Real-world asset (RWA) tokenization is an emerging concept that traces back to the advent of blockchain technology, writes Jane Kiatkina for Cointelegraph.
The journey began with Bitcoin’s introduction in 2009, which unveiled a decentralized, secure, and transparent ledger system.
This groundbreaking technology laid the foundation for turning physical assets into digital tokens recorded on a blockchain. However, the real leap forward came with Ethereum in 2015, introducing smart contracts —self-executing agreements coded directly onto the blockchain.
With smart contracts, it became possible to digitally represent physical assets like real estate, art, and commodities, bridging the gap between the physical and digital worlds. The potential for this technology to impact global economies and social structures quickly became apparent.
Why do RWAs matter?
To understand the significance of RWA tokenization, picture a large pizza you want to share with friends. Instead of giving each friend the whole pizza, you slice it into pieces, with each slice representing part of the whole.
Tokenization works similarly with assets. When an asset is tokenized, it’s divided into smaller parts called “tokens,” each representing a share of the asset. These tokens can represent anything valuable, from real estate to intellectual property. Managed and traded using blockchain technology, these tokens ensure secure and transparent ownership records, making assets more accessible, liquid, and tradable globally.
The impact of tokenization
Consider the real estate market in cities like New York or London. A $10 million property could be divided into 10 million tokens at $1 each. This enables individuals to invest as little as $100, owning a slice of high-value real estate.
Tokenization brings liquidity to the real estate market, which is traditionally illiquid and difficult for smaller investors to access. According to MarketsandMarkets, the global real estate tokenization market is projected to reach $1.4 trillion by 2026, growing at a CAGR of 22.8%.
The same principle applies to commodities. An ounce of gold worth $2,000 can be tokenized into 2,000 shares at $1 each. This lowers the barrier to entry, allowing more investors to gain exposure to commodities without needing significant capital. Grand View Research forecasts the tokenized commodities market to reach $4.5 billion by 2025.
Tokenization also empowers creators to monetize their intellectual property. A patent valued at $1 million could be divided into 1 million tokens at $1 each. Investors can purchase these tokens and share in the revenue generated, rewarding creators while opening up investment opportunities to a broader audience. Juniper Research predicts the market for tokenized intellectual property rights will reach $320 million by 2025.
