Chapter 1 - Digital Assets as Economic Goods

Abstract

This chapter first looks at the origins and philosophical concept of value, the different schools of thoughts from the subjective and objective views of value, the differences between intrinsic and extrinsic value, the definition of traditional assets, the definition of economic goods, and current asset valuation methods. Then, five unique characteristics of digital assets distinct from traditional assets are outlined. For example, the most fundamental assumptions of the discipline of economics are that: (1) the amount of resources available for a society is limited; and (2) the market exists as a measure of substitutability of those limited resources. To find optimal distribution of resources by means of free competition under these assumptions has always been thought to be the fundamental purpose of economics. Today, some argue “limitless” computing has arrived, making digital value theory inherently unique from past theories. This chapter then defines intrinsic digital value, extrinsic digital value, and a digital value matrix for categorizing digital assets according to their economic functions, this is, core value versus supporting value, digitized versus digital native, rather than technical functions, for example, software, hardware, etc. Attributes of digital assets that contribute to intrinsic and extrinsic value creation are then discussed along with measurement methods. This chapter closes with a review of current methods used for digital asset valuation.