by Blockchain Technology

Blockchain-enabled digital ownership is a concept that refers to the ownership, management, and transfer of digital assets using a decentralized database, or blockchain.

How does it work? The easiest way to show this is with a working example, the Bitcoin network. In simple terms, we can assume that the Bitcoin blockchain network is simply a global, constantly updated database, stored by a network of interconnected computers, which contains information about settlements/transactions using the BTC cryptocurrency. Every time Bitcoin network users make a transaction using this cryptocurrency, data about it is saved in the blockchain. The Bitcoin network allows users to own and transfer units of digital currency without the need for intermediaries. Bitcoin owners control their funds using private cryptographic keys (used to authorize transactions using cryptocurrencies), which provides direct ownership and the ability to manage their resources.

How do you know who has what amount of Bitcoins at any given time? And why can't they be copied infinitely?

These issues are addressed using specific features of blockchain technology, which are:

• Immutability – immutability ensures that the history of the transaction and the resulting property it is durable and resistant to manipulation. Thanks to this, owners of digital assets, in our example cryptocurrencies, can be sure that no one will challenge the ownership of the cryptocurrencies they hold, and that information about their resources is accurate and true (quantity, place of storage, origin).
• Decentralization – decentralization eliminates the need to trust central intermediaries (controlling entities) in the exchange of information, which increases security and transparency. Asset owners can manage them without fear of data loss or abuse by central authorities;
• Transparency – transparency enables tracking of ownership and transaction history, which allows for auditability and verification of the authenticity of digital assets. This increases trust in the system and enables transparent management of assets;
• Cryptographic security – cryptographic security protects data from unauthorized access and ensures transaction integrity. Protection private keys ensures that only authorized owners can manage their assets;
• Consensus – consensus mechanisms ensure that, when certain conditions are met, all participants in the Bitcoin network agree on the correctness of the transactions carried out and recorded on its blockchain. This ensures the integrity of the ledger and the reliability of ownership data.

Through these mechanisms, Bitcoin has given rise to a new form of digital property that is both transparent and resistant to fraud and manipulation.

NFT tokens

In reality, however, ownership is not limited to just money. Just as in the physical world we have all sorts of physical assets, in the digital world we can also own all sorts of digital objects, not just digital money  in the form of cryptocurrencies. In the digital world, they can come in the form of NFT tokens.

NFTs (Non-Fungible Tokens) are unique tokens that represent ownership of specific digital assets. These can be audio files, video files, photos, documents, database access, or characters and items from computer games. Similar to Bitcoin, ownership of NFTs results from records on the blockchain. However, NFTs are not currency, but rather a digital certificate of ownership of a specific asset. Each NFT is non-fungible, meaning that it is unique and cannot be directly replaced by another NFT. This distinguishes NFTs from cryptocurrencies such as Bitcoin, which are fungible - one Bitcoin always has the same value as another one Bitcoin.

Each NFT has its own unique identifier recorded in the blockchain, which clearly determines its identity. Even if two people create an NFT representing the same file (e.g. an image), each of these NFTs will have a different identifier on the blockchain and will be considered a separate token.

Importantly, the fact that NFTs cannot be copied does not mean that the file itself that the NFT represents (e.g., an image, music, or video) cannot be copied. It only means that the NFT itself, as a unique digital asset on the blockchain, cannot be copied. In practice, anyone can download or copy the file that the NFT represents, but it will not be an original NFT – the copy of the file will not contain proof of ownership or authenticity recorded in the blockchain. In practice, it can be assumed that the person who copies such a file will be the owner of its “fake”.

Although at first glance it may seem unintuitive, it is a deeply thought-out solution that finds practical application. What?

• Online Art Galleries and Digital Images – Creators of digital images in the form of NFT tokens are entitled to royalties generated from the sale of these images on online secondary market. If their images were not in the form of NFT tokens, they could be copied at will. In such a situation, it would be impossible to determine who is entitled to the royalties.

• Items and characters from video games can be freely sold on the secondary market for traditional money. Game creators can receive a commission for each such sale.

• An audio-video file representing a music video, in the form of an NFT, can be sold on the market. Its buyer, in turn, is a person who is entitled to receive financial benefits resulting from the creation of this file (a kind of form of securitization).

NFT tokens also have a potentially very wide range of applications through the so-called tokenization. In short, tokenization is the process of transforming property rights to physical or intangible assets into digital tokens that can be managed, stored, and exchanged on a blockchain. Tokenization allows you to trade assets online that an ordinary individual investor investing in public markets would never have access to. You can democratize access to investments that are by their nature reserved for very wealthy investors. You can also verify the authenticity of luxury goods such as clothing and accessories, alcohol, and jewelry. There are many applications for tokenization, but this is certainly a topic that deserves a separate post.

Cryptocurrencies and NFTs as the Foundations of a Digital Property Economy

The combination of cryptocurrencies and NFTs creates the foundation for modern digital economy. Cryptocurrencies such as Bitcoin, are a form of digital money that can be used for transactions and store of value. NFTs, on the other hand, introduce the concept of unique digital assets that can be bought, sold, and from which one can derive financial benefits.

This new form of digital property is already enabling innovative business models, such as NFT art trading, microtransactions in video games, and new forms of content licensing and distribution. The blockchain economy brings with it more transparency, efficiency, and security, which could lead to further development of digital markets and new opportunities for creators and investors alike.

The Future of the Digital Property Economy

Looking to the future, we can certainly expect further development of strictly digital solutions, as well as the integration of blockchain technology in various aspects of the physical economy.

Digital ownership, enabled by cryptocurrencies and NFTs, has the potential to revolutionize a variety of sectors, from finance and art to commerce and entertainment. It’s worth remembering, however, that this is a relatively new technology whose application is currently limited. However, that doesn’t mean it will always be that way. Much like in 2000, there was the internet, but no Uber, Netflix or Amazona (at all or not operating in the same way as we know it today), this is how blockchain technology, cryptocurrencies and NFTs are today, but there are probably not such extensive applications for them yet. There is a good chance that we will see the development of innovative blockchain applications that will introduce new forms of digital assets and business models. One of the key challenges will therefore be to keep up with technological progress.

Growing awareness and adoption of the technology behind the cryptocurrency market will also be key to the continued growth of the digital economy. With the ongoing adoption of technology, digital property will increasingly become an integral part of our daily lives and the economy.

In conclusion, digital property in the context of cryptocurrencies and NFTs is redefining the way we manage and protect assets in the digital space. This dynamic and growing field offers promising opportunities for the future of the economy, based on innovative technologies and transparent ownership rules. Combined with the growing importance of the internet in people's daily lives, this is certainly the reason why the cryptocurrency market is enjoying such great interest from investors from all over the world.