In This Article
RWA in the Web3 Era: Why Tokenize What Already Works?
With banks thriving, real estate appreciating, and bonds paying dividends, a perfect picture of nothing but a thriving real-world assets market, valued at over $300 trillion, is set. That begs a simple question – “If it isn’t broken, why fix it”?
The answer’s easy. Tokenization is an enhancement, not a disruption. It doesn't replace traditional finance. Just imagine adding WiFi to a library. Access suddenly turns limitless without reducing the value of the books. As of 2023, RWA tokenization was a $310 billion market. Today, we’ll dive deeper into how it works, its evolving landscape, along with predominant trends and solutions in RWA Tokenization.
Real-World Assets 101
To put things in perspective, these are tangible assets, including corporate bonds, commercial real estate, and commodities-powered industries. Unlike experimental meme coin projects, these assets are the bedrock of institutional portfolios globally. For instance, asset management organizations like BlackRock, JP Morgan Chase, and Vanguard manage assets worth trillions of dollars a year.
But more importantly, specific characteristics of traditional RWA make it attractive to both individual and institutional investors, including:
Proven risk-return profile
Tangible backing
Legal protection
These characteristics are common to all established RWA categories, including real estate – the largest global asset class representing a $228 trillion global share. Private equity and credit markets also contribute about $7 trillion in alternative investments.
Still, these TWA markets are far from perfect, and issues such as accessibility and constant structural challenges often reduce their efficiency. This is where tokenization comes in. This technological solution preserves everything valuable about traditional assets while eliminating structural inefficiencies.
The Tokenization Advantage: Evolution, Not Revolution
So what happens after RWAs are tokenized? Let’s start with what remains unchanged. With the tokenization of traditional assets, the real value of RWA remains unchanged. All tokenization does is transform the assets into blockchain-based tokens that legally represent the same fundamental assets with identical value and risk profile, but with enhanced accessibility.
With this modern technological infrastructure, tokenized RWA saw a massive YoY increase, reaching $15.2 billion by the end of 2024.
Tokenization benefits create entirely new investment possibilities with key differentiators from traditional RWA investing, including:
Accessibility
Liquidity
Settlement speed
Transparency
Global access
Crowdlending
While the tokenization market is still bustling with many theoretical projects, crowdlending is securing shared-risk loans for many people who previously couldn’t have accessed it via traditional financial institutions. This is done in a way that countless people get to participate in lending with reduced risk.
Some platforms like 8lends offer collateral completely eliminating that risk and states that it has yet to experience a late payment or default. People can profit handsomely off of these loans while paying no commission while businesses gain much-needed help getting off the ground.
Market Trends and Future Outlook
One reflection of a technology’s success is the rate of its adoption, and presently, institutional adoption has been the driving force for RWA tokenization across traditional finance. Based on this adoption, consulting firms such as BCG (Boston Consulting Groups) have predicted the RWA market to blow up to $18.9 trillion by 2033.
Another important element driving this adoption is regulatory developments supporting tokenization, given that regulatory clarity accelerates institutional adoption globally. For instance, the European Union's MiCA regulation provides a comprehensive framework for tokenized assets, while Singapore's monetary authority licenses digital asset platforms under established securities laws.
Practical Investment Considerations
The talks of potential enhancements and investment accessibility with this technology all boil down to one question: who benefits the most from tokenized RWAs?
The list of beneficiaries includes traditional investors seeking enhanced liquidity without sacrificing security or regulatory protection. Crypto-native investors want real-world backing beyond volatile digital assets. Institutional players are pursuing operational efficiency gains and cost reduction.
Nevertheless, a thorough risk assessment is required, which includes understanding multiple interconnected layers. Having a diversification strategy becomes more accessible through tokenization. The barrier that previously existed, where $100,000 may only invest in one property, is broken. Now, investors have no restrictions to building a profitable portfolio across multiple asset classes, markets, and geographies.
Conclusion
RWA tokenization keeps fundamental elements like risk-return profile, asset values, and legal protection unchanged. Thankfully, it improves other aspects like accessibility, transparency, and liquidity, which gives the process a significant appreciation compounding over the years.
There are few methods of leveraging this type of technology as well as crowdlending. 8lends gives investors the option of investing through comprehensive due diligence, collateral backing, smart contract self-execution, and no commissions charged to investors.
Sign up for your 8lends account today.
