There is an enormous potential for tokenization due to the development of the cryptocurrency industry, especially for real-world assets (RWAs). The potential market size of blockchain software development using the decentralized framework produced by RWAs tokenization could reach $746.41 billion by 2032.
Tokenization allows businesses to create digital depictions of both digital and physical assets to be exchanged in the decentralized network. This makes way for transforming different industry verticals. These tokens provide formerly unattainable liquidity and accessibility and are simple to trade, fractionalize, and control.
This blog covers everything you need to know about real-world asset tokenization and its latest updates.
Table Of Content
Real-World Asset Tokenization – What Makes It Unique?
Theoretically, tokenization is possible for almost any asset, whether it is tangible (real estate) or intangible (shares of a business). You can use dApps development services to create applications capable of converting the right of ownership of a specific asset into a digital token. Later, the tokens can be stored and exchanged on a blockchain network. This is the right way to tokenize assets. Besides, the tokens created in the decentralized network hold a small amount of ownership of the asset being tokenized.
Businesses are swiftly adopting the tokenization of firm equity, real estate, industrial assets, and more. Moreover, transactional costs are reduced because tokenization improves security, promotes crowdsourcing, and generates revenue. Also, tokenization has made it practical for real-world assets that previously were not a part of the DeFi ecosystem.
RWAs – Benefiting Global Businesses
Tokenization of physical assets gives your business leverage with profound advantages that facilitate asset management and revenue generation. Let’s check some of the considerable benefits of tokenization to take note of for your business:
● Better Liquidity
The conversion of tangible assets into digital tokens can be successfully completed with the assistance of a top blockchain development company in India. They can guide your business on the right path and increase liquidity. Moreover, this makes assets such as fine art, real estate, and others available to a vast pool of investors by enabling them to sell a portion of their holdings rather than the entire asset.
● Increased Availability
Assets can now be traded globally thanks to tokenization. This facilitates the process of investing your assets. Moreover, it even diversifies portfolios for individuals accessing the assets from any corner of the planet.
● Cost Effective
Blockchain technology ensures that all transactions are permanently documented. This reduces the likelihood of fraud and maintains the record of who owns what. According to blockchain experts specializing in NFT development, this approach fosters mutual trust between buyers and investors.
● Transparency and Reliability
Tokenized assets can benefit you with greater security and reliability thanks to blockchain technology. Due to its decentralized nature, fraud or manipulation is prevented. Moreover, the technology gives you confidence in terms of transactions and holdings that are better than what they were earlier.
Additionally, your crypto wallet holdings are easily accessible and are updated after every transaction. So, any sale or transfer of tokens can be easily traced and assessed at any time of the day. This transparency of blockchains also lowers the danger of deceit in tokenized asset markets.
● Market Fluidity
Tokenizing physical assets can improve market efficiency and fluidity in different ways. Firstly, because tokens represent partial ownership that can be bought or sold quickly and easily by investors.
Moreover, fractional ownership increases the liquidity of traditionally sold properties like real estate. This makes real estate transactions sophisticated and time-consuming in today’s competitive market. This calls for asset tokenization, easing the sale of the entire property.
● Fractional Ownership
One significant advantage of RWA tokenization is that it allows you to diversify your business holdings and grow your portfolios by breaking down the assets. The good thing for you is that the assets can be broken into smaller tokens and marketable fractions.
● 24/7 Accessibility
To trade digital tokens, you need access to a decentralized platform that gives you 24/7 access to international marketplaces. In other words, as an investor, you can buy, sell, or exchange real-world assets at any time. The best thing is that neither you nor your business process is constrained by time or location.
What is The Process of Tokenizing Real-World Assets?
The answer to the question could vary depending on the project requirement. Here is how you can tokenize real-world assets.
● Asset Valuation and Recognition
Identifying the object that will be tokenized, such as commodities, real estate, artwork, or a white-label NFT marketplace development. It goes through a procedure to determine its value after exploring the item physically. Additionally, this will assist in determining the price of the tokens that are represented.
● Legalizing and Compliance
All legal and regulatory criteria are fulfilled before an asset is tokenized. This makes sure that the asset is legitimate at the location where it is kept and where the tokens will be offered for sale. Written agreements outline all the rights of token owners who will be part of this process.
● Smart Contract Creation
Smart contracts, which are created through blockchain software development, play a crucial role in tokenization. These are self-executing agreements that execute the conditions that are explicitly encoded into computer codes. Besides, they automate transfers, make dividend payments, and perform other ownership rights. The additional security that smart contracts offer is that transactions only take place when specific requirements or parameters are met.
● Token Supply and Distribution
Following the creation of digital tokens and the implementation of smart contracts, the token supply comes next. Moreover, these tokens can be made available to investors through a security token offering or another exchangeable technique. However, it might depend on the asset type and the associated legal framework. By buying tokens, you, as a buyer, can obtain a portion of the underlying asset.
● Secondary Market Trading
When it comes to selling tokenized assets, the lower-level markets or secondary markets play a crucial role. Once distributed in the network, you can trade the tokens in the secondary marketplaces. The ability to purchase and sell tokenized assets gives you flexibility and liquidity. Being immutable, every transaction is recorded in the blockchain network, which upholds transparency and confidence.
● Fabricating an Exchange Platform
Here, we are now at the last stage of tokenizing real-world assets. An exchange platform is established where investors can buy, sell, or trade tokenized real assets in a simple and secure manner.
Also Read: How Blockchain Is Resolving IoT Security Issues?
Asset Tokenization – Real-World Use Cases
There are markets fixed for a variety of asset classes that can benefit you by tokenizing physical assets. Below are a few practical examples of them:
● Tokenization of Real Estate
As an investor, you can purchase a part of a property without having to purchase the entire asset, thanks to the tokenization of real estate properties. Moreover, this standardizes real estate investing, making it more accessible to a vast pool of individuals or investors. This gives you the benefit of tokenizing real-world assets where each token is equivalent to a small part of a million-dollar commercial space’s ownership. These tokens are tradable by investors on blockchain-based platforms that provide liquidity.
● Tokenization of Arts and Collectibles
Tokenization gives you partial ownership of art and special items, which are often reserved for affluent individuals. A piece of an expensive painting or a rare artifact can be owned by several investors if it is divided into multiple tokens. This allows for tokens to be exchanged on the open market through NFT development, therefore improving liquidity and accessibility to valuable goods.
● Tokenization of In-game Assets
Tokenization is made accessible in the gaming domain as well. Players of the popular blockchain-based game Axie Infinity can easily tokenize in-game items. Later, those items can then be bought, sold, or exchanged, opening up new business prospects for the gaming industry.
● Tokenization of Business Bonds or Shares
Tokenization of business shares or bonds opens several opportunities for investors. Bond administration tasks like interest payments and maturity settlements can be automated using tokenization. Moreover, it can also expedite the bond-issuing process. Along with other benefits such as fewer middlemen and lower transaction costs, it can increase the accessibility and efficiency in the bond marketplace.
Final Thought
Summing up, an important development in ownership and economics is the tokenization of RWAs using blockchain technology. Moreover, this technological advancement improves accessibility, transparency, and efficiency. On the other hand, tokenization gives you the advantage of simplified procedures and democratized investment options.
Get in touch with Webgen Technologies, a market leader in blockchain development, NFT development, dApp development, RWA tokenization, smart contract development, and more. Furthermore, the tokenization of RWAs has the potential to function as a significant force in the global financial system, with the development of the technological landscape opening up new avenues for both asset owners and investors.
