Understanding Tokenization

Unlike native cryptocurrencies such as Bitcoin or Ethereum, which represent entirely digital assets, tokenization brings traditional asset ownership from the physical world to the digital blockchain world. Tokenized real world assets are digital securities that legally represent your ownership with compliant asset-backed tokens rather than paper stocks & contracts. Tokenization not only enhances liquidity but also streamlines operations and reduces costs associated with traditional financial systems.

With Ernst & Young forecasting an infusion of $28.7 trillion of assets onto blockchains by 2030, supported by the Boston Consulting Group’s estimate of $16 trillion, it’s clear that RWAs are not just a fleeting trend but the cornerstone of future economies. Currently, the market cap for RWAs stands at $25B, but with a predicted 1,200-fold surge within six years, the growth potential is nothing short of staggering.

Tokenization enables new innovations such as DeFi where assets may be traded 24/7 on exchanges that never custody of user’s funds, drastically reducing fraud. Tokenized assets may also be utilized as collateral to instantly collateralize a loan, reducing costly paperwork, wasted time, and closing costs. Lastly, new innovations such as digitally native ETFs (exchange-traded funds) that exist solely as tokens may be created to diversify investment portfolios across the globe, or open the doors to fund managers to create personalized ETFs.

The scope of tokenizable assets is expansive. From real estate and luxury items to financial instruments like Treasury bills and stocks, virtually any asset can be tokenized and traded on-chain. This flexibility extends to intellectual property, where content creators like a popular YouTube artist can tokenize their earnings and audience engagement, leveraging it as collateral for financial transactions.