How Real-World Assets Tokenization is changing the current financial landscape

As the world embraces blockchain technology, the financial sector is in the lead of innovation, quickly evolving and becoming more decentralized. Real World Assets Tokenization and DeFi payment platforms are more appealing to investors, giving them more flexibility and broader options when it comes to choosing where to apply their funds.

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Recent data from RWA.xyz shows that by the end of 2023, the total value of RWA tokens was around $5 billion, and a report by BCG/ADDX estimates that RWA tokenization will reach $16.1 trillion by the end of this decade.

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Disrupting the Financial Status Quo

Traditional financial institutions are increasingly being surpassed by DeFi solutions that allow investors to easily trade their assets online in a safe, transparent, and decentralized blockchain network.

On-chain solutions are now evolving beyond the digital world. Physical assets, networks, infrastructures, and objects are becoming more attractive to investors and crypto enthusiasts as they are tokenized and more easily swapped.

Real World Assets (RWA) Tokenization is the modern web 3.0 expression for the on-chain representation of either a tangible object or an intangible assurance, with a fungible or non-fungible token being created in the blockchain and uniquely attached to the said asset. A tangible physical asset can be a car, a house, or any other touchable object. When it comes to intangible assets, we can be talking about treasury bills, bank securities, or other government bonds.

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Discovering the benefits of RWA

This new concept of transforming an object or asset with real-world value and implications into a digital token has several advantages. Among the list are the following:‍

Flexibility

‍Acquiring, lending, borrowing, or selling assets becomes effortless.

Accessibility

‍Investors can trade assets anytime, anywhere, without intermediaries and different financial investments.

Liquidity

‍Liquidity is highly increased since it does not depend on traditional markets and trading hours.

Fractional ownership

‍Ownership can be split between multiple investors, which means the asset can receive debt financing. 

Lower costs

‍Due to the lack of intermediaries’ fees, buying and selling costs are lower, and the investment is focused on the real asset value.

Increased transparency and security

‍By being on-chain, it is registered on an immutable blockchain network, which makes it more secure, traceable, and transparent to all involved parties.

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Real-world examples and applications

Since the concept emerged in late 2017, there have been numerous use cases of real-world assets being tokenized, making them more accessible to investors. The highlight obviously goes to real estate, which can be fractionated and bought in different shares by different people. This is especially useful for apartment buildings and condominiums, for instance.

Another great example is Art and Collectibles, which had a huge spike with the democratization of NFTs, making high-value art accessible to everyone and helping artists to monetize their work. 

Commodities have been tokenized throughout the years, giving gold, silver, and other precious materials a newfound value and liquidity by easier trading while enhancing the security of transactions and holding management.

And, of course, Financial Services have seen their fair share of RWA tokenization with bonds, treasury bills, and company equities. This is an especially ever-growing field, with more investments being moved to on-chain networks.

One of the most prominent use cases, often quoted as one of the main catalyzers for the growth of the tokenized market, is the BlackRock fund called BUIDL (BlackRock USD Institutional Digital Liquidity Fund), now acknowledged as “the world's largest asset manager”, according to an article by Kucoin. 

This article also mentions several successful projects focused on tokenizing RWA, selecting the following top 10:

• Ondo Finance (ONDO)
• Mantra (OM)
• Polymesh (POLYX)
• OriginTrail (TRAC)  
• Pendle (PENDLE)
• TokenFi (TOKEN)
• Securitize 
• Untangled Finance
• Swarm Markets (SMT) 
• MakerDAO (MKR)

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A new era for RWA Tokenization

It’s fair to say that, throughout the years, RWA tokenization has evolved and widened its purposes. More recently, it has found a new way to enable infrastructure networks to become decentralized, a concept known as DePIN (Decentralized Physical Infrastructure Network). As the idea progresses and becomes more broadly adopted, it is becoming a renowned success case, giving yet another opportunity for RWA tokenization to rise to its full potential.

DePIN is usually related to services such as telecommunications, energy, wireless connectivity, data collection, and storage, which require a physical network to operate. Since the traditional concept includes a centralized business model, with a few corporate giants managing the whole market, new companies have little to no space to enter the sector.

DePIN emerged with the promise of allowing new enterprises to enter the space and several investors to bet on these new businesses. With on-chain tokenization and less financial capital required per investor, it also empowers several people to participate in building the network, receiving rewards for their contributions and governance rights to a certain extent.

As more DePIN apps and platforms emerge, they can benefit from RWA tokenization in several ways:

1. By becoming a virtual network of physical infrastructure, a DePIN must rely on RWA tokenization to ensure its smooth and effective operation while creating transparent, immutable, and traceable on-chain blocks and, ultimately, developing a decentralized token economy system.
2. By being decentralized, a DePIN can use RWA tokenization to create a feedback loop in which activities and milestones in the real world are easily transformed into information on the blockchain, ensuring that the system functions as a whole.
3. By integrating RWA tokenization, a DePIN project can grant access to capital funding quicker and more effectively, as it can be fractionalized.

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As the DeFi world evolves and more use cases arise, we are thrilled to be a part of the solution and contribute to developing a more equitable and accessible financial sector.

At Skyline Digital, we ensure all our clients can easily trade crypto and fiat, manage their investment portfolios, and have the flexibility they desire to invest in RWA, such as bonds or treasury bills. We look forward to helping DePIN projects grow by enabling a more extensive range of payment systems within one single platform.

To learn more about our solution, please get in touch with us through our Telegram.