What are RWAs?
RWA stands for Real World Assets Tokenization. Real World Assets, like your favourite collectables or property, are transformed into digital tokens and utilized within the realm of DeFi.
This process, called tokenization, simply converts the asset’s value into a digital form, allowing easy
representation and transactions on the blockchain. In essence, Real World Assets (RWA) involve bringing
traditional off-chain financial assets onto the blockchain.
How large could the RWA tokenised market become?
Although we are at the very beginning of RWA tokenisation, it is set to become a major industry.
Citigroup’s latest research report (3rd quarter of 2023), estimates that by 2030, there will be a staggering $40 trillion to $50 trillion in tokenized digital securities.
Currently, major players in the traditional financial sector are actively exploring and deploying the tokenization of Real World Assets (RWA). Notably, financial institutions including JPMorgan Chase, Goldman Sachs, DBS Bank, UBS Group, Santander Bank, Société Générale, and Hamilton Lane, have transitioned from research and exploration to the testing/implementation phase.
Interestingly, Bank of America (BAC) sees RWA as a significant factor driving the adoption of digital assets.
In fact, a recent research report by BAC highlights that the tokenized gold market has already surpassed an impressive $1 billion in value. So, it seems like the RWA market is set for some serious growth!
What are the advantages of RWA Tokenisation?
The tokenization of Real World Assets (RWAs) on the blockchain enables transactions that are both efficient and secure, merging the reliability of real-world asset values with the benefits of decentralized systems.
This method effectively reduces risks associated with virtual assets and enhances the flow and management of physical assets in the digital realm.
Other advantages include:
Provenance
NFTs provide a tamper-proof history of an asset, ensuring its authenticity and ownership history. This is particularly valuable in art, collectibles, and luxury goods.
Reduced costs
Middlemen like lawyers and brokers are not necessary.
24/7 Market trading
Available worldwide to anyone
Fractional ownership
Liquidity
RWA tokens offer greater liquidity compared to physical assets. They can be swiftly bought and sold without the usual hassles of liquidation, delivery, and storage associated with tangible assets.
RWA and NFTs
Real-world assets with NFTs (Non-Fungible Tokens) represent an innovative blend of the physical and digital worlds.
The NFT acts as a certificate of authenticity and ownership
over the asset it represents.
Why are NFTs perfect for RWA?
The uniqueness of NFTs makes them perfect for representing ownership or proof of authenticity.
How are RWA linked to NFTs?
The process involves creating a digital representation (NFT) of a real-world asset on a blockchain. This NFT can include details about the asset, like its history, ownership, and characteristics. For example, an NFT linked to a piece of art would contain information about the artist, the artwork’s history, and its authenticity.
What assets can be tokenised?
Real World Assets (RWAs) encompass a broad range of tangible and intangible assets existing outside the digital realm.
Here’s a categorization of various types of RWAs and why they are beneficial:
Tangible Assets:
1 Real Estate:
Tokenizing property rights, titles, and deeds, where each NFT represents ownership or a share of a physical property.
2 Physical commodities like Gold, Silver, oil, and more.
3 Art/collectibles like sculptures, paintings, and more. Cars, yachts, aircraft, and more.
5 Luxury goods like a Rolex.
6 Fine wines and rare spirits.
7 Sports Memorabilia.
Intangible Assets:
1 Intellectual Property: Rights to music, films, books, or patents can be tokenized. NFTs can represent ownership or licensing rights, providing a new way for creators to monetize their work.
2 Financial Instruments: Stocks, bonds, derivatives, and other financial contracts.
3 Contracts and Agreements: Leases, licensing agreements, and other contractual rights.
4 Digital Rights: Rights to digital content, like music,
videos, and software.
5 Claim-Based Assets: Debts: Loans, mortgages, and other receivables.
6 Charitable donations (tracking)
7 Reward programs
Hybrid Assets:
Assets that have both tangible and intangible components, like a business which might have physical assets, intellectual property, and contractual rights.
The reality is that anything from the real-world can be tokenised!
Examples of real-world assets that have been tokenised:
Some real-life event meetups have used NFTs as a POAP -mproof of attendance protocols. Justin Bieber linked one of his hit songs to an NFT. Holders of the NFT receive a share of the royalties.
Many web3 games have released NFTs that allow holders to play and earn inside their ecosystem.
You can now purchase a decentralised domain name and sell it as an NFT.
El salvador are looking at implementing property and land deed NFTs attached to IRL property and assets.
Amazon are launching NFTs tied to real world assets.
Magic Eden NFT marketplace released 100 tokenised
Pokemon cards.
Solana and RWAs
One blockchain perfectly positioned (low fees/fast transactions) for RWAs and NFTs is Solana.
Here are some examples of Solana projects involved in RWA:
Parcl – You can long/short real estate
HomebaseDAO – Tokenisation of US real estate
LiquidProp – Fractionalizing U.S. Rental Properties Via Tokenized Shares
Maplefinance – RWA Lending and Digital Asset Lending
BAXUS – Tokenising Wine and Spirits
Collector – Collector bridges RWAs such as Pokemon cards onto the blockchain
Blockride – Blockride transforms fractional bus fleets ownership into real and reliable crypto assets
ISC International stable currency – A RWA flatcoin designed for stability & wealth preservation
RWA moving forwards
Real-world assets with NFTs present a frontier in asset management and ownership, blending the physical with the digital through blockchain technology. However, this area is still developing and faces various
challenges that need to be addressed for widespread adoption.
As BlackRock CEO Larry Fink stated, “the next generation for markets, the next generation for securities, will be tokenization of securities.”
