RWA Tokenization – Cryptocurrencies have revolutionized the way we approach assets and finances.

They created unprecedented levels of utility and inclusion compared to the established markets.

But they still need to catch up when it comes to sheer capitalization and widespread adoption. However, that might change with the introduction of real-world assets in crypto.

RWAs saw a massive influx of capital in 2023., setting a precedent for growth in the tokenization market.

The RAW protocols saw a meteoric 700% increase in TVL in 2023. Protocols facilitating RWA transactions like Polytrade($TRADE) and Clearpool Finance ($CPOOL) have given 1038% and 277%YTD growth respectively.

This year it could accelerate this trend as more assets become digitized, appealing to institutions looking for innovative investment opportunities.

Further, it will narrow the gap between traditional finance and the blockchain.

It’s a concept that’s gaining momentum and interest from traditional finance players.

In this blog post, we will explain how real-world asset tokenization works, and we will also discuss the benefits it provides to investors.

What is RWA Tokenization?

RWA tokenization means turning physical assets into digital tokens on the blockchain.

The core idea of real-world asset tokenization is basically to create a virtual investment vehicle on the blockchain linked to tangible things like real estate, precious metals, art, and collectibles.

So instead of the deed to a house as a physical piece of paper, the ownership is put on-chain.

The Bank of America has recently highlighted RAW tokenization as a “key driver of digital-asset adoption”.

According to their report, the tokenized gold market has captured over $1 billion in investment.

There’s also a growing demand for tokenized U.S. Treasury bonds, with the combined market capitalization of tokenized money market funds nearing $500 million, according to data compiled by CoinDesk.

Right now, the future looks bright for tokenization with global business advisory firm Boston Consulting Group forecasting that the market for tokenized assets could mushroom to $16 trillion by 2030.

Essentially RWA allows you to diversify your portfolio beyond the volatile crypto market.

This in turn promotes the widespread adoption of cryptocurrencies in the real economy by facilitating the trade of tangible assets within the crypto realm.

This tokenization of real–world assets (RWAs) isn’t just happening in art but in bonds, cars, gold, houses, and more.

This process has several advantages such as improved Liquidity and accessibility

Tokenization makes it easier to buy and sell assets that are usually hard to trade. It enables partial ownership of high-value assets, letting a wider range of investors join markets that were previously hard to access.

Read More https://cryptofreemetaverse.com/hyper-tokenization-what-is-it/

RWA Tokenization – The Evolution of Asset Tokenization

Pre – 2010-2024

Pre- 2010

Asset tokenization took root in the early stages with the advent of blockchain technology, notably Bitcoin in 2009.

Bitcoin, as a digital asset, laid the foundation for exploring how blockchain will be utilized and trade real-world assets.

The early 2010s

In the early 2010s, Initial Coin Offerings (ICOs) gained popularity as a means to raise capital for blockchain projects.

However, these fundraising methods faced criticism due to the lack of regulatory oversight and investor protection.

Late 2010s

Responding to the regulatory concerns surrounding ICOs, the late 2010s witnessed the ascent of Security Token Offerings(STOs) as a more regulated and compliant approach to asset tokenization.

STOs introduced tokens representing ownership in tangible assets such as real estate, stocks, and commodities.

Early 2020s

The 2020s witnessed the explosive growth of Decentralized Finance(DeFi), focusing on the tokenization of financial assets like cryptocurrencies and lending platforms.

Simultaneously, Non-Fungible Tokens (NFTs) gained widespread attention, tokenizing both digital and physical assets, including art, music, collectibles, and virtual real estate.

2020s – 2023

In this era, real estate tokenization became a prominent use case, enabling fractional ownership of properties, boosting liquidity, and simplifying international investments.

The evolution of cross-chain interoperability and regulatory frameworks continued, contributing to the increased accessibility and security of asset tokenization.

Governments and central banks also began exploring digital currencies and tokenization for various applications, such as central bank digital currencies (CBDCs).

2024

The trajectory of asset tokenization indicates ongoing innovation and increasing adoption. This progress is unfolding as blockchain technology matures and regulatory frameworks gain further clarity.

Advancements in privacy-preserving technologies and the development of self-sovereign identities hold the promise of enhancing security and privacy within the realm of asset tokenization.

RWA Tokenization Process

The tokenization process of real-world assets involves minting digital tokens that represent their ownership.

This is commonly done by companies that manage real-world assets, which they store for safekeeping while issuing cryptocurrency to their buyers, much like bills of sale.

One of the simplest ways of understanding how tokenizing real-world assets works is by looking at the example of a stablecoin, like USDT.

The company behind USDT, Tether Limited Inc., is solely responsible for minting and burning this cryptocurrency, as well as maintaining its peg to the fiat dollar. Here’s how the process goes:

• Backing. Tether claims that every USDT they issue is backed 1:1 to the USD. As a result, their private reserves need to equal the USDT total supply at all times to maintain the peg.
• Purchase. When an individual or an entity wants to purchase new USDT tokens from Tether, they usually send the equivalent amount in USD to the issuer’s bank account.
• Minting. Tether stores newly acquired fiat assets in their reserves and mints USDT in return. The stablecoin can be issued on several different networks, including Bitcoin, Ethereum, Tron, and Algorand.
• Redeeming. When someone wants to redeem their USDT holdings for real-world assets, they send them back to Tether. The company transfers USD from its bank account to the holder’s and burns the corresponding number of USDT tokens.
• Usage. While in circulation, USDT can be used like any other DeFi asset. Users can stake them, trade, provide liquidity, and more.

Read More https://cryptofreemetaverse.com/asset-tokenization-why-it-is-important/

RWA Tokenization – What are the Challenges?

While real-world asset tokenization is an innovative concept with many advantages, it’s not without challenges.

Some of these challenges stem from the nature of cryptocurrencies and blockchain, while others are unique and depend on the services that specific platforms and protocols provide.

For example, one of the biggest concerns with credit market protocols that facilitate borrowing and lending is the default risk.

The volatility of cryptocurrencies coupled with undercollateralized loans resulted in lenders being unable to get their capital back on multiple occasions.

Platforms like Maple Finance, TrueFi, and Centrifuge all saw millions of dollars in losses.

While this issue is solved with the shift toward stablecoins to reduce volatility, the overarching problem remains.

Another challenge comes from the fact that many real-world asset platforms feature human factors.

Humans still perform KYC procedures and anti-money laundering (AML) processes, which means there are biases in who gets approved and who gets rejected.

Ultimately, that goes against the decentralized nature of cryptocurrencies.

Centralization creates another issue, which is trust. If a centralized entity tokenizes real-world assets, their buyers and holders need to trust the issuing company not to manipulate the system.

For example, this is one of the most prominent concerns with USDT which is one of the largest cryptocurrencies by market cap.

While the company claims they have enough capital to back every USDT they minted, there’s an ongoing debate about the validity of these claims.

Tether Limited Inc. has yet to provide undisputed proof of these claims, and there haven’t been proper audits to corroborate them.

Finally, there are always concerns regarding regulatory compliance. Regulation surrounding the crypto sphere is unclear, at best. Things get even more complicated once you introduce TradFi elements, like securities.

Read More https://cryptofreemetaverse.com/what-are-tokenized-securities/

RWA Tokenization – Top RWA Altcoins in 2024.

Pendle

Pendle is a tokenizing-specific platform designed for trading future yields. It has introduced a unique Automated Market Maker (AMM) that accommodates assets with time decay.

The current sentiment for Pendle’s price prediction is bullish! PENDLE price is USD 3.94 and scores 81 on the fear and greed index.

Maple

Maple is a decentralized bank for companies where it helps businesses straightforwardly get money using blockchain technology.

If you put your money into Maple you can earn a steady income by lending it to different groups of renowned crypto organizations.

Currently, Maple token (MPL) is USD 25.77 with a market cap of USD 114.0 million. We suggest Maple for your 2024 RWA altcoin investment.

Polymesh

Polymesh is a specialized, high-grade blockchain for regulated assets, providing institutional solutions.

It is different from general-purpose blockchains like Ethereum as it overcomes limitations that might hinder the acceptance of security tokens by institutions. 

The token price is USD 0.6262 and has a market cap of $506.01 million. Coinpedia places its bet on the token owing to the bullish sentiments the RWA token holds presently.

LumiShare

Lumishare is a modern-age renewable energy investment that offers real-time data to investors so that they can make informed decisions.

It removes all the geographical and financial constraints and helps investors across the globe to access sustainable investment ways.

The LUMI token price is USD 0.1292 and has been growing since last year.

Creditcoin

It is a new and exciting credit platform built to transform digital wallets into an investment market.

Additionally, it is backed by strong blockchain technology and sporting solutions for borrowing and lending CTC cryptocurrency.

It is trending as one of the top RWA altcoins to invest in 2024 for 10x profits. 

Ono Finance

Ono Finance has come up as a direct proxy for the RWA coins, allowing users to earn a good deal of return on US treasuries across different blockchains.

ONDO is USD 0.9114 and is giving bullish sentiments for growth in 2024.

Read More https://cryptofreemetaverse.com/altcoins-amazing-5-altcoins-to-dca-in-bear-market/

Fixing DeFi with TradFi

DeFi protocols can become much more relevant by integrating with real-world assets, or tokenized versions of financial instruments such as bonds, equities, and debt, and physical assets such as gold, real estate, and art.

Doing this would introduce more stable assets into DeFi, making users’ investments safer and protocols more accessible.

Tokenization refers to the process of creating digital representations of real-world assets that are on a public blockchain.

This enables assets traded transparently and without intermediaries, making transactions faster and more efficient, with lower costs.

DeFi protocols have already proven their worth in the digital asset markets and their efficiency is so compelling that traditional financial institutions are studying their potential.

While there is still some opposition to the idea of automated and decentralized asset trading.

Due to its association with a crypto market that’s often perceived to be lawless and volatile, there’s a growing consensus that traditional finance can no longer ignore the potential benefits blockchain can provide.

DeFi

DeFi is an alluring concept for traditional financial institutions because it can be a superior alternative to traditional financial systems.

The tokenization of traditional stocks, commodities, government bonds, and even things like art and real estate will enable more seamless transactions with far greater transparency than existing mechanisms.

At present, such markets rely on intermediaries such as stock brokers, who invariably take a small cut from any transaction.

DeFi eliminates these intermediaries through its smart contracts. Which are automated, coded agreements executing automatically when certain conditions match.

They process transactions faster, with reduced administrative and operational costs.

And they’re more transparent as everything is recorded on a publicly viewable blockchain for everybody to see.

So they increase trust and accountability in the process too.

Moreover, the DeFi protocols themselves benefit from offering assets with a level of stability that they could previously only dream of.

Real-world assets are far stabler than most DeFi tokens, and the reduced volatility will drastically reduce the number of liquidations.

Moreover, these real-world assets are used as alternative forms of collateral. Thereby, enabling many kinds of businesses to access DeFi for the first time. For instance, businesses could tokenize their outstanding invoices to obtain short-term credit.

By tokenizing real-world assets, you can also take advantage of services unique to DeFi, such as “staking” and yield farming.

Fractional-ownership

Fractional ownership is another unique benefit that will transform accessibility in existing markets. It enables assets such as real estate and art to be split among multiple owners.

A property or picture represented by tokens becomes divisible, transferable, and instantly tradeable across decentralized platforms.

In this way, DeFi protocols can be incredibly disruptive, offering greater inclusion.

Though there is some pushback from hardcore crypto enthusiasts who are ideologically opposed to integration with fiat and traditional financial markets, many are likely to be brought onside.

As TradFi becomes more closely entwined with DeFi, real-world assets will act as a gateway to the wider digital asset ecosystem.

As institutional investors become more comfortable with decentralized assets, they’ll start looking at tokens like Bitcoin and Ethereum more closely.

Read More CeDeFi-The Future Of Finance?

Why DeFi and TradFi are better together?

Left alone, DeFi is unlikely to ever shake off the volatility that plagues the wider cryptocurrency ecosystem, and investors will just have to endure the never-ending bull and bear market cycles for years to come.

However, if DeFi opens up to real-world assets, it too benefits from the consistent, long-term growth that is associated with traditional financial markets.

Read More DeFi – Should You Invest Money In DeFi?(2024)

The Usage of RWAs in DeFi.

List of real-world assets in crypto and protocols that facilitate their use and management:

• stUSDT is a token issued by the TRON network RWA platform. The token is given to crypto owners who submitted their USDT stablecoins for staking into a money market fund. The fund is fully decentralized and governed by a DAO that manages more than $500 million in total value locked.
• Ondo Finance is a growing platform designed for investing in exchange-traded funds. It allows stablecoin holders to exchange these crypto tokens for US dollars, purchase real-world assets, and gain new tokens in their wallets as proof of ownership.
• Backed Finance gives cryptocurrency enthusiasts access to publicly traded securities. It’s a centralized platform where users must perform KYC verification before buying securities. They can then sell these assets on secondary markets to anonymous traders. For every purchased security, buyers get a break of the same value.
• MakerDAO, the protocol behind the biggest decentralized stablecoin, recently disclosed that almost 80% of their revenue comes from real-world assets.

Read More https://cryptofreemetaverse.com/stably-usd-bitcoin-networks-brc20/

The Future of Real-World Assets in Crypto.

Real-world assets in crypto have an exciting future ahead. The process of tokenization brings many benefits to established goods and commodities, increasing their flexibility and facilitating financial inclusion.

If RWA tokenization continues its projected growth, the DeFi space is likely to see expansion and broader adoption.

Many crypto enthusiasts will turn to RWAs to diversify their portfolios and gain exposure to traditional markets.

On the other hand, TradFi investors attract blockchain and crypto perks such as transparency, efficiency, and fractional ownership.

Technological advancements and blockchain innovation could make the tokenization process more accessible and secure.

As crypto developers continue to work on interoperability, likely, it’ll positively affect tokenized real-world assets, making it easier to trade and manage them.

Ultimately, one of the most influential aspects of the future of RWAs is likely going to be regulatory clarity.

As heavily regulated TradFi assets enter DeFi, the regulatory pressure from centralized government authorities will increase.

Initial endeavors might slow the expansion of decentralized finance and RWAs, but the long-term results could be positive.

They could bring much-needed stability to the space, attracting risk-averse investors concerned about crypto volatility and unpredictability.

Read More What Are Governance Tokens In DeFi?

Top 3 Highlights of CoinGecko’s RWA Report 2024: Rise of Real World Assets

1. USD-Pegged Assets Dominate Fiat-backed Stablecoins, Accounting For 99% of All Stablecoins
2. Commodity-Backed Tokens Hits $1.1B in Market Capitalization, Gold Remains Most Popular Commodity 
3. Tokenized Treasury Products Have Grown 782% in 2023, Worth Over $931M Now

Read More The Rise of DeFi Ecosystem?

Cutting-Edge Digital Bank for RWA Tokenization (Latin America)

Acura Capital and Patex are joining forces to launch a digital bank focused on RWA tokenization!

Key Features

• Transformation of tangible assets into tradable securities. Based on these securities, they will craft tokenized assets that encapsulate the value of these real-world assets in a digital token.
• Secure storage
• Flexible Interest rate
• Pix transactions facilitated using Patex tokens
• Swift currency conversions at competitive rates
• 24/7 money transfers, completed within seconds
• Crypto cards
• Personalized financial planning and investment management

Acura Capital’s financial expertise _Patex’s blockchain expertise = RWA tokenization driving a new banking paradigm in Latin America.

RWA Tokenization with TOKENFI

The TokenFi module is created for the tokenization of RAW that are not classified as securities. This feature serves as a quick and efficient means for users to tokenize real-world assets through the TokenFI platform.

The TokenFI RWA Tokenization Module will mainly allow tokenizing assets that are not securities.

Chainlink is the world leader when it comes to RWA tech and infrastructure with over $9 trillion in total transaction value enabled!

With Chainlink specifically, TokenFI will use the Chainlink Proof of Reserves (PoR) and the Chainlink Cross-chain Interoperability Protocol(#CCIP) to power the RWA Tokenization module.

Additionally, Chainlink Proof of Reserves (PoR) allows smart contracts to validate the true collateralization of any off-chain or cross-chain reserves. A key factor in ensuring an accurate representation of tokenized assets on the blockchain.

Further, it uses a decentralized network of oracles to audit off-chain collateral/reserves in real time. Thereby, preventing tampering through fractional reserve practices or other potential attempts at manipulation.

Furthermore, it also leverages a network of trusted on-chain auditors to monitor the collateral/reserves of a tokenized asset in real-time. By giving users assurances of an asset’s collateralization at all times.

Besides helping to ensure the validity and collateralization of a tokenized asset, Chainlink PoR can also help securely mint, redeem, and burn wrapped assets or halt these automatically in response to the real-time status of the collateral used for a tokenized asset.

Read More Dogecoin- Will Dogecoin See A Comeback In This Bull Run?

Transformative Impact of AI on Tokenization

AI’s integration into asset tokenization streamlines the process, enhancing accuracy, efficiency, and scalability. This pivotal role of AI paves the way for a revolutionary approach to digital asset management.

OG$ Point

Most recently Black Rock launched a digital liquidity fund, advancing RWA tokenization on the Ethereum blockchain.

Thereby, targeting a $16 trillion market. It is betting on RWA means it’s a sure thing. They are not the largest financial institution in the world for nothing.

Conclusion

Experts believe that most if not all, financial assets represent digitally on the blockchain.

Advantages of RWAs include fractional ownership, increased liquidity, and wider access to assets. RWA tokenization is seen as a key driver for the mainstream adoption of blockchain and cryptocurrencies.

A thesis increasingly shared within crypto and traditional finance is that the tokenization of real-world assets (RWAs) will form the backbone of the next bull run and unlock the transfer of trillions of dollars of value into crypto.

Or in Perez’s terms, RWA tokenization will unlock a new Golden Age — in blockchain and traditional finance.

Read More The Next Crypto Bull Run?

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