Imagine owning a part of a historic landmark or an original Picasso with just a few clicks.
As blockchain continues to reshape our ideas of ownership, Non-Fungible Tokens (NFTs) are making this futuristic vision a reality. By bridging digital convenience with tangible assets, NFTs enable a new way to manage Real World Assets (RWAs) such as real estate, art, and collectibles.
This blog explores the role of NFTs in representing tangible and intangible assets and creating your own Real World Asset.
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Real World Assets (RWAs) encompass tangible properties like real estate, art, and collectibles, and intangible assets like intellectual property. These assets may be represented on-chain by fungible tokens and non-fungible tokens (NFTs).
Fungible tokens such as USDT and USDC stablecoins have existed for quite some time. Both reflect the value of their US-denominated asset-backing. However, there’s a rising interest in RWAs represented through NFTs.
NFTs have been heavily utilized for crypto gaming assets, such as land, characters, or items with distinct characteristics. These characteristics closely mimic many physical assets and goods.
NFTs are ideal for managing diverse RWAs thanks to their ability to embed detailed metadata and unique identifiers (TokenIDs).
In the example above, the Metadata consists of the picture, the text description, and the “race” property. Meanwhile, the item contains a token ID of 66 to differentiate it from other NFTs in the collection.
This metadata can include specifics like size, material, color, and historical significance, which are crucial for assets where uniqueness directly correlates with value. For example, luxury goods can be uniquely identified using RWAs that detail their provenance, condition, and authenticity. These traits would be challenging to track in fungible tokens, where all tokens look the same.
The NFT use case for RWAs becomes apparent when the asset has many properties.
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The first step in creating an RWA is identifying what type of asset you want to tokenize.
High-value collectibles, real estate, and even exclusive music rights are prime candidates for Real World Assets. The uniqueness and potential appreciation of these assets make them ideal for tokenization. Collectors even hold and secure these assets through titles (in the case of real estate) and vaults (for collectibles and paintings).
Certain assets, especially in the collectors’ industry, are valued to determine their worth.
Limited edition assets, such as a sports collection, change hands less frequently. Their value may come from special auctions. For instance, a limited edition Michael Jordan sneaker collection, which fetched $8 million at a Sotheby’s auction, could be tokenized to allow broader participation in this collectible.
RWAs can be leveraged by everyday items like fashion goods and tickets. Small-ticket items can use RWAs to provide a layer of authenticity and host an immutable ownership ledger. Anytime you want to see an item’s ownership history, you can check the RWAs’ transaction history.
Now that you’ve identified the physical asset, it’s time to make an NFT.
Now that you’ve identified the physical asset, it’s time to make an NFT.
Making NFTs doesn’t have to be complicated or require mastering lines of codes or smart contracts. Many marketplaces now provide all-in-one tools to mint and market your NFTs. Anyone can get started with this process.
NFT.io, Enjin’s Global NFT marketplace and tokenization platform, empowers users with an easy-to-use platform where you can easily make an NFT for your Real World Assets in just a few minutes.
Click “Create” then “Item,” as found at the top of the page. You’ll be asked to connect your crypto wallet. If you don’t have an Enjin wallet, you can download it from the Apple Store or Google Play Store.
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Once you have the Enjin Wallet installed, simply scan the QR on the screen using the Enjin Wallet app to connect your account.
Since this is your first time making an NFT, you must create a new collection.
Complete the details for your collection:
Note that a deposit of 6.25 ENJ is required to create a collection. The creator can recover the deposit if all tokens are burned and the collection is destroyed.
Next, select the Collection you’ve just created and click “Create New Item” to mint your first NFT. Choose the desired image for your NFT and fill in other relevant details such as the Name, External link, and Description of your NFT.
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A token on the blockchain is often referred to as a coin. However, on Enjin Blockchain, it's more accurately described as a digital asset that enables developers and users to create unique items such as Non-Fungible Tokens (NFTs).
On the Enjin Blockchain, each token can be classified as an NFT, irrespective of its supply quantity. This encompasses tokens with a single unit (with a supply of one) and tokens with multiple quantities (with a supply greater than one).
Depending on the asset you’ll tokenize, you might want to utilize NFT with a single supply or that of multiple quantities.
Picture a limited edition designer cap. This luxury fashion item has various quantities of the same design. It would make sense that its NFTs would also have one design but represented by different Token IDs. This setup best utilizes an NFT of various quantities.
Each NFT on the marketplace will look the same but be represented by varying Token IDs.
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On the other hand, if you have several items with distinct characteristics, these would best be represented by single-supply NFTs. Think of computer game characters turned into figurines. You would have a magician, swordsman, and cleric. Each character would have their weapon, clothes, and headgear.
You can deploy two Minting Methods for NFTs of multiple quantities: One Time Mint and Split Mint.
Step 4: Connect the NFT to the Physical Asset
To tie the physical asset to the NFT, you can embed the item with an NFC chip that links to an NFT-based digital certificate. You can also attach an Enjin Beam QR code on the item, which will claim the NFT upon scanning with a mobile phone. Crypto wallets like the Enjin Wallet app allow you to scan and subsequently claim the NFT from your phone.
Congratulations! You’ve now made a Real World Asset using an NFT.
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Once the NFT is onchain, collectors may hold, trade, or transfer the Real World Asset. As the tokenized asset moves from one collector to another, the corresponding physical item also shifts ownership.
The seller and buyer must agree to move the physical and digital items together to ensure that the ownership of the RWA and physical assets moves as one. This could be done on a trust basis, especially for small-ticket items. In other cases, a third party facilitates the transaction.
Recently, custodial houses have been set up to safeguard and streamline transactions for Web3 collectibles.
As ownership shifts hands, it concurrently denotes the transfer of rights to the corresponding physical asset, ensuring transparent and secure transactions on the blockchain.
Not all RWAs are created equally. Small-value RWAs for anime figures would differ from real estate NFTs worth millions of dollars. Legal and compliance issues are daunting, as the regulatory framework for digital asset ownership varies widely by jurisdiction and asset type.
Tokenizing real estate involves navigating complex local and international property laws, potentially requiring government recognition of digital deeds.
Furthermore, ensuring that NFT transactions comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations adds another layer of complexity, especially in high-value transactions.
BlackRock, the world’s largest asset manager, launched a tokenized fund that enables investors to earn yield on their US dollar holdings. Investors must comply with KYC and regulatory practices and invest a minimum of $5 million.
Smart contracts are central to managing RWAs efficiently through NFTs. These contracts automate critical processes such as payments, ownership transfers, and compliance checks, reducing the administrative burden and enhancing transaction speed.
In real estate, for example, smart contracts can handle escrow, releasing funds only when all contractual conditions are met, simplifying and accelerating property sales.
Having access to the resources and technical team to develop smart contracts can be a hindrance to the everyday applications of Real World Assets.
NFTs are set to redefine how we view and interact with real-world assets. By providing a secure, transparent, and efficient framework for the tokenization of assets, NFTs not only open up new ownership opportunities but also ensure that these assets can be managed in a way that is in tune with the digital age.
As the technology and regulatory landscape continue to evolve, the potential for NFTs to further integrate into traditional markets is immense, promising a future where digital and tangible assets are interchangeable and equally valued.
You’ll receive:
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