Understanding tokenization is essential not just in the cryptosphere but in the world of finance in general. The principle and history of the real-world asset (RWA) tokenization can be traced back to 2017, although the world has yet to catch up with the many features of the blockchain — one company did.
The infamous BlackRock became the first conceptualized use case of the blockchain, building its first token assets called BUILD. Being a pioneer in asset management, the once-hidden possibilities of the blockchain gave rise to a new set of digital assets called Real-World Assets (RWA). As of today, the real-world asset industry is estimated to be worth over $3 billion, and by 2035, financial analysts project its valuation to skyrocket to over $15 billion. Here’s all you need to know about real-world asset tokenization.
What is real-world asset tokenization?
Real-world asset tokenization is converting a physical asset into a digital asset without compromising its rights or values. The process of tokenization involves using the blockchain for computing, storage, calculation, and data processing to fractionalize ownership, allowing for easy access, purchase, and instant settlement. Tokenization allows for the easy conversion of any real-world asset into a digital asset, and this includes real estate, artworks, or stock commodities.
Usually, the process of getting 1 to 1,000,000 units of real-world assets was difficult; the barrier to entry was high and required specific financial requirements. With real-world tokenization, anybody can get any unit of stock easily without meeting any requirements or submitting paperwork. Tokenization has also promoted homogeneity and compatibility between companies of similar value, allowing for the swift transfer of assets.
History of Tokenization
Since the onset of stocks and Treasury bills, there have been many kinds of physical representations of real-world assets for interest participants. Many of these assets existed before the discovery of the blockchain and employed certain procedures that served its purpose, although these procedures posed a drawback to the marginalized. In the history of tokenization, the only pre-existing assets with similarities to tokenized digital assets were exchange-traded funds (ETFs) and real estate investment trusts (REITs), representing value for both real estate and commodities, respectively.
The adoption of digitalization led to E-gold tokenization, which is another notable case of real-world asset tokenization. Although E-gold failed to gain momentum in the retail market, its impact on digitizing real-world assets is undeniable. The tokenized assets that came after E-gold solely focused on finances as the global supply chain continued to search for tokenized assets.
Tokenized assets experienced a breakthrough in the 2010s as blockchain was developed and discovered by other financial institutions. Blockchain was marketed as a tool that allowed for the fastest, most secure, and most verifiable transfer of assets, eliminating middlemen and strenuous paperwork. While many traditional financial bodies pushed against the use of blockchain by developing de-limiting policies, cryptocurrency still experienced adoption, and blockchain encouraged development.
The earliest use of real-world tokenization was challenging as it failed to impress the retail market. A clear example of this was the failure of colored coins and mastercoin on the Bitcoin blockchain network. The success of Vitalik Buterin’s Ethereum Blockchain changed the trajectory for tokenizations through the introduction of smart contracts. Today, tokenized assets have moved from mere ideas to outstanding innovations like BlackRock’s BUIDL.
Case Study: Goldman Sachs’ Digital Asset Platform (DAP)
Like BlackRock’s BUIDL, Goldman Sachs has also introduced its form of blockchain digitalization called the Digital Asset Platform (DAP). Hosted on a private blockchain stack, the FAP is a result of a mutual collaboration with the European Investment Bank (EIB) aimed at developing a decentralized platform for the secured and swift issuance, registration, and custody of digital assets.
This platform employs the full possibilities of blockchain and automatically captures asset-tight complexities and cash flows. In addition, the platform ensures security as only approved stakeholders get access to its security protocols. Goldman Sachs has embraced blockchain asset tokenization and management and re-engineered it to facilitate end-to-end digital lifecycle processing across tokenized assets.
Goldman Sachs has harassed the many opportunities of blockchain tokenization to reduce the extensive bond issuance settlement time of the European Investment Bank, taking it from T+5 to T+0 within a speed of sub-60 seconds with the platform. Like Goldman Sachs and BlackRock, there are numerous real-world use cases of asset tokenization, especially in the cryptosphere.
5 Crypto Projects Tokenizing Real-World Assets
There are numerous projects tokenizing RWAs, here are some of the best.
- PTPWallet
PTPWallet offers businesses and startups the ability to build tokenized solutions for their products. The tokenization can come in various kinds including utility tokens, security tokens, Non-fungible tokens, stablecoins, equity tokens, and smart-contract tokens. Businesses operating in various industries such as agriculture, maritime, retail, finance, and so on have shown interest in adopting PTPWallet to create token solutions for their platforms.
- Centrifuge
Centrifuge is one of the largest decentralized finance (DeFi) projects bringing RWAs to the blockchain. This project allows users to tokenize their assets via non-fungible tokens (NFTs). This is made possible through its decentralized application (dapp) called Tinlake, which allows users access to its open marketplace consisting of different tokenized assets.
The application allows users to tokenize anything, including real estate or even royalties, by turning them into NFTs. These NFTs are acceptable collateral you can use to borrow from the pool of investors. In addition, Centrifuge has a native CFG token that is used for payment, governance, and voting.
- Ondo Finance
Ondo Finance is another crypto project that has been gaining significant and consistent popularity. With a valuation of over $200 million, Ondo Finance invests in multi-billion-dollar, highly liquid exchange-traded funds, allowing stablecoins to earn passive income. Ondo Finance allows users to deposit through stablecoins, which are then exchanged with fiat currencies (United States dollars), which are used to buy assets. As these assets generate yield, they are reinvested to generate more yield, and upon completion, the users receive interest.
- Maple Finance
Maple is a DeFi lending protocol, and in 2023, they introduced RWA liquidity pools. This project provides uncollateralized loans for borrowers and also provides additional opportunities for the borrowers and lenders. Maple Finance is a multi-chain platform available on both Ethereum and Solana. Its recent partnership with Cicada Partners, a blockchain credit risk management firm, has allowed for the management of investment-grade credit portfolios on the blockchain with the inclusion of RWAs.
- Pendle Finance
Pendle Finance is a DeFi protocol that allows for the easy tokenization of future yields from any of your figural assets and the transformation of these yields into tradable tokens. This project allows crypto investors to improve their investment strategies and speculations. Pendle Finance also acts as an automated market maker (AMM), offering similar interest rates to those in the traditional market. Introduced RWA products in 2023 and used both MakerDAO’s Boosted Dai Savings (sDAI) and Flux Finance’s fUSDC for yield generation.
Tokenize Your Assets With PTPWallet
If you want to join the long list of crypto projects involved in asset tokenization, then you need expertise and resources to facilitate the development of your project. PTPWallet is equipped with the right resources to handle your crypto tokenization projects.
