Tokenization, a process on the blockchain, converts real-world assets into digital tokens, increasingly adopted by financial institutions and organizations. It is seen as a game-changing innovation in finance, allowing blockchain technology to bring its benefits to traditional assets.
In this blog post, we introduce tokenization, delving into the fundamentals of real-world asset tokenization, its operational processes, and its key use cases for the future.
Real-Worlds Assets: An Insight
Real-world assets (RWA) in cryptocurrency refer to tangible assets from the physical world that are tokenized and brought onto the blockchain. This trend includes the growing adoption of blockchain capital market products, which are digitally secured and made available to retail buyers. These assets range from real estate properties and art to commodities and stocks, all accessed by users through unique platforms.
Current market and predictions for RWA
The current market size for tokenized real-world assets (RWA) stands at a total of $300 billion, and forecasts suggest a significant increase to between $3.5 trillion and $16 trillion by 2030. The increasing adoption of blockchain technology in the traditional financial sector is important and promising for 2030’s growth trajectory. Investors are increasingly recognizing the incredible benefits that tokenized assets offer, leading to this rich market expansion.
Growth of Tokenized Assets between Jan 2023 and Jan 2024
A report from CoinGecko says that tokenized US treasuries experienced a remarkable surge in demand during the bear market, witnessing a staggering 782% increase in market capitalization throughout 2023, soaring from $104.0 million to $917.0 million. However, this upward momentum has somewhat plateaued in 2024, with growth slowing to 1.5% in January, resulting in a market capitalization of $931.0 million.
Providers of yield-bearing stablecoins like Mountain Protocol and Ondo Finance have garnered significant attention. As of February 2024, Mountain Protocol has issued $151.0 million worth of Mountain Protocol USD (USDM) tokens since its launch in September 2023. Similarly, Ondo Finance boasts a total locked value of $185.7 million in Ondo US Dollar Yield (USDY) and tokenized short-term US Treasury bills (OUSG).
While Ethereum holds the lion’s share of the tokenized treasuries market at 52.9%, notable players like Franklin Templeton and Wisdomtree Prime have chosen Stellar as their preferred issuance platform, commanding a 35.8% dominance.
Why Should You Tokenize Your Assets in 2024?
Global investment opportunities
RWA tokens streamline cross-border transactions, removing the limitations imposed by traditional financial systems.
New market creation
Through the tokenization of tangible assets like real estate, art, or commodities, RWA tokens pave the way for the creation of fresh financial products and investment opportunities.
Use Cases of RWA Tokenization
Financial assets
Creating financial assets such as bonds, stocks, and shares helps diversify them, creating opportunities for investors around the world. The democratization of opportunity allows more people around the world to participate in investment opportunities previously restricted by traditional barriers.
Payment settlement
Security based on tokens or other financial assets can be settled on transfer versus payment transparently and instantly through smart contracts, eliminating the need for intermediaries such as CSDs. This automated process provides benefits such as time management and reduced transaction costs, making business more efficient and profitable.
Real estate
Tokenizing real estate holds the promise of transforming conventional real estate investment practices. Enabling fractional ownership and facilitating swift ownership transfers through almost instantaneous settlement introduce greater efficiency and accessibility to the real estate market.
Investment funds
Tokenization offers versatile applications for funds across the investment spectrum, facilitating fractionalized investments throughout the entire lifecycle. Fund managers stand to gain from increased flexibility and autonomy in asset distribution while also experiencing operational efficiencies.
Most Popular RWA Tokens in 2024
- ONDO – It provides investors with unprecedented access to a wide range of investment opportunities. Its current market cap is estimated to be $1.36 billion with a maximum supply of 10 billion ONDO.
- Polymesh (POLYX) – It is a secured and transparent investment avenue with its main focus on RWA tokenization and asset digitalization. Its current market cap is $607 million, with a volume of $207 million.
- Mantra (OM) – It stands as one of the top tokens in 2024 for its innovative approach to tokenization of real-world assets. Its current market cap is $600 million with a volume of $69 million.
- Centrifuge (CFG) – It acts as a bridge between traditional finance and the blockchain ecosystem. Its market cap is estimated at $503 million with a volume of $7.4 million.
- Pendle – It provides efficient trading and RWA management on blockchain. It has emerged as a key player in the ongoing evolution of asset tokenization. It has a market cap of $408 million and a volume of $133 million.
Bottom Line
Real-world asset tokenization is the first method of industrial change, and it is ready to define money and investment as having a great impact on the global economy. Its impact spreads across sectors, delivering unprecedented efficiency and opening up new revenue streams. From investing and trading to asset management, companies are seeing a revolution driven by tokenization, heralding a new era of innovation and opportunity in the financial world.
