Where the Physical World is Tokenized into Real-World Assets
Tokenization and Real-World Assets (RWAs) are two ideas that stand out in the quickly developing field of blockchain technology because they can completely transform both traditional and digital marketplaces.
Gaining an understanding of what can be tokenized, why it should be tokenized, and how RWAs fit into the blockchain ecosystem will help shape the financial and asset management landscape of the future.
Tokenization combined with RWAs signifies a revolutionary change in investment and asset management. With further development, blockchain technology will probably become more deeply integrated with physical assets, improving financial systems’ efficiency, security, and inclusivity.
“Tokenization allows assets to be broken down into individual digital pieces and traded via exchanges. Tokenization does not change the original asset but rather creates a new and efficient way that the ownership of the asset can be managed digitally. In simple terms, tokenization represents the value of something as a token that is issued and transacted on a blockchain or DLT network. The token could represent money, a financial derivative, works of art, land, voting rights, collectibles, or your identity.”*
This development suggests a future in which physical and digital assets are complementary and interconnected, altering the fundamental structure of economic possibilities and activities.
Applications and Implications
Blockchain-based Real World Assets are already having a big influence on a lot of different industries:
Real estate: Unlike traditional real estate investing, platforms such as RealT facilitate the buying and selling tokenized property, offering market access and liquidity. For instance, the RealT platform allows users to purchase shares in properties in Detroit, Michigan, starting at a few hundred dollars, from any location in the world.
Art and Collectibles: NFT platforms have revolutionized the buying and selling of art by giving creators more control over their creations and establishing a thriving new market for art enthusiasts. One prominent example is the sale of Beeple’s digital artwork, which went for over $69 million at Christie’s because of NFTs that validate ownership and authenticity.
Finance: Tokenized stocks and bonds allow for quicker, easier, and less expensive transactions, which could revolutionize the financial markets. Blockchain technology was used by German automaker Daimler AG to issue a €100 million corporate bond, streamlining the procedure and cutting down on expenses and time.
Can You Tokenize Anything?
The process of turning an asset’s rights into a digital token on a blockchain is known as tokenization. This creative method can be used with a variety of assets:
Tangible assets: Include things like real estate, artwork, machinery, and cars. These assets can be tokenized to better manage the purchasing and selling procedures, wider investment involvement, and fractional ownership.
Intangible Assets: Copyrights, stocks, bonds, and intellectual property are some intangible assets. By creating visible, unchangeable records, tokenizing these assets can improve regulatory compliance, increase market accessibility, and speed up transactions.
Digital Assets: Tokenization opens up new possibilities for profit-sharing and ownership structures. Examples of digital commodities include software licenses, digital media rights, and virtual real estate on Internet platforms.
The Reason for Tokenizing?
“Unlike traditional markets with set trading hours, the nature of blockchain technology allows for continuous engagement with these tokens, providing individuals with more flexibility. Moreover, the transparency built into blockchain technology increases investor confidence, further reducing the possibility of fraud and ownership conflicts.”**
The reasons for tokenizing assets are as diverse as the assets themselves:
Enhanced Liquidity: By tokenizing traditionally illiquid assets, such as real estate, they become more accessible and tradeable.
Market accessibility: It removes obstacles to entrance, enabling smaller investors to take part in markets that were previously controlled by large institutions or affluent people.
Cost Efficiency: Transaction costs are reduced, and processing times are accelerated when intermediaries are eliminated.
Enhanced Security and Transparency: All transactions are made transparent, safe, and unchangeable thanks to the intrinsic qualities of blockchain technology.
Blockchain’s Real World Assets (RWAs)
RWAs are the process of tokenizing tangible and intangible assets so they may be included in the digital blockchain ecosystem and interact with the actual economy. These assets gain new functionality and flexibility on the blockchain while keeping their inherent worth. This is the significance of RWAs:
Bridging Two Worlds: RWAs enable a smooth interaction between physical and digital assets by integrating the real world with the blockchain. By this integration, fraud is decreased, improved compliance is ensured, and a stronger financial system is built.
Enabling Fractional Ownership: RWAs allow several investors to hold high-value assets, such as real estate or fine art, fractionally. This democratizes access to these investments, which are traditionally costly and challenging to divide.
Increasing Investment Possibilities: Tokenizing RWAs gives investors access to a worldwide market. For example, tokenized shares of European real estate are easily attainable by an Asian investor.
“Traditional assets like real estate and commodities often require substantial initial investment. Similarly, while there are various denominations available, a reasonable investment in bonds also demands a significant outlay, limiting participation mainly to already wealthy individuals. Regulations, jurisdictions, and geographic locations play a critical role in asset accessibility.” ***
The integration of Real World Assets into Web3 is still in its infancy but promises to radically alter how assets are perceived, managed, and traded. The future could see a seamless integration of the digital and physical, where buying a piece of land on another continent is as simple and secure as purchasing a book online. The key to this future lies in overcoming regulatory, technological, and market adoption challenges, paving the way for a more inclusive, efficient, and transparent asset market.
Pioneering experiments, endless possibilities
Galaxis has already implemented RWA tokenization in its collections. The best known of these was the successful Girls Robots Dragon NFTs digital and physical redeemable solution. Fans also had access to NFTs with utilities in the digital collection that could be hung on the wall as canvases signed by the artists. The meeting point of physical and digital art demonstrates how RWA works in real and virtual space.
There were a dozen different tangible utilities that were supplied by Collie Buddz’s NFTs. These utilities ranged from the singer’s CD to little souvenir trinkets for fans. The most fortunate collector can go all the way to Costa Rica with the most valuable NFT in the collection.
However, the most unexpected tokenized item that Galaxis presented was unquestionably the grand prize of the Mike Tyson Collection, which granted the winner the opportunity to spend an entire day at the farm of the famous boxer. When they train together, even the most fortunate fan has the opportunity to pick up some excellent punches from the athlete who is still quite popular.
At the same time as tokenization made it possible for fans to get closer to their favorite celebrities, it also made it possible for celebrities to further improve their popularity among their fans. In the future, the new communities that have emerged in the Galaxis will continue to provide fresh concepts and answers to these opportunities.
Source:
* Asset Tokenization: What It Is and How It Works
https://chain.link/education/asset-tokenization
**What are Real-World Assets (RWA)?
https://www.coinbase.com/learn/crypto-glossary/what-are-real-world-assets-rwa
*** What are Real World Assets (RWAs)?
https://www.bitcoin.com/get-started/what-are-real-world-assets-rwa/
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