Introduction: What Is Asset Tokenization?

First, let's define what tokenization is – it is a transformation of the processes of issuing, accounting and managing an asset, as well as conducting transactions with it, by transitioning to the digital field. The rights to the object are recorded in the form of a cryptocurrency token. The procedure is applicable to both tangible and intangible assets.

The transition to a decentralized economy has expanded the possibilities for the application of blockchain technologies in the financial system. Currently, asset tokenization is becoming a new standard in the modern economy. It opens up additional investment opportunities for the population that does not have access to financial instruments. Asset tokenization has simplified many processes of the traditional market. It can be used to unlock illiquid assets and generate additional income by opening up reinvestment opportunities. Tokenization technology is of interest to private companies and government agencies that are looking for new opportunities to attract capital.

Blockchain technology lets users break down assets, digitizing them into tokens or digital certificates (rights) of ownership that have real market value. Therefore, the process of asset tokenization is a promising solution for converting various groups of assets (rights to assets) into a unique digital representation called a “token”.

Asset tokenization applies to almost any object, including real assets (real estate, goods, currencies, securities, intellectual property, etc.), digital assets (management rights in DAOs, cross-chain assets, etc.) and game assets (skins or in-game currencies)

What Are RWA (Real World Assets)?

Tokenization of real assets is a process that transforms traditional assets into digital ones that can be traded on a blockchain platform. This technology has the potential to revolutionize the way we invest in and manage assets.

Current Situation: Volume and Adoption in Crypto

According to DeFiLlama, the RWA TVL is worth over $6 billion

Tokenization of real assets alone (which today is more than $867 trillion) can make the global crypto industry market a modern driver of economic growth. According to estimates by the World Economic Forum (WEF), by 2027, up to 10% of global GDP will be associated with tokenized assets, which by that time could potentially grow to $24 trillion. Therefore, it is no coincidence that not only scientists, but also leading business structures of the global economy, such as Microsoft and Vanguard, Boston Consulting Group and ADDX, BlackRock and Deloitte, BNY Mellon and EY, have begun to actively study this new economic phenomenon.

Tokenization of global illiquid assets estimated to be a $16 Trillion business opportunity by 2030 by the Boston Consulting Group and ADDX

According to an S&P Global report, private credit markets have been expanding at a compound annual growth rate of 17% over the past five years. Despite reaching $1.7 trillion globally, only around $500 million of private credit has been tokenized so far. This indicates significant growth potential as tokenization can improve liquidity, efficiency, and transparency within this market​

In a paper published on October 29, global consulting firm Boston Consulting Group (BCG) called the tokenization of RWAs “the third revolution in asset management.” The report predicts that in just seven years, tokenized funds will be able to manage assets equivalent to 1% of global mutual fund and ETF assets, amounting to more than $600 billion by 2030. 

This trend is expected to continue, especially as regulated on-chain currencies such as regulated stablecoins, tokenized deposits, and central bank digital currencies (CBDCs) come into play. Additionally, a separate paper from State Street Global Advisors suggests that bonds, due to their structural characteristics, are likely to lead the way in the widespread adoption of tokenized real-world assets. The report highlights that the bond market is mature and well-suited for tokenization. The complexity of these instruments, the recurring nature of issuance costs, and the high competition among intermediaries contribute to rapid adoption and significant impact. Blockchain technology could play a critical role in markets that prioritize transaction speed, such as repos and swaps.

Industry analysis platform rwa.xyz noted in a post on X that it has seen an increase in the number of RWA research papers published by institutions and asset managers. The platform shared that the total value of off-chain RWA is $13.25 billion, up 60% in a year.

Institutional Aspect and Regulatory Concerns

Source: CoinGecko (https://www.coingecko.com/research/publications/rwa-crypto-interest-countries)

The financial sector and Asian countries are currently emerging as the ideal testing ground for asset tokenization, having become the first in the world to realize the benefits of tokenized assets. A case in point is HSBC Singapore, Cargill, and ING, which in May 2018 executed a real trade finance transaction on R3’s scalable blockchain platform Corda. A year later, in November 2019, HSBC Singapore announced a partnership with SGX and Temasek to begin issuing and servicing fixed income securities.

The Asia-Pacific region (APAC) is expected to account for the vast majority (90%) of the 2.4 billion new users entering the global economy in 2027, with much of this growth coming from China, India, and the rest of Southeast Asia (Schwab, 2019). This is where the largest number of Internet users will live, the population will actively use cryptocurrencies and non-cash payments. Given the rapidly growing digital accessibility of the population (especially due to the increase in the number of smartphone owners) in the Asia-Pacific region, we believe that this market will have huge and unique potential for the development of asset tokenization.

In 2024, DeFi platform Ethena made a $46 million investment in tokenized RWA funds, targeting products like BlackRock's BUIDL and Superstate’s USTB. Meanwhile, Solana-based marketplace AgriDex partnered with Stripe’s Bridge and Circle’s USDC to reduce cross-border agricultural trade costs, lowering traditional fees from 2-4% to around 0.5%. Latin American banks like Littio are also adopting Avalanche’s blockchain for RWA vaults. Also the UBS Group AG, the largest Swiss financial holding company, launched its first tokenized fund, the "UBS USD Money Market Investment Fund Token," on Ethereum's blockchain. The Monetary Authority of Singapore is exploring asset tokenization through initiatives like Project Guardian to develop common standards for tokenized assets, while financial institutions in China are embracing digital assets by issuing fully digital structured on the blockchain – highlighting the region’s demand for asset tokenization and the increasing role of stablecoins as a cost-effective alternative to traditional banking.

Benefits of Tokenizing Real Assets

Benefits of tokenization. Source: Coalition Greenwich

Tokenization is an innovative process today. Therefore, data on its reliability remains unverified and is not considered completely reliable. However, in essence, this technology is being developed and implemented to bring the following advantages:

Increased Liquidity and New Investment Approaches Across Industries

Tokenization enables fractional ownership of assets, allowing investors to buy and sell smaller portions. This opens up opportunities for investors to diversify their portfolios and access traditionally illiquid assets like real estate or art. It lowers the barrier to entry and enhances market participation.

• Real Estate: Tokenization allows for direct investments in specific properties, bypassing the limitations of traditional real estate funds or REITs. Investors can own a fraction of a building or property, democratizing access to real estate investments.
• Art and Collectibles: In the art market, tokenization allows collectors to own fractional shares of valuable pieces, making high-value works accessible to more investors.

Enhanced Transparency 

Blockchain-based tokenization platforms are inherently secure and transparent, enabling investors to track their investments and ownership records with confidence. 

Security 

The reliability of blockchain technology minimizes risks related to counterfeiting or theft of tokenized assets. All transactions are securely recorded on an immutable tamper-proof ledger.

High Operational Efficiency 

Tokens allow for seamless sharing of infrastructure without the need for intermediaries, significantly reducing transaction costs and complexities.

Technological Challenges and Solutions

The primary challenges of asset tokenization stem from the "blockchain trilemma," proposed by Ethereum co-founder Vitalik Buterin (2014). This concept states that a blockchain can only achieve two of three key properties – decentralization, security, and scalability – at once. 

While greater decentralization enhances security, it also requires more nodes, which can slow down consensus and limit scalability. Examples like Cosmos Hub and Polkadot highlight the financial and technical barriers to attacking such networks, but also the trade-offs in performance.

Modern developments are attempting to resolve these issues through methods like sidechains, rollups, and timestamping, which enable asset transfers and data exchange across multiple blockchains. However, these solutions are still vulnerable, with over $2.5 billion lost in security breaches across blockchain bridges.

To address these risks, some experts advocate for multi-chain interoperability, allowing decentralized applications to operate on multiple chains. While opinions differ, cross-chain interoperability is increasingly seen as crucial for improving tokenization efficiency and achieving broader blockchain adoption. Projects like Genesis, Guardian, and JP Morgan’s initiatives exemplify these efforts, aiming to establish reliable cross-chain frameworks for asset tokenization.

Also important are regulatory considerations, which vary by jurisdiction and are a significant concern. Any tokenization project must comply with local laws and regulations.

Comparison With NFTs: Hype or Real Utility?

While both RWAs and NFTs leverage blockchain technology, their purposes and value propositions are quite distinct. RWAs focus on tokenizing physical or financial assets like real estate, bonds, or commodities, aiming to bring liquidity, transparency, and fractional ownership to traditional investments. This provides clear, tangible utility by bridging traditional finance with blockchain.

In contrast, NFTs primarily represent digital art, collectibles, and digital ownership, often with a speculative element driven by market trends. While they have utility within digital ecosystems and gaming, NFTs have faced criticism for being driven more by hype than underlying value.

Unlike NFTs, tokenized RWAs are backed by real-world assets, ensuring their value is tied to tangible economic factors rather than market sentiment. This foundational difference positions RWAs as more stable, investment-driven opportunities, whereas NFTs cater to niche markets and cultural trends.

Key Players and Market Perspectives

RWA ecosystem

Several standout RWA projects are pioneering advancements in tokenizing traditional assets. These projects are leading the charge in bridging traditional finance with DeFi, each bringing unique value and fostering innovation in areas like lending, regulatory compliance, and institutional investment. Here are some of the most impactful RWA projects to watch.

• MakerDAO: With a focus on the U.S. Treasury assets, MakerDAO's high RWA revenue highlights its commitment to secure, stable investments. This approach could attract more institutional capital as it expands into traditional assets.
• Maple Finance: Specializing in undercollateralized RWA lending, Maple’s recent expansion into trade receivables suggests continued growth in the DeFi credit space.
• Centrifuge: Known for its diverse RWA infrastructure, Centrifuge aims to broaden DeFi's appeal with institutional-grade, asset-backed pools, potentially leading to more mainstream RWA adoption.
• Polymesh: Designed for regulated securities, Polymesh’s focus on compliance makes it a key player for traditional investors seeking security and transparency.
• Ethena: Ethena is establishing itself with substantial investments in tokenized assets, channeling funds into secure RWA-based products. With a recent $46 million investment in BlackRock’s BUIDL and other stable, revenue-generating tokens, Ethena is positioned for growth within the RWA space, leveraging blockchain for reliable asset-backed investments.

Not all RWA projects are built with their own blockchain technology, as seen with Polymesh. Many rely on established blockchain solutions. For example, Maker (MKR), Ethena, Maple (MPL), Centrifuge (CFG), LCX (LCX), and Ondo Finance (ONDO) operate on Ethereum. Meanwhile, RedSwan was developed on Algorand, Juno on Cosmos, and Parcl on Solana. Investing in projects offering ready-made blockchain solutions for RWA, such as Ethereum or Solana, is less risky, as many of the projects mentioned have low capitalization and may not yet be established as reliable and proven in the market.

Market Analysis of Ether (ETH) and Solana (SOL)

For a mid-term forecast, we should focus on the Weekly timeframe. ETHUSD is currently moving within a symmetrical triangle, squeezed between two trendlines. The price is testing the POC at the 2575 level, with the 200-MA providing support. The Momentum oscillator’s cross above the 100-line signals bullish sentiment. A potential upward move could push ETHUSD above the POC, targeting the VAH around the 3400 resistance level, aligned with the golden Fibonacci pocket. In a corrective scenario, ETHUSD may dip to the 0.318 Fibonacci before resuming its uptrend.

On the Daily timeframe, Solana (SOL/USDT) is moving within a bullish flag pattern, currently testing the upper boundary at the 175 resistance level. A breakout above this level could initiate a rise toward the VAH zone and potentially the previous ATH at 257.70. In a correction scenario, the price may fall to the POC zone near the 0.318 Fibonacci level before resuming its upward trend.

Conclusion

In summary, tokenizing real-world assets is ushering in a new era of finance, where traditional assets gain enhanced liquidity, transparency, and global accessibility. As this field matures and regulatory clarity improves, RWA platforms have the potential to create a more inclusive and efficient financial ecosystem, benefiting both traditional and digital investors. This evolving sector is set to become a cornerstone in bridging DeFi with established finance, promising broader access and more flexible investment opportunities on a global scale.