Blog Information

• Posted By : Melissa Miller
• Posted On : Jan 07, 2024
• Views : 117
• Category : Technology
• Description : Real world assets (RWAs) like real estate, commodities, and private equity have been relatively illiquid and challenging for most investors to gain exposure to.

Overview

• Real world assets (RWA) like real estate, commodities, and private equity have been relatively illiquid and challenging for most investors to gain exposure to. The emergence of blockchain technology presents an opportunity to “tokenize” these assets and unlock greater accessibility and efficiency.
  

  What Are Real World Assets and Why Tokenize Them?

  
  Real world assets are physical or digital assets like:
  
  Real estate
  Commodities (gold, oil)
  Fine art & collectibles
  Private equity and venture capital stakes
  Mortgages and rental income streams
  Supply chain invoices
  Music royalties & more
  
  These assets have typically only been available to high net worth individuals and institutions because of high minimum investments, geography constraints, and lacking liquidity.
  

  Tokenization aims to improve:

  Accessibility: Lower investment minimums to open RWA markets to smaller investors
  Liquidity: Enable easier transferability of token representations of the assets
  Transparency: Embed relevant metadata like cash flows, ownership stakes directly into smart contracts
  Compliance: Meet regulatory and jurisdictional requirements for trading
  By putting real world assets on a blockchain via “tokens”, the benefits of cryptocurrencies and decentralized finance can be brought into traditionally opaque physical asset classes.
  

  The Step-By-Step RWA Tokenization Process

  For organizations and asset owners interested in tokenizing real world assets, the process includes:
  
  Asset Evaluation First, identify the exact real world asset you wish to tokenize, gather necessary approvals from stakeholders, and evaluate benefits.
  
  Technical Buildout Next, determine the best blockchain network for asset representation, and develop ERC-20 compatible smart contracts that encode investment terms.
  Token Distribution Then, execute an initial sale or distribution of the asset-backed tokens to investors through IDO, ICO or other approved offerings.
  
  Trading & Settlement Finally, list the tokens on cryptocurrency exchanges for trading, while settling token transfers on chain per programmatic rules.
  Key Benefits of Real World Asset Tokenization
  
  Digitized on blockchain, previously analog real world assets can start to unlock value in exciting new ways including:
  
  Greater Accessibility
  
  For assets with high minimums, tokenize ownership into more affordable increments to democratize investment exposure.
  
  24/7 Liquidity
  
  Enable around the clock global peer-to-peer transferability instead of relying on business hours of legacy players.
  
  Automated Compliance
  
  Smart contracts allow embedding KYC/AML directly into token issuance and trading without gatekeepers.
  
  Transparent Cash Flows
  
  Tokenization provides real-time clarity into asset performance like dividends, profit shares that were earlier opaque.
  
  Fractional Ownership
  
  Allow groups of smaller investors collectively participate in asset classes together that were previously unthinkable.
  
  As blockchain platforms mature, expect tokenization of real world assets to massively expand access to wealth creation opportunities to more investors around the world. The token revolution promises open participation for all.
  
  See Also: Value Proposition for Tokenizing Real Estate