Tokenizing Real World Assets

One of the biggest critiques against crypto was that it is just a digital bubble that would eventually burst. This early perception once caused the industry to be rather disconnected from the tangible economy. The fact however is the crypto market is still very much advancing, thus it seems that argument will soon be put to rest.

Real-World Assets (RWA) have recently emerged as the bridge connecting the $300 trillion traditional financial system with the high-speed rails of Web3. RWA tokenization is basically the process of taking a physical or traditional asset like a government bond, a skyscraper, a house or even a bar of gold and representing it as a digital token on a blockchain. This tokenization process acts more than just a digital receipt as the technology enable the asset to be programmable according to the requirements of the owner. Since the blockchain never close unlike a traditional bank or agency, ownership of that particular tokenized asset can be traded, collateralized, and settled instantly, 24/7.

RWA is Coming Your Way

While early RWA projects focused on stablecoin, the sector has expanded into nearly every asset class. Before RWA emerged, the NFT technology that powers RWA has already made significant headways in the creative industry. So, let's look at some of the key factors fueling institutional rush into RWA:

1. Fractionalization & Accessibility:
   Traditionally, investing in a office building or a private fund required millions of dollars. Through RWA, these assets can be broken into "fractions," allowing a retail investor to own just a minor fraction of the asset.
2. Instant Liquidity for Assets:
   Real estate and fine art are notoriously slow to sell. By moving these assets onto the blockchain, they can be traded on secondary markets as easily as Bitcoin, turning "locked" capital into liquid cash.
3. Programmable Yield & Automation:
   Using smart contracts, RWA tokens can automatically distribute rental income or bond coupons directly to holders' wallets. This removes the need for banks and clearinghouses to manually process payments.
4. Institutional-Grade Transparency:
   "Proof of Reserve" has been a long standing gold standard and now, advanced oracles like Chainlink provide real-time data feeds that verify the physical asset exists in a vault or registry, giving investors unprecedented confidence.
5. Regulatory Clarity:
   The passage of major frameworks like the CLARITY Act in the US and MiCA in Europe has finally given banks like J.P. Morgan and BlackRock the green light to move trillions in Treasuries and private equity onto public and private blockchains.

Web3 Onboarding You Can Try Now

1. The biggest RWA trend is moving US Treasury bills on-chain. This allows you to earn a steady interest rate on your digital dollars, backed by the US government. You should be able to find out more from Ondo Finance.
2. You can swap your USDC for (Ondo US Dollar Yield), a yield bearing stablecoin. Just by holding it in your wallet, the value increases as interest from the underlying US Treasuries is funneled back to you. If you do not understand what I mean by USDC or wallet, please read my other posts on stablecoin or decentralized finance (DeFi).
3. If you want to hold gold without the hassle of a physical safe, tokenized gold can serve as a regulated and secure option. For example, you can buy PAX Gold (PAXG) on a decentralized crypto exchange like Uniswap.

Unlike regular DeFi, RWAs often have a "human" element. Keep these three things in mind:

• KYC (Know Your Customer):
  Because these are Real World assets, platforms like Ondo will require you to upload a photo of your ID. This is a sign of a regulated, legitimate platform.
• Oracle Reliability:
  These projects rely on Chainlink (LINK) to obtain the real world price of the asset. Seeing a project use Chainlink is a good indicator for technical safety.
• Exit Liquidity:
  Unlike Bitcoin, which you can sell instantly, some tokens might take a few days to sell on a secondary market. Always check how easy it is for you to pull out before you invest your money.

Leading market players like Ondo Finance is leading the way in tokenized treasuries such as stocks, ETFs, gold, treasury and corporate bonds, etc. RWA is proving that the future of finance isn't about crypto vs. banks. In fact, banks and other financial institutions are beginning to stack up on Bitcoin too, so we should expect to witness a sea of changes coming very soon to the financial markets.