The term real-world asset (RWA) is something of a misnomer. After all, at one point, does an asset become 'real'? Cryptocurrency is not considered real, yet aggregates the value of all digital tokens and coins in circulation and it runs into the trillions. Fiat is deemed real-world yet paper money hasn't been backed by, well, anything since it delinked from gold decades ago.
In any case, the term is picking up plenty of traction. It applies broadly to so-called tangible assets—think bonds, equities, real estate, gold, oil, debt, freight, and even art. Thanks to the wonders of blockchain, these investable commodities are finally stepping into the digital age. By tokenizing them on a public ledger, RWAs can now be securely traded and managed out in the open.
The promise of RWA tokenization, as with currency tokenization (BTC, ETH, etc), is manifold. Generally speaking, key benefits touted include greater transparency, deeper liquidity, streamlined cross-border trade, portfolio diversification, and improved accessibility via fractional ownership (don't buy a mansion, buy a 100th of a mansion).
Approximately $50 billion of real-world value will hit the blockchain in 2025, with Standard Chartered predicting a staggering $30 trillion in tokenized RWAs by the year 2034. If the latter forecast comes to pass, RWA could become as familiar an acronym as KFC.
Why Tokenize RWAs?
So, why on earth would anyone want to tokenize a physical good, whether it be a Manhattan penthouse, a solid gold bar, or a corporate bond? Well, when we clarify that tokenization simply means creating digital representations of the corporeal commodity, it becomes easier to grasp.
Tokenizing physical goods allows them to be bought, sold, and traded far more easily than before. This is why tokenized gold is so popular: why take ownership of the real thing, with all the security risk and storage baggage it entails, when you can hold the digital equivalent instead?
As mentioned, fractional ownership is one of the primary benefits of tokenization. Imagine, for instance, a beachfront property worth $10 million being split into a million tokens, each worth $10. With this model, even modest everyday investors can own a slice of prime real estate without drowning in debt: they can play the property market without incurring significant capital outlay. And because these high-value assets are tokenized on-chain, there's no need for middlemen like brokers or banks.
Another advantage is that tokens are tradable 24/7 on global markets, deepening liquidity and improving accessibility to retail investors from around the globe. For industries like freight, in particular, the net result is faster settlement and less red tape.
Who Is Bringing RWAs to the Masses?
In light of such advantages, it's no surprise that a preponderance of platforms are bringing RWAs on-chain, tokenizing everything from carbon credits and oil to intellectual property and compute power. With every transaction and ownership transfer recorded immutably on a public network, verification is easy and security strong.
U.S. regulated trading platform INX One is one standout. Late last year, it launched a "Buy Assets" feature to broaden access to investments such as tokenized real estate and securities. On INX One, users can trade tokenized shares of Google, Tesla, GameStop, Microsoft, and Nvidia, each backed 1:1 by their underlying assets, as well as tokenized versions of the S&P 500 ETF and BlackRock's iShares Treasury ETF.
Luxembourg-based Blocksquare is another pioneer, one focused on the property sector. The platform's legally binding 'Notarized Real Estate Tokenization Framework,' which is integrated with land registries, effectively allows property owners to tokenize economic rights to their bricks-and-mortar dwellings. Properties can be divided into 100,000 tokens, either partially or in full.
And then there's PinLink, which takes a different tack entirely, tokenizing specific physical assets such as GPUs, IoT devices, and WiFi hotspots via its own token standard, RWA-2055. A marketplace for decentralized physical infrastructure network (DePIN) assets, PinLink purports to slash costs for AI developers by crowd-sourcing compute, unlock liquidity for asset owners, and expand blockchain's reach into real-world infrastructure. The PinLink mainnet is expected to launch later this year.
A $30 Trillion Opportunity?
Is it only a matter of time before tokenized real-world assets achieve critical mass? Or are they destined to be a short-lived phenomenon? In truth, only time will tell. While challenges remain—particularly around regulation in different territories and lack of standardization—the market potential is evidently immense. Hence, there are lofty predictions about how big it could become.
As more RWAs are brought on-chain, the experience of investors will represent the ultimate litmus test that determines the success or failure of the industry at scale. Perhaps some assets are inherently suited to tokenization, while others are best served within existing frameworks. Whatever the outcome, there's no denying the momentum or feel-good factor currently permeating RWAs. Buckle up; it's gonna be a fun ride.
