When it comes to Web3, the very sense of “time” gets twisted.

If you are building a project, your public may consider 2 months as a “long-term” thing.

With crypto it gets even worse: A 319838% gain with that obscure memecoin followed by a 90% drop, all within 24h 😂.

That’s why some concepts, opinions, and views that we shared and discussed months ago sometimes need an update.
And that’s why we’ll be revisiting some topics every once in a while, to give you a fresh(er) look at what’s going on within the Web3 trenches.

The first edition of The Wild West of Web3 I published in 2024 was about RWAs (#21) and shortly after we delved into its application in the Real Estate sector (#29).

Feel free to revisit these editions to get a broader perspective on this super exciting topic.

LFG!

Flying under the radar:
Is RWA Tokenization an “uncool” concept?

Despite its (truly) revolutionary potential, Real-World Asset (RWA) tokenization often flies under most people's radars.

This could be because it doesn’t sound as flashy as other Web3 concepts or might seem too complicated. However, this perception is likely to change soon. Just as blockchain and cryptocurrencies were initially misunderstood (and to be fair, they still are in a way), the tokenization of real-world assets is gradually gaining the attention it deserves.

RWA tokenization enables the conversion of physical assets into digital tokens on a blockchain, and this not only makes assets more accessible and liquid but also introduces unprecedented transparency and efficiency.
These advantages can transform various industries, from finance to real estate, making tokenization an essential topic for forward-thinking investors and businesses.

This level of transparency reduces the risk of fraud and enhances trust among investors and stakeholders. As more people become aware of these benefits, the adoption of RWA tokenization is expected to accelerate (I for one firmly believe this).

One key aspect that can help shift the current perception and make RWA Tokenization really “pop” is the growing recognition of tokenization’s practical benefits, which will keep exploring - after all, more than any explanation, showing actual uses tends to bring better results when it comes to adoption.

From funds to buildings:
RWAs can be everywhere

As said above, Real-World Asset Tokenization is set to revolutionize different sectors and products, including the financing, trading, and management of assets, from stocks to everyday goods.

By having digital tokens backed by RWA (Real-world assets), a new level of accessibility and liquidity is introduced. This transformation is particularly impactful for industries that rely on efficient asset management and transparent trading systems.

One of the most compelling advantages of RWA tokenization is its ability to enhance liquidity. Traditional assets like real estate or fine art (but not only), which typically require substantial investment and are difficult to trade, can be fractionalized into smaller, more manageable units. This fractional ownership model democratizes investment opportunities, allowing a broader range of investors to participate in markets that were previously inaccessible to them.

The impact of these changes extends beyond the financial industry. For example, in real estate, tokenization can simplify property transactions and ownership transfers, making the process faster and less costly. Similarly, in supply chain management, tokenizing assets can enhance traceability and reduce fraud.

(By the way, back in edition #29 we talked a lot about RWAs in the Real Estate sector; and later on, in edition #36, we explored how Web3 synergizes with Supply Chain)

For renewable energy and utility projects, tokenization is enabling small investors to fund initiatives directly - which is an amazing way to open investment avenues that otherwise would be only available to ultra-super deep pockets.

As you can see, there’s potential for reaching basically any industry - and if you are a Web3 builder, this might be a very interesting option depending on what your goals are.

So, before we proceed, let’s make a quick recap:

→ RWA tokenization transforms traditionally illiquid assets into easily tradable tokens.

→ Fractional ownership democratizes investment opportunities.

→ Blockchain technology ensures transparency, security, and efficiency in transactions.

→ Reduces transaction costs and settlement times by removing intermediaries.

→ Enhances asset management and trading across various industries.

RWA Tokenization in Finance:
It’s closer than you (may) think

The importance of Real-World Asset (RWA) tokenization in the future of finance cannot be overstated.

I know this may sound super cliché, but this technology can truly reshape the financial environment by introducing new levels of accessibility, efficiency, and transparency.

By enabling fractional ownership, RWA tokenization democratizes investment opportunities, allowing a more diverse group of investors to participate in high-value markets that were previously out of reach.

When it comes to the financial sector, it offers new avenues for investment and asset management. Major financial institutions are recognizing the potential of RWA tokenization, leading to notable developments.

By converting traditional financial assets such as bonds, stocks, and real estate into digital tokens, institutions can enhance liquidity and accessibility. This process - among many other benefits - introduces efficiencies that benefit both retail and institutional investors.

For instance, Goldman Sachs (a 150-year-old financial institution) plans to launch a series of tokenized funds, and BlackRock has committed $500 million to explore RWA tokenization.

While I’m not saying “hey, if these big banks are there, it must be good”, I am saying that you should at least pay attention to what’s cooking within the RWA space - and finance.

Moreover, the integration of RWA tokenization with decentralized finance (DeFi) platforms is opening up new financial products and services. Tokenized assets can be used as collateral for loans, staked for yield farming, or traded on secondary markets, providing investors with innovative ways to generate returns and manage risk. This trend underscores the transformative potential of RWA tokenization in the financial sector.

(You can read more about digital assets being used to secure loans here; And there’s an entire edition about DeFi → #20)

Commodity-backed tokens: The new gold standard?

Still exploring the financial sector, let’s talk about Commodity-backed tokens, as they represent a fascinating development within the space of RWA tokenization.

These tokens are digital representations of physical commodities like gold, silver, oil, or agricultural products, backed by the actual commodity they represent. This approach combines the tangibility and stability of physical assets with the flexibility and efficiency of digital tokens.

One of the primary advantages of commodity-backed tokens is their ability to provide a stable store of value. Unlike cryptocurrencies, which can be highly volatile, commodity-backed tokens derive their value from real-world assets, offering a more predictable and secure investment option. This makes them particularly appealing to investors looking for stability amidst the often turbulent digital asset markets.

Furthermore, commodity-backed tokens enhance liquidity and accessibility. Traditional commodity investments often require significant capital and involve complex processes. By tokenizing these assets, investors can purchase fractional shares, making it easier to diversify portfolios and access a broader range of investment opportunities. This democratization of commodity investments is expected to attract a new wave of retail investors.

Transactions involving commodity-backed tokens are recorded on an immutable ledger (hey, Blockchain), ensuring that all parties have a clear and accurate record of ownership and transfers. This reduces the risk of fraud and enhances trust among investors and stakeholders.

Tokenization in everyday products:
RWAs beyond high-profile goods

A great thing about Real-World Asset (RWA) tokenization is that we are not limited to high-value assets like real estate and fine art, as it is also making its way into everyday goods, revolutionizing how we interact with daily products.

This progress is driven by the increasing interest in integrating blockchain technology into supply chains and consumer products, enhancing transparency, traceability, and trust.

For example, luxury brands are using blockchain to verify the authenticity of their products. By tokenizing luxury goods, consumers can access a digital ledger that tracks the product's history, from manufacturing to sale. This ensures that buyers are purchasing genuine items and reduces the risk of counterfeits.

Similarly, the food and beverage industry is adopting RWA tokenization to improve supply chain transparency. Blockchain can track the journey of food products from farm to table, ensuring quality and safety. This level of traceability helps build consumer trust and allows brands to provide verifiable claims about the origin and quality of their products.

Furthermore, tokenization can enable new business models for consumer goods. For instance, companies can offer fractional ownership of high-demand products, allowing multiple consumers to invest in and benefit from the appreciation of luxury items or limited-edition goods. This approach democratizes access to exclusive products and creates new investment opportunities for everyday consumers.

At the end of the day, it’s a market expected to reach a staggering USD 10 trillion mark by 2030. Even if it reaches “only” half of this, I’m pretty sure a 5-trillion space would be enough to create A LOT of opportunities for companies, brands, and professionals.

Are you positioning yourself accordingly?

See you soon.

#LFGrow
Diego Borgo