Tokenization, the process of converting real-world assets into digital tokens on blockchain networks, has gained prominence in the crypto market. Its history dates back to the early 2010s, with early initiatives like colored coins on the Bitcoin blockchain. However, it wasn't until the Ethereum blockchain's launch in 2015 that tokenization found a more versatile platform. As of March 2024, the total market cap of RWA coins exceeds $8.4 billion, according to Coingecko.
The entry of BlackRock, the world's largest asset manager, into the real world asset (RWA) tokenization space with its tokenized fund, BUIDL, on the Ethereum network, marks a significant milestone that further validates and stimulates interest in the RWA tokenization sector of the crypto market.
BUIDL, positioned as the BlackRock USD Institutional Digital Liquidity Fund, is designed to offer a stable value and pays daily accrued dividends directly to investors' wallets, representing an innovative approach to earning yield on blockchain-based tokens. The fund's emphasis on assets like cash, U.S. Treasury bills, and repurchase agreements for its investment strategy underscores a conservative yet pioneering approach to merging traditional financial assets with the flexibility and efficiency of blockchain technology. Key ecosystem participants include major names like Anchorage Digital Bank NA, BitGo, Coinbase, and Fireblocks, highlighting the broad industry support and the collaborative effort in the ecosystem to push forward the RWA tokenization agenda.
Global Tokenized Market Growth | Source: BCG X ADDX
Learn more about the rise of the tokenization of real-world assets.
How Tokenization Brings Physical Assets to the Blockchain
Tokenization could revolutionize the crypto market by bringing physical assets to the blockchain. Tokenizing real-world assets can empower investors in several ways:
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Unlock Liquidity for Previously Illiquid Assets: Tokenization brings physical assets to the blockchain, unlocking liquidity for traditionally illiquid assets and enabling fractional ownership.
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Enable Diversification of Portfolios: It democratizes investment opportunities, diversifies portfolios, and provides global accessibility to assets.
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Drive Global Accessibility of Crypto Market: The process can attract more participants to the crypto market, driving its growth.
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Boost DeFi Innovation: Tokenization fosters innovation in decentralized finance (DeFi), creating new financial products and services.
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Provide Secure Platform for Investors: Blockchain technology used in tokenization ensures transparent, tamper-proof records, increasing investor trust and security.
Top Tokenization Crypto Projects
Several crypto projects are at the forefront of tokenizing RWAs, including but not limited to:
Ondo (ONDO)
Ondo Finance (ONDO) stands at the forefront of the Real World Asset (RWA) tokenization movement, offering innovative solutions that bridge traditional finance with decentralized finance (DeFi). It provides a platform for tokenizing real-world assets, making them accessible and liquid on blockchain networks. The key products of Ondo Finance include OUSG, the world's first tokenized US Treasuries product, and Flux Finance. This lending protocol showcases the utility of using tokenized Treasuries as collateral in DeFi markets. The ONDO token is used for governance within the Ondo DAO, allowing holders to vote on proposals regarding the protocol's future direction, development, and resource allocation.
Recent developments highlight Ondo's strategic expansion and ability to innovate within the RWA space. The introduction of Ondo Global Markets (Ondo GM) marks a significant step towards securities tokenization, providing a platform that includes a broker-dealer capable of accepting orders via both traditional methods and smart contract calls. This innovation is part of Ondo's broader mission to improve the liquidity challenges traditionally associated with RWAs. Furthermore, Ondo's recent partnerships with Sui and Aptos networks underscore its ambition to extend its tokenized products' reach and utility across multiple blockchain ecosystems, potentially setting new standards for the integration of real-world and on-chain assets.
As of March 2024, Ondo Finance plans to move $95 million of assets to BlackRock's tokenized fund BUIDL for instant settlements for its U.S. Treasury-backed token (OUSG). This shift will make OUSG significantly more usable within the crypto ecosystem as a store-of-value and collateral asset. This marks the first example of a crypto protocol leveraging asset management giant BlackRock's tokenized fund offering.
Mantra (OM)
Mantra (OM) is a Layer 1 blockchain platform that has garnered attention in the real-world asset (RWA) tokenization space. Following a successful $11 million funding round led by Shorooq Partners, a notable venture and technology investor in the MENA region, Mantra has positioned itself as a key player aiming to mainstream RWA tokenization. This capital boost will aid Mantra in achieving several critical objectives, including the creation of regulatory-compliant infrastructure, providing developers with the necessary tools to develop RWA-centric protocols, and expanding the tokenization of real-world assets. The platform focuses on making investments more accessible, particularly in the Middle East and Asia, by increasing market liquidity and promoting economic growth.
The OM token is used as a governance and utility token within the Mantra Chain, enabling staking for passive yield earning and participation in governance decisions across various products. Mantra's innovative approach is designed to address the scalability challenges of RWA tokenization, setting a foundation for a global financial ecosystem shift. The platform is set to streamline asset transactions, open new investment avenues, foster entrepreneurship, and attract global investment. With a mission to bring the world’s financial ecosystem on-chain, Mantra's efforts are not only focused on innovation but also on ensuring that their infrastructure is inviting for builders, institutions, enterprises, and users interested in exploring the possibilities of RWAs.
Polymesh (POLYX)
Polymesh (POLYX) is a specialized, public permissioned layer 1 blockchain meticulously designed to enhance the security token industry. Its architecture offers a robust solution for tokenizing securities, expanding the already vast securities market with significant real-world value. Polymesh distinguishes itself by addressing the intrinsic challenges related to governance, identity, compliance, confidentiality, and settlement within the realm of security tokens. This institutional-grade blockchain aims to simplify and secure the process of bringing real-world assets onto the blockchain, thereby fostering a more efficient and transparent market. Its approach combines the trustworthiness of private networks with the openness and transparency of public chains, ensuring a reliable ecosystem for all participants.
POLYX, the native utility token of Polymesh, serves multiple vital functions within its ecosystem. It is not only the medium for paying transaction fees but also underpins various operational aspects of the network, such as governance, staking, and creating and managing security tokens. POLYX operates under a unique tokenomics model where its supply approaches an asymptotic limit, with new tokens generated based on a predefined algorithmic schedule. This design intends to strike a balance between incentivizing network participation and maintaining a controlled inflation rate, ensuring the long-term sustainability and security of the network. The ecosystem is further enriched by a robust governance model that allows POLYX holders to partake in strategic decision-making, fostering a democratic and participatory environment.
OriginTrail (TRAC)
OriginTrail is an innovative project designed to enhance the trust and transparency of supply chains through its Decentralized Knowledge Graph (DKG). This technology integrates blockchain and knowledge graph methodologies to enable the creation of AI-ready Knowledge Assets, fostering a secure and verifiable exchange of data across various sectors such as supply chains, healthcare, construction, and the metaverse. By facilitating trusted knowledge sharing, OriginTrail aims to supercharge data with ownership, discoverability, and trust, addressing the challenges of misinformation in the digital age. The project aims to construct a sustainable global economy by organizing trusted AI-ready Knowledge Assets, making it a key player in real-world asset tokenization.
The Trace token (TRAC) is the lifeblood of the OriginTrail ecosystem, powering all operations on the DKG. Launched in 2018 as an ERC-20 token on the Ethereum network, TRAC has a fixed supply of 500 million tokens. It is utilized for various functions within the network, including publishing and updating assets, serving as collateral on OriginTrail nodes, and facilitating delegated staking. TRAC's multichain approach ensures its functionalities are accessible across a broader range of blockchain ecosystems, enhancing its interoperability and scalability.
Pendle (PENDLE)
Pendle is a decentralized protocol that revolutionizes the way yield-bearing assets are managed within the DeFi ecosystem. It allows users to tokenize these assets, separating them into Principal Tokens (PT) and Yield Tokens (YT), enabling advanced yield management strategies. This unique approach allows users to trade future yields and principal separately on Pendle's Automated Market Maker (AMM), offering novel investment opportunities and flexibility in handling yield-bearing assets. By tokenizing the yield component of these assets, Pendle provides a platform for speculation on yield fluctuations, offering a sophisticated mechanism for investors to optimize their yield strategies over time.
Expanding its horizons, Pendle has recently integrated support for Real-World Assets (RWA) such as MakerDAO’s Boosted Dai Savings and Flux Finance’s fUSDC, marking a significant step towards bridging DeFi with traditional financial instruments. This integration not only amplifies Pendle's utility in the DeFi space but also positions it as a pioneer in facilitating on-chain access to tokenized traditional assets like U.S. Treasury Bonds. With this, Pendle offers an innovative platform for both retail and institutional investors, enabling them to manage and hedge yields of RWAs efficiently. The protocol's adaptability to include RWAs underscores its potential to attract substantial institutional investments onto the blockchain, thereby expanding the DeFi landscape to include traditional financial products.
TokenFi (TOKEN)
TokenFi is designed as a user-friendly platform to simplify the creation and tokenization of Real World Assets (RWA) without the need for coding. It targets the burgeoning RWA market, which is anticipated to grow to $16 trillion by 2030, providing tools for launching ERC20/BEP20 tokens, among other functionalities. Through features like the TokenFi Token Launcher, Generative AI for NFTs, and a suite of tools for direct connections with market players, TokenFi facilitates seamless entry into the DeFi ecosystem. This initiative aims to democratize the tokenization process, making it accessible and affordable, thereby positioning TokenFi to capture significant growth in the DeFi space.
The TokenFi (TOKEN) token serves as a utility token within the TokenFi ecosystem, enabling users to tokenize Real World Assets (RWA) efficiently on the platform. It facilitates various operations such as launching ERC20/BEP20 compliant tokens without coding, leveraging Generative AI for NFT creation, and connecting users with institutions for deeper liquidity and reach. TOKEN also powers the platform’s AI Smart Contract Auditor for on-the-spot audits, enhancing trust in the tokens created through TokenFi.
Securitize
Securitize is a comprehensive platform for managing digital securities. It offers compliance services, investor communication tools, and issuance services. It's known for its adherence to regulatory standards. By 2022, a mere three years after its launch, Securitize Markets featured among the top 10 US stock transfer agents, servicing over 1.2 million investor accounts and 3,000 clients. Securitize primarily uses the Ethereum blockchain but is blockchain agnostic, meaning it can work with various blockchains.
Securitize was founded in 2017 and has become a prominent name in the security token industry. BlackRock's strategic investment in Securitize, alongside appointing Joseph Chalom, BlackRock’s Global Head of Strategic Ecosystem Partnerships, to Securitize’s Board of Directors, further cements its commitment to driving the compliant digitization of financial assets through blockchain technology. This move amplifies the potential for broader adoption and innovation within the RWA tokenization field.
Untangled Finance
Untangled Finance is a tokenized real-world asset (RWA) platform that recently went live on the Celo network. It's designed to facilitate the tokenization and trading of real-world assets in a decentralized and blockchain-based manner. Established in 2020, Untangled Finance announced a $13.5 million funding round in October 2023.
The platform aims to bring private credit assets onto the blockchain, making them more liquid and accessible to a broader range of investors. Untangled Finance's mission is to bridge the traditional financial world with the decentralized blockchain realm by tokenizing real-world assets, thus increasing accessibility and liquidity in the financial markets.
Swarm Markets (SMT)
Swarm specializes in the tokenization of real-world assets. Swarm's platform supports a wide range of assets, including real-world assets, securities, and cryptocurrencies. Swarm emphasizes regulatory compliance, making it suitable for traditional financial markets. It aims to create a bridge between traditional finance (TradFi) and DeFi by using the tokenization of real-world assets to establish a new financial market. As of March 2024, according to data on DefiLlama, Swarm enjoys a TVL of over $5.4 million.
The Swarm Markets (SMT) token is used as a payment token for simplified transactions, offering discounts and rewards on the Swarm platform and facilitating a cycle of fee payments and rewards through Swarm Markets. In July 2023, Swarm announced a partnership with Mattereum to securitize more RWAs on-chain. This partnership can provide a comprehensive and compliant solution for real-world asset tokenization.
MakerDAO (MKR)
MakerDAO, one of Ethereum's oldest and most established DeFi protocols, has made significant strides in adopting RWAs into its DeFi ecosystem. The leading DeFi project has several institutional investors that borrow its DAI stablecoin and effectively tokenize Treasury bills (T-bills) to use within the MakerDAO ecosystem.
MakerDAO Balance Sheet | Source Dune Analytics
The MakerDAO (MKR) token is used for governance of the Maker Protocol, allowing holders to vote on changes to the protocol, including adjustments to the Dai stablecoin's stability fee and other risk parameters. In March 2024, real-world assets comprised just under 30% of MakerDAO’s balance sheet. Of its TVL of over $6.6 billion, RWAs account for over $2.06 billion.
Closing Thoughts
The crypto projects driving the tokenization of RWAs are at the forefront of revolutionizing the investment landscape. As the crypto market continues to gain traction, tokenization is set to play a pivotal role in mainstream adoption and investor empowerment.
Overall, the future of real-world asset tokenization looks promising, with an expanding range of asset classes, increased institutional adoption, improved market liquidity, evolving regulatory frameworks, advancements in DeFi, and the integration of real-world data into blockchain networks. These trends will contribute to the growth and maturation of the tokenization industry in the years to come.
Stay tuned for further developments in this exciting space.
Further Reading