Real World Assets (RWAs) 101

Real-World Assets (RWAs) represent an emerging asset class that is rapidly gaining momentum. With the potential to change the way that we buy and sell traditional assets and to positively impact the way in which blockchain technology is perceived, it's worth understanding exactly what RWAs are and how the tokenization process works.

What Are Real-World Assets?

Tokenized Real-World Assets are a type of crypto token designed to represent real, tangible assets that exist "offline", including real estate properties, commodities, art and collectibles, and more.

By representing real, universal assets on the blockchain and bringing them into the decentralized finance (DeFi) space, RWAs can be securely bought, sold, and traded on digital platforms, with ownership monitored on-chain.

How Does the Tokenization Process Work?

"Tokenization" is the process of converting a real-world asset into a digital token using blockchain technology.

1. Assets Are Selected – An asset needs to be evaluated to ensure it's suitable for tokenization. This involves analyzing its market value, legality and eligibility
2. Legal Framework is Established – A clear legal structure is created, and the rights and responsibilities of the token holders is established
3. Token Specifications Are Defined – A decision is made about the type of token (fungible or non-fungible) and blockchain to use
4. Tokens Are Created, Issued and Listed – Tokens are created using smart contracts, which dictate the behavior of the tokens and how buyers and sellers can interact with them. Once minted, tokens are issued and become available for trading on decentralized exchanges (DEXs) or dedicated marketplaces. These platforms facilitate liquidity and allow investors to buy, sell or trade the tokenized asset
5. RWAs Are Integrated with Off-Chain Data – Tokenized assets are often integrated with off-chain data (financial data, ownership changes, etc.) to ensure they stay up-to-date with real-world changes

What Are the Benefits of Tokenization?

There is a range of benefits with tokenization and RWAs:

• Liquidity – RWAs can enable increased market liquidity for assets that have historically been very illiquid. Also, crypto exchanges operate automatically on a 24/7 basis, which provides investors with greater opportunities to interact with RWAs compared to traditional financial markets
• Transparency – Represented on-chain, RWAs are transparent and auditable, and ownership can always be verified. Blockchain records are also unalterable (immutable), which means that historical data cannot be tampered with
• Accessibility – Tokenized RWAs provide greater accessibility to certain asset types, especially through fractional ownership, which allows users to buy a fractional share of an asset. RWAs are also not limited by borders and can be accessed globally by anybody with internet access

What is the Potential for Real-World Assets?

There is huge potential for RWAs. With traditional finance worth a massive amount globally, RWAs represent one of blockchain's largest opportunities for real-world impact.

Some of the potential use cases for RWAs include:

• Real Estate – Property ownership can be moved onto the blockchain, which streamlines the buying and selling process, and allows investors to purchase fractional shares of properties
• Art and Collectibles – Tokenization can help to improve liquidity and transparency within the art market and allow investors to own shares of valuable artwork that would otherwise be unaffordable
• Commodities – Through tokenizing commodities as RWAs, companies can closely monitor the movement and condition of goods in real-time, helping to reduce fraud, improve efficiency, and ensure compliance

What is the Future for RWAs?

RWAs on-chain will take a lot of assets to new levels by enabling substantially-improved liquidity, transparency, and capital efficiency—it is estimated to be a $3+ trillion market by 2030.

These tokens continue to bridge traditional assets to the blockchain, enabling innovation and inclusivity.

By increasing the availability of financial tools that would otherwise be inaccessible, the tokenization of Real-World Assets is likely to contribute to crypto's mainstream adoption, and as technology and adoption grows, RWAs could revolutionize how we interact with traditional assets.