Asset tokenization spans a wide array of asset classes, including intellectual property and traditional securities. The examples provided here are illustrative, showcasing just a fraction of the potential applications of tokenization.
Treasuries
In 2023, the tokenized treasury market saw a substantial increase, expanding from around $100 million to $864 million. This growth was fueled by the emergence of new participants and the expansion of existing platforms, according to the monitoring platform RWA.xyz (RWA.xyz: Tokenized Treasuries).
The benefits of tokenized treasuries include:
24/7 Trading: Tokenized treasuries facilitate round-the-clock trading, enhancing liquidity and providing more trading opportunities.
Direct Ownership: Retail investors can directly own fractional shares of treasuries.
Programmability: Smart contracts can automate terms such as coupon payments and maturity, thereby reducing administrative costs.
Bonds
Tokenized bonds, which offer enhanced liquidity, 24/7 accessibility, and direct transactions without intermediaries, have gained popularity amid rising global bond yields. These instruments provide yields comparable to their underlying assets and can also be used as collateral for loans.
The benefits of tokenized bonds include:
Flexible offerings: Issuers can design bonds with customized principal amounts, maturity dates, and interest rates for each fractionalized token, targeting specific investor subsets.
Trading efficiency: Automated compliance and settlement processes reduce illiquidity premiums and trading costs.
A new investor pool: Fractionalization enables access to global retail investors, diversifying the investor base to include those previously excluded by accredited investor rules or high entry requirements.
Commodities
Tokenized commodities, including gold, precious metals, oil, energy resources, and agricultural products like wheat and coffee, use blockchain technology to enhance accessibility, affordability, and transparency of these vital economic assets.
The benefits of tokenized commodities encompass:
Settlement efficiency: Transactions are completed in seconds rather than days, minimizing settlement risks associated with commodity price volatility.
Fractional ownership: Investors can buy small fractions of raw materials, such as gold or oil, democratizing access for retail investors.
Transparent audit trails: The movement of commodities from origin to destination is easily tracked, improving accountability, ensuring ethical sourcing, and aiding in regulatory reporting, monitoring, and theft prevention.
Real Property
The global real estate market, anticipated to reach $6.13 trillion by 2030, is on the cusp of a major transformation through tokenization. This innovation allows for fractional ownership and reduces investment barriers, making property rights and investments more accessible. Traditionally hampered by high entry costs and low liquidity, the market could see a revolution as blockchain-based solutions emerge, potentially supplanting traditional structures like real estate investment trusts (REITs).
The benefits of tokenized real estate include:
Accessibility: Tokenization reduces entry barriers by allowing fractional property ownership. For instance, instead of investing $500,000 in a single property, individuals can purchase $5,000 worth of tokens that represent a fractional interest in that property.
Liquidity: Listing tokens on an exchange significantly increases liquidity compared to traditional real estate transactions, providing investors with an exit option.
Diversification: Investors can mitigate risk by spreading their investments across multiple properties in various geographic locations, rather than focusing on a single asset.
Automation: Smart contracts can automate tasks such as payment collection, reducing the operational costs associated with property management.
Carbon Credits
Tokenizing carbon credits into digital assets on a blockchain significantly expands their accessibility beyond the traditional Voluntary Carbon Market frameworks. This allows millions of crypto wallet users to purchase and retire credits, addressing current challenges in market transparency and liquidity. It democratizes participation in climate action, enabling individuals, not just corporations with broker access, to engage actively in combating climate change.
The benefits of carbon credit tokenization include:
Reduced double counting: An immutable ledger prevents recycling and double counting of offset credits, enhancing the integrity of the scheme.
Accessible marketplaces: Tokenization creates global marketplaces that remove intermediaries, improving the efficiency of trading.
Transparent monitoring: The tracking of offsets from issuance to retirement becomes more robust, enhancing accountability.
Art, Collectibles, and Royalties
Tokenization, particularly through NFT development, is transforming the traditionally illiquid $400 billion global art and collectibles market. By enabling artists to directly monetize their digital creations, NFTs reduce the need for intermediaries such as galleries and auction houses. This shift democratizes art ownership by dividing artworks into digital tokens, empowering artists with greater creative freedom and financial independence. Additionally, it paves the way for innovative uses of NFTs in interactive and virtual reality art experiences.
The benefits of tokenizing art, collectibles, and royalties include:
Provable scarcity: Tokens enable precise tracking of editions and establish verifiable digital scarcity for rare collectibles.
A chain of custody: Detailed records help minimize forgery and undisclosed restoration in fine art, reducing information asymmetry between buyers and sellers.
Market expansion: Continuous availability increases the addressable buyer pool, particularly benefiting niche collectible segments.