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July 8, 2024

What is the Tokenization of Real World Assets? Benefits of Crypto RWA Explained

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What is the Tokenization of Real World Assets? Benefits of Crypto RWA Explained
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Explore how tokenization transforms real world assets like music and real estate, making it accessible and efficient through blockchain.

Have you ever dreamt of owning an original Pablo Picasso?

Blue-chip artwork such as Pablo Picasso remain out of reach for ordinary investors. However with tokenization and real world assets emerging in the blockchain field, soon investors can own a piece of high-end work.
Weeping Woman, by Pablo Picasso

With Picasso’s work selling for millions of U.S. dollars, most people’s dream of owning blue-chip artwork will forever remain a dream. However, blockchain could make this possible with the tokenization of real world assets (RWAs).

While you won’t own the whole Picasso project, you can own a fraction of the work.

Real world assets offer novel ways to manage and invest in various assets, from real estate to intellectual property. Consulting companies like McKinsey have projected that the RWA industry can reach USD 2 trillion by 2030.

Tokenization is such a big opportunity that institutional players like BlackRock have begun offering RWA solutions to their clients.

In today’s blog, you’ll learn all about real world assets and how you can benefit from this new innovation.

What are Real World Assets (RWAs)?

Real world assets encompass tangible properties like real estate, art, and commodities, as well as intangible assets such as intellectual property. These assets are integral to our lives and provide the basis for wealth and investment across industries. 

Transactions involving real world assets have been complex, requiring extensive legal and regulatory oversight. Think of your house. Buying or selling your property requires various government documents and approvals. You might also have to clear the payment with your bank.

Blockchain is setting the stage for a more streamlined approach, by tokenizing these real world assets and opening access for the majority of the world.

Benefits of Tokenized Real World Assets

Tokenization is rapidly redefining the financial landscape, providing transformative benefits across various sectors. Here's a quick look at how tokenization of real-world assets (RWAs) is enhancing industries:

Increased Transparency

Businesses like the New York Culture Club (NYCC) embed their high-end fashion products with near-field technology (NFC) chips. When customers tap their NFC-enabled smartphones on a real world asset, they receive a digital certificate of authenticity via Enjin Blockchain.

New York Culture Club utilizes Enjin Blockchain to offer tokenized certificates of authenticity for their real world assets.
NYCC's RWAs deliver tokenized certificates of authenticity through embedded NFCs.

Blockchain’s immutable ledger permanently and transparently records each transaction and ownership. Through tokenized RWAs, buyers and sellers can quickly confirm authenticity of physical products.

The delivery of a digital certificate of authenticity cane take place through several methods such as QR codes, links, and NFC.

Improved Liquidity

Certain assets, like real estate and art, are not quickly or easily sold, and owners struggle to liquidate their investments. Tokenization divides these assets into digital tokens that can be sold individually. 

Going back to the example of your house, pretend that it has a current market value of USD 1 million. You can wait months or years to liquidate your property. With tokenization, however, you can divide your house into much smaller investments. One token could be worth one USD, enabling a million people to take ownership of this investment.

Democratization of Investments

Tokenization lowers investment barriers by enabling fractional ownership, allowing more people to invest in high-value assets. 

For instance, Artsgain is a blue-chip art investment company that offers accredited parties the opportunity to invest in tokenized art funds as a store of value. Each artwork acquisition takes advantage of identified opportunities in the art market.

This approach allows investors to participate in the art market through professionally managed funds, offering a more structured investment than individual art purchases.

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What is the Tokenization of Real World Assets? Benefits of Crypto RWA Explained
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Industries Leveraging Tokenization with RWA Crypto Projects

Various sectors have begun taking advantage of tokenization to address each sector’s distinct characteristics and challenges. 

Here's an expanded look at how tokenization is impacting key industries:

Music and Collectibles

Musicians such as George Murphy and the Rising Sons created vinyl records with verifiable tokenized ownership records. The physical vinyl serves as a real world collectible and plays the artists’ live and studio music. Meanwhile, the non-fungible token (NFT) grants the owner access to exclusive events.

Musicians like George Murphy and the Rising Sons are tokenizing Real World Assets to deliver unique experiences to their audience.
George Murphy and the Rising Sons, promotion picture for tokenized music records.

Real-world asset tokenization in music can revolutionize how artists manage music rights, royalties, and ownership. This new paradigm offers artists new opportunities to distribute real world assets like intellectual property.

Artists can offer token holders exclusive perks such as early ticket access, behind-the-scenes content, or VIP experiences. These tokens can be a digital pass to exclusive fan club benefits, deepening the artist-fan connection.

Real Estate

In 2018, the St. Regis Aspen Resort in Colorado, sold $18 million through a real estate token sale. On their own, most investors would not have the financial or social access to purchase a hotel. The token sale gave this ownership opportunity to investors.

Aspen coin token owners got access to exclusive discounts for tiered ownership of the coin.

St. Regis Aspen launched one of the first RWAs with a tokenized hotel sale.
St. Regis Aspen Colorado

The real estate market benefits significantly from tokenization, which introduces new levels of liquidity and accessibility. Tokenization enables investors to purchase smaller property shares, making property financially accessible to a broader audience. 

This system also streamlines the transfer of ownership, reducing the systemic hurdles associated with real estate transactions. 

Finance

Tokenization is streamlining the processes involved with various financial instruments. By converting the finance industry’s real world assets into tokens, buying, selling, and trading becomes more efficient. 

Everyday investors get easier access to real world assets such as treasury products and bonds. Tokenization can also introduce more transparency into these markets, as the transaction records are immutable and stored on the blockchain. 

BlackRock, the world’s largest asset manager, made waves in 2024 with the launch of its first tokenized fund, BUIDL. Accredited investors can purchase tokens in the fund, representing shares, and take advantage of U.S dollar yield products such as U.S. treasury bills.

Enjin Blockchain Role in Tokenized RWA in Crypto

Enjin plays a critical role in bringing tokenized assets to life.

Platform for RWAs

Enjin enables the creation, management, and trade of digital tokens by providing a robust blockchain platform. Through this platform, organizations and individuals can easily tokenize their real world assets and enable their distribution through Enjin’s end-to-end suite of tools.

  • Enjin Wallet: With over 3 million downloads, the Enjin Wallet applications provides a secure method for storing and sending RWAs. Features like Beam, Enjin’s proprietary QR-code tool for distribution of digital assets, allow anyone with a smartphone to access the RWA. 
  • NFT Marketplace: Global NFT marketplace such as NFT.io offer RWA holders a platform for transparently buying and selling digital assets. Users may also engage in advanced features such as auctions to provide a different buying experience.

Tokenization Network

The Enjin Ecosystem features a Collab Network, an exclusive community built to connect Enjin adopters with valuable partners and services. These connections include infrastructure providers, game and app developers, and launchpads among others.

Adopters meet and collaborate with partners who can support their growth and scale to mass market adoption. Partners such as New York Culture Club and MRKD provide the platform and patented technology to enable tokenization in the virtual world.

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