What is RWA? The process of tokenization of real assets
Tokenization of real assets (Real World Assets, RWA) is one of the most promising types of use of blockchain technology, its potential market size covers almost all human economic activities.
Tokenized RWAs are digital assets that have value outside the blockchain, such as stocks, bonds, art, intellectual property, etc. Tokenization can provide increased transparency, liquidity and improved access to real assets.
The combination of blockchain technology with traditional finance has led to significant changes in the way assets are owned. Tokenization is penetrating various industries and opening up new opportunities for investment. The lines between the physical and digital space continue to blur, setting the stage for the future of decentralized finance (DeFi).
Tokenization of real assets has the potential to dramatically change the DeFi landscape. Using real assets, decentralized finance can become an inclusive currency system that combines traditional finance and crypto space.
Statistics show significant year-over-year RWA growth, with TVL reaching over $6 billion as of April 2024. Therefore, tokenization of real assets has considerable potential in accelerating the merging of the physical and digital worlds. We are on the threshold of a financial revolution, a future where assets will be more accessible and markets will be more democratic.
The tokenization revolution in real estate
Currently, the total value of world real estate is estimated at more than 200 trillion dollars. In comparison, the value of each ounce of gold that was once mined by mankind is about 30 times lower.
Real estate tokenization is a revolutionary process of transforming real assets into blockchain-based digital tokens, transforming traditional real estate investments.
The adoption of this technology means a departure from traditional norms. This opens up new opportunities for both property owners and investors. Investing in real estate usually requires a significant amount of capital. This limits access for low-income individuals. Real estate tokenization removes this obstacle.
Tokenization is a transformational approach that radically changes the concept of real estate, providing such advantages as:
Increased liquidity. By splitting RWA into tokens and selling them further, it opens up the real estate market to smaller investors, increasing demand for the entire industry.
Partial ownership. Tokenization helps spread capital across a variety of assets, reducing risk and maximizing diversification. Split ownership of digital tokens allows individuals to invest in pieces, lowering the financial entry point and democratizing real estate investing. This innovation signals a noticeable shift in the dynamics of property ownership.
Reducing the risks of fraud. Blockchain, smart contracts and decentralized networks provide improved authentication and help avoid fraud in real estate transactions.
Economic efficiency. Real estate tokenization streamlines transaction processes, reducing associated costs. Smart contracts specify the terms of transfer and automatically execute approved transactions.
Thus, the sector is changing significantly due to tokenization. This technology makes the real estate industry more democratic, efficient and accessible to everyone.
Tokenization of art and collectibles
Art has always had an exclusive nature. Its limited availability not only created significant barriers to entry for new collectors and investors, but also limited the circulation of cultural values to a narrow audience. The advent of tokenization of digital art and collecting is set to change this field significantly. Research shows that the digital art market will reach $11.8 billion in 2023, up 7% from 2022.
Tokenization allows you to purchase a stake in digital art, allowing a wider audience to invest in valuable artworks that were previously unavailable. The partial ownership model significantly increases asset liquidity. It is easier for institutions to manage their investments by buying or selling interests in works of art without having to purchase the actual asset outright. This flexibility can greatly improve cash flow management.
The market for exclusive art and collectibles is democratizing through tokenization for a number of reasons:
Tracing the provenance of a work of art. Immutable blockchain records ensure that every transaction or transfer of ownership is recorded with proof of the originality of the artwork. This reduces the risk of fraud and ensures the integrity of investments, which appeals to institutions that prioritize the security and transparency of their assets.
Distribution of investments. Tokenized art offers institutions a new asset class to invest in, diversifying their portfolios beyond traditional stocks, bonds and real estate. The unique value proposition of art as an investment provides an attractive hedge against market volatility.
Access to the global market. Tokenization removes geographic barriers, giving institutions access to a global marketplace of buyers and sellers. This expands their potential client base and investment opportunities, making it easier to buy, sell or collaborate on international projects without the logistical complexities of transporting physical art.
Royalty Tokenization allows artists to integrate smart contracts into their creations, ensuring they receive royalties every time their work is sold on the secondary market. This feature expands opportunities by providing a steady stream of income and allowing you to benefit from the increasing value of your work over time. Smart contracts can facilitate the distribution of royalties among other stakeholders involved in the creation or promotion of a work of art.
Tokenization is a modern financial revolution. Very soon, it will fundamentally change the art market, providing new sources of income for creators and expanding access for collectors.
Tokenization of patents and intellectual property
One of the most interesting examples of RWA is tokenized patents and intellectual property (IP). IP does not have a physical embodiment, but instead is a product of human activity embodied in services, products, inventions, etc.
Traditional forms of IP, such as copyright, can be converted into tokens. By splitting a patent, asset owners can sell or license smaller parts, bringing a wider market to their ideas and inventions. Tokenized intellectual property simplifies licensing processes. For example, smart contracts on the blockchain automate the payment of royalties, ensuring a fair reward for creators.
Tokenization of patents provides transparency and traceability of transactions and exchanges, which helps protect the rights to these assets. It is an IP dispute resolution tool that avoids unauthorized use and any fraud through verified transaction records.
A clear example of tokenized intellectual property is the CryptoKitties project. Launched in 2017 on the Ethereum blockchain, the collection allowed users to collect, breed and trade digital cats in the form of non-fungible tokens (NFTs). Each CryptoKitty represented a unique instance with its own set of traits and characteristics. The project demonstrated how traditional notions of ownership and value in the field of digital collectibles can be shaken.
Tokenization of intellectual property has significant prospects for unlocking the value of patents and copyrights. It changes the way assets are valued, traded and managed, opening up new opportunities for creators and investors. In the future, we expect a transformation of the market with the inevitable improvement of IP management.
Visnovok
Tokenization is already changing the management of real assets and will continue to spread its influence across every industry. This merging of the physical and digital worlds will bring many benefits to both corporations and ordinary people. From a favorite artist's painting to an oceanfront villa, tokenization is revolutionizing the very nature of ownership.