Crypto Investor’s Guide to Tokenized Real-World Assets

Key Takeaways:

• Tokenizing real-world assets (RWA) requires ownership of a real-world asset (real estate, artwork, contracts, etc.) to be digitally represented as an on-chain token.
• Tokenization can streamline stock and bond trading, facilitate fractional ownership of collectibles, provide investors with exposure to commodities, and give inventors and artists a way to monetize their creations.
• Tokenization is also used in security, games, NFTs, real estate, etc.
• For investors, tokenization offers the opportunity to reduce risk, improve efficiency, and access alternative investments, making it easier to diversify your portfolio.
• Converting real-world assets to blockchain-based tokens could help reshape the cryptocurrency investment landscape by putting everything on chain.

Real-world asset (RWA) tokenization has been around since 2017, but has yet to gain widespread attention. But when BlackRock, the world’s largest asset manager, unveiled its first tokenized fund called BUIDL, the market got excited about this new class of assets.

BUIDL operates on the Ethereum blockchain and allows institutional investors to earn returns in US dollars through tokenized RWA. BUIDL can trigger mass adoption of investments in RWA through its token.

Here is a guide to investing in RWA tokens:

What is Real Asset Tokenization?

real assets (RWA) refers to any “real” asset that is bought, sold or traded. Examples include land, goods, precious metals, etc. RWAs can be physical or digital assets.

Tokenization It means converting a real-world asset into a bundle of digital tokens on the blockchain, like converting a company into stocks. Like traditional stocks, tokenization allows people to purchase a portion of an asset (e.g. a token representing 1/1000th of a parcel of real estate). This “fractional ownership” allows more investors to participate at a lower price.

in other words, All assets can be tokenized and traded on the blockchain..

Benefits of Tokenization

To understand the power of tokenization, let’s look at some of its key benefits.

• ease of use: Tokenization provides improved liquidity, making it easier to buy, sell, and trade RWA assets. For example, traditional real estate investments are typically time-consuming, complex, and require selling the entire property. However, tokenization allows investors to quickly and easily buy and sell tokens that represent fractional ownership.
• accessibility: Tokenization improves accessibility by allowing a wider range of investors to participate. While traditional real estate investments can cost hundreds of thousands of dollars or more, tokenization allows investors to participate at a much lower cost due to fractional ownership through digitized tokens.
• Fee reduction: Tokenization helps reduce fees and overhead. Let’s say someone has invested in a high-end piece of art. If you had invested the traditional way, you would have had to worry about shipping costs, document-related costs, etc. Tokenization can eliminate many of these costs and fees.
• transparency: Transparency is improved through tokenization, as blockchain technology provides an immutable record of transaction history and asset ownership, helping to reduce the risk of fraud, counterfeiting, and disputes.
• Composability: Tokenization opens up new possibilities for composability. RWA tokens can be integrated into the wider DeFI ecosystem and serve as a financial building block. For example, you can borrow using RWA tokens as collateral.

Case Study: BlackRock Enters Tokenization

BlackRock, the world’s largest asset manager, owns the BlackRock USD Institutional Digital Liquidity Fund (BUIDL).

BUIDL invests in U.S. Treasury bonds, repurchase agreements, and cash. The minimum investment requirement is $5 million, and BUIDL tokens will be issued on the Ethereum blockchain with the help of Securitize, an American digital asset securities firm.

Rather than investing directly in all these real assets Investors can purchase BUIDL tokens and gain immediate access to the entire portfolio..

BUIDL is unique in that it provides investors with a secure and transparent platform to earn US dollar returns through enhanced liquidity and instant settlement. We also comply with SEC regulations for stock issuance and investor protection. We also aim to maintain a stable token value of $1 per token and pay dividends in new tokens every month.

Another element of BUIDL’s success is strategic partnerships. In addition to Securitize, BlackRock partners with infrastructure providers Coinbase, Fireblock, BitGO, and Anchorage Digital Bank NA to secure and manage the fund’s operations.

BUIDL has been a huge success, attracting $245 million in deposits from 7 investors in the first week since launch. One of the investors, Ondo Finance, moved $95 million into the BUIDL fund. On April 11, stablecoin issuer Circle announced that it would launch an intelligent contract service that would allow BUIDL users to instantly convert their BUIDL tokens to USDC.

Because BlackRock is the world’s largest asset manager, it has significant influence and is highly regarded within the financial industry. Since its debut, RWA tokens have seen a notable surge across cryptocurrency markets. Notable gainers include Centrifuge (CFG), Polymesh (POLYX), and Ondo (ONDO), each with significant gains of over 30% on average.

With BlackRock now offering its RWA pursuit model to the rest of the financial industry, we expect continued adoption of RWA tokenization.

Cryptocurrency project that tokenizes real-world assets

There are several RWA tokenization projects that investors should pay attention to. Please check the following:

POLYX

Polymesh, a blockchain focused on security tokens, recently unveiled Polymesh Private, a private permission-based blockchain for financial institutions starting to tokenize RWAs. Enterprises can initially utilize a private, permission-based network and then switch to a public network when ready (or remain on a private network indefinitely).

Since the overwhelming majority of RWA tokenization by banks and other large financial institutions still takes place on private blockchains, Polymesh seeks to cater to institutions by providing a seamless transition to the public domain.

As mentioned, Polymesh has seen significant growth since the launch of BUIDL, with an 80% price increase in mid-March. Polymesh is expected to grow as tokenized RWA adoption increases.

Temperature (ONDO)

In April 2024, Ondo Finance announced that it would partner with asset issuance chain Noble to introduce tokenized U.S. Treasury bond products to the Cosmos blockchain ecosystem. The expansion into Cosmos means Ondo’s token offering will be integrated into more than 90 blockchains, driving adoption of U.S. Treasury-backed products.

Ondo is one of the largest players in the tokenized Treasury bond market, having attracted over $300 million in deposits since its debut in 2023. Through its partnership with Noble, Ondo is now strategically positioned for global expansion.

Realio Network (RIO)

Founded in 2018, Realio Network is a DeFi marketplace that seeks to democratize access to real estate and other real-world assets. It offers an open-source, permissionless architecture that combines traditional asset management with advanced blockchain technology.

One of the most powerful features of RWA tokenization that Realio leverages is fractional ownership. This allows investors to hold a tradable fractional stake in a real estate asset. This could help democratize access to potentially lucrative real estate investments, making them available to more people.

Realio is uniquely positioned to streamline and transform the real estate industry through blockchain technology. According to CoinCodex, the price of Realio is expected to rise 225.54% by the end of May 2024.

land interest (LAND)

Landshare offers tokenized real estate investments on Binance Smart Chain. Landshare strives to make real estate investing accessible to everyone by offering a minimum investment of just over $1.

Like Realio, Landshare allows users to purchase Landshare RWA tokens, which represent fractional real estate asset ownership. By leveraging the transparency, efficiency, and security of blockchain technology, Landshare offers a unique opportunity to participate in real estate assets without the traditional barriers to real estate investment.

With its innovative approach to real estate investing, Landshare is poised to play a significant role in RWA tokenization. In 2023, Landshare successfully sold three properties and flipped its first property. Additionally, after the launch of BUIDL, Landshare’s token price soared 450%, jumping from $1.3 to $7.2 in just over a week, making it one of the highest rising tokens.

Why tokenization is good for cryptocurrencies

Tokenization benefits the cryptocurrency landscape as a whole as it puts it in a strong position to bring more capital into the industry. Tokenization of assets is expected to form the backbone of the next bull market and could move trillions of dollars into the cryptocurrency space.

in other words, More and more assets will be moved on-chain..

By improving efficiency, liquidity, transparency, accessibility, and costs, RWA tokenization can help attract more investors (and therefore more capital) to the cryptocurrency market. According to CoinDesk, the tokenized RWA market could reach $10 trillion by 2030, transforming the cryptocurrency landscape to unprecedented levels.

Investor Implications

RWA tokenization could revolutionize the investment landscape. Tokenization can help break down barriers to traditional financial investments by enabling fractional ownership of real-world assets.

RWA adoption is expected to expand across global markets as investor confidence grows and regulatory clarity increases. Additionally, continued advancements in blockchain technology, DeFi, and smart contracts will help further expand RWA tokenization possibilities.

As we navigate the evolving financial and investment landscape, we can expect RWA tokenization to revolutionize the future of capital markets and asset ownership.

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