Today, the tokenization of real assets (RWA) is one of the most promising trends in the world of finance and investment. Experts predict that by 2030, the volume of this market could grow 50 times, reaching a value of $10 trillion. Such rapid development opens new opportunities for both financial institutions and private investors looking to take advantage of the digital economy.
What is tokenization of real assets (RWA)
Tokenization of real assets (RWA) is the process of converting physical or traditional assets into digital tokens. This allows asset owners to represent them as digital units, facilitating their management, trading, and investment. The idea of tokenization first emerged alongside the development of blockchain and cryptocurrencies such as Bitcoin $BTC and Ethereum $ETH , which demonstrated how technology could be used to store and transfer value without intermediaries.
In the process of tokenizing an asset (real estate or artwork), tokens are created that represent a share of ownership or rights to that asset. This opens the possibility of breaking its value into smaller parts that can be bought or sold on the market, making investing accessible to a broader audience. For example, instead of buying an entire house, an investor can purchase just a small share in the form of tokens and participate in earning income from rent or resale.
Why tokenize real assets
Below are the main reasons why the demand for tokenization is growing:
Increased liquidity: tokenization allows assets to be divided into smaller parts, making them available for buying and selling on digital platforms. This enhances liquidity even for traditionally illiquid assets, such as real estate or works of art.
Transparency and security: the blockchain technology used for tokenization ensures transaction transparency and protects ownership data, reducing the risk of fraud and manipulation.
Convenience and efficiency: the digitization of assets simplifies the process of managing them, transferring ownership rights, and exchanging. This reduces dependence on intermediaries and cuts down on transaction time and costs.
Global access: tokenized assets can be easily bought and sold from anywhere in the world, opening markets for global investors and increasing the potential audience for their owners.
Which assets can be tokenized and examples of existing RWA
Asset tokenization allows virtually any tangible and financial assets to be converted into digital forms, giving them access to global markets. Here are the main categories of assets that can be tokenized, along with specific examples:
Real estate: tokens representing shares of real estate allow investors to purchase part of a property instead of the entire building or office. For example, in 2018, the company Harbor tokenized a building in Palo Alto (USA) valued at $20 million, allowing investors to buy shares in the property.
Works of art: expensive art objects can also be tokenized, making them more accessible for purchases. For example, in 2018, the company Maecenas tokenized an Andy Warhol painting, allowing investors to purchase a share of this artwork on the Ethereum blockchain.
Commercial assets and businesses: some companies tokenize their shares or assets to attract investment. For example, in 2020, RealT, a real estate tokenization platform, began offering investors shares in several homes in Detroit, allowing them to earn rental income in cryptocurrency.
Financial assets and debt obligations: financial products such as bonds or loans can also be tokenized to facilitate their circulation in the market. For example, Societe Generale, one of the largest banks in Europe, issued bonds in the form of tokens on the Ethereum blockchain in 2019, marking one of the first instances of tokenization of debt obligations.
Luxury items: cars, jewelry, and similar. For instance, the LuxToken platform allows tokenization of watches, jewelry, and other elite goods, providing opportunities for fractional ownership and trading.
Platforms for asset tokenization
Numerous platforms are emerging in the modern market that provide services for tokenizing real assets using blockchain. Among them, Harbor stands out, specializing in the tokenization of commercial and residential real estate. It allows owners to attract global investors, simplifying the process of purchasing shares in real estate.
RealT focuses on the U.S. real estate market, offering investors the opportunity to earn profits in cryptocurrency. The platform operates on the Ethereum blockchain, ensuring automated rental payments.
Maecenas is engaged in the tokenization of art objects, allowing investors to purchase shares of paintings and sculptures. The value of the works is divided among tokens, which are stored on the blockchain for transaction transparency.
Polymath offers a comprehensive solution for tokenizing financial assets, particularly stocks and bonds. The platform works with regulators to ensure that tokens comply with international security standards.
Advantages and disadvantages of tokenization of real assets (RWA)
Advantages:
Tokenization of real assets increases their liquidity, making them available for buying and selling in digital form.
Allows retail investors to participate in large projects through the ability to purchase shares of assets.
Blockchain ensures transparency and security of all transactions, reducing the risk of fraud.
Digitization of assets reduces the time and costs associated with processing transactions.
Disadvantages:
Regulatory challenges can create legal risks for investors and platforms.
Technical failures or hacker attacks on the blockchain can threaten the security of tokens.
The volatility of cryptocurrency markets affects the value of tokenization.
In new markets, a limited number of buyers can reduce the liquidity of tokens.
Conclusions
Tokenization of businesses and real assets promises to capture a significant share of global financial markets, changing not only the way of investing but also approaches to trading and property management. The integration of traditional finance with blockchain technologies is becoming not just a trend, but a fundamental step towards creating a more accessible, efficient, and dynamic financial ecosystem.
Currently, stablecoins dominate the RWA sector, accounting for over $170 billion of the market. In comparison, tokenized securities and government bonds are valued at $2.2 billion. As this sector develops, opportunities are growing for other types of assets, opening new prospects for investors and financial institutions.
