This type of cryptographic assets is experiencing great growth due to its real application
The cryptocurrency and blockchain technology ecosystem is constantly evolving, generating new niches and applications as it matures. An emerging trend that is capturing the attention of investors, companies and enthusiasts, and which is said to be one of the narratives that gain the most strength in the coming months, is the tokenization of real world assets or “Real World Assets” (RWA). ). This innovative practice promises to revolutionize the way we interact with valuable physical assets by digitally representing them on blockchains, turning them into tradable, divisible and transferable assets in a transparent and efficient manner. Basically, in a more efficient way than the processes and mechanisms that currently apply to many of these assets.
RWA
The fundamental premise behind RWA tokenization development is to harness the power of blockchain technology and smart contracts to democratize access to diverse classes of tangible assets and foster greater liquidity in traditionally illiquid markets. Through tokenization, physical assets such as real estate, precious metals, works of art, agricultural commodities and intellectual property rights are converted into unique and traceable digital assets.
By tokenizing an asset, its ownership is fractionated into smaller, tradable parts , significantly lowering the barriers to entry for investors. This opens up new opportunities for a broader audience to participate in markets previously restricted to large institutional investors or wealthy individuals.
Tokenization
The real world asset tokenization process is based on the synergy of various blockchain technologies and protocols . At its heart are smart contracts, self-executing programs that reside on the blockchain and define the rules and conditions that govern the behavior of asset tokens, such as their issuance, transfer, and rights management.
Tokenization protocols, such as the popular ERC-20 and ERC-721 token standards on the Ethereum blockchain, establish the technical details for the creation and management of these digital assets . These protocols define the data structure of the tokens, as well as the functions and rules that determine their interaction with other smart contracts and decentralized applications (DApps).
Since real-world assets exist outside of the blockchain, “oracles” are needed to connect real-world information to the blockchain. These oracles are reliable data sources that provide up-to-date information on the status , valuation, and other relevant details of the underlying assets. Among these oracles, the Chainlink project is the most popular and provides data to areas as diverse as finance or sports betting.
Furthermore, to ensure the legitimacy and support of asset tokens, secure custody solutions for the underlying physical assets are required . This may involve the use of secure deposits, legal registries, or legally binding contracts that link digital assets to their physical counterparts.
Disruptive uses
RWAs have the potential to disrupt several sectors and open new opportunities in various areas. One of the main advantages of real asset tokens, or security tokens, is allowing the division of ownership of valuable assets into smaller, more affordable fractions . This could allow a greater number of people to invest in luxury real estate, renowned works of art, or assets previously inaccessible to the average investor. That is to say, a work valued at ten million euros can be divided into ten million shares of one euro, and thereby break the entry barrier that naturally entails access to the most sought-after art market.
Another application is the tokenization of commodities such as coffee, cocoa, minerals or oil , which could significantly improve traceability, transparency and efficiency in global supply chains. Asset tokens would allow the origin, ownership and movement of these products to be tracked, reducing the friction and costs associated with their international trade.
Likewise, intellectual property rights such as patents, trademarks and copyrights could be tokenized, facilitating their licensing, commercialization and management in a more transparent and efficient way . Another possible application is asset-backed tokens to raise funds and finance real estate development, mining, infrastructure or startup projects, offering investors a direct participation in the underlying assets. This form of financing could further democratize access to opportunities previously reserved for large institutional investors.
While Real World Assets are still in an early stage of adoption, their potential to transform the way we access, transfer and invest in tangible assets is undeniable. As blockchain technology and Real world asset tokenization protocols mature, and regulatory and custody challenges are resolved, as is already occurring both nationally and with future European MiCA regulations , more widespread adoption of RWAs is likely to occur. in various sectors, fundamentally changing the dynamics of traditional asset markets.
