About Real World Assets (RWAs)
What they say about RWA
Boston Consulting Group predicted that by 2030, the tokenization of assets in general is going to be a multi-trillion dollar market.
Source - Boston Consulting Group: https://web-assets.bcg.com/1e/a2/5b5f2b7e42dfad2cb3113a291222/on-chain-asset-tokenization.pdf
One emerging trend is the growth of blockchain-based investment platforms, offering diverse opportunities in RWAs. These platforms may expand to include various tangible assets.
Source - Nasdaq: https://www.nasdaq.com/articles/real-world-assets-and-fractional-ownership-revolutionizing-investment-for-a-new
Art market research firm ArtTactic estimates that over $625 million of art has been sold fractionally since 2017, over a third of which was in 2022. This recent surge is part of the huge growth in the broader art market over the last two years.
More than 80 percent of UAE art investors have invested in fractional ownership
Source - Spears: https://spearswms.com/wealth/whats-next-for-fractional-art-investment/
Tokenization is a tale of two trends, happening across two dimensions of real-world assets (RWAs), namely the digitalization and financialization of RWA. (i) Digitalization is the transformation of physical assets into digital formats followed by further improvement in the way these assets are represented and used in a digital database. (ii) Financialization is the trend of turning real assets into financial instruments through the reengineering of cash flows and investment opportunities.
Source - Outlier Venture: https://outlierventures.io/article/tokenization-of-rwas-beyond-the-hype/
Citigroup estimates the tokenization market could swell to $5 trillion by 2030, spanning digital representations of real-world assets like bonds, property, and private equity. One claimed benefit is that tokenization makes illiquid assets easier to trade, deepening the pool of buyers and improving price discovery.
Source - Bloomberg: https://www.bloomberg.com/news/newsletters/2023-11-16/asia-hubs-vie-for-a-slice-of-a-5-trillion-tokenization-pie
Outperforming the S&P500
Last year, several categories of real-world assets outpaced the S&P 500, offering significant value increases beyond the typical performance of stocks and other financial instruments.
For instance, the art sector saw an impressive average price surge of 29% in 2022, a figure that markedly exceeds the S&P 500's annual growth. Similarly, classic cars proved to be a lucrative investment, with an average value appreciation of 25% across this category. Meanwhile, high-end watches, known for their statement value, witnessed an average price increase of 18%.
Other luxury investment assets like designer handbags, fine wine, and collector coins also experienced growth rates surpassing the S&P 500's performance from the start to the end of 2022.
Looking at a longer timeframe, such as the past decade, the luxury investment sector continues to show remarkable results. In this context, rare whisky stands out, with an astonishing price increase of 373% over the ten years, significantly outstripping the S&P 500's performance in the same period.
Switzerland as our base
Being a Swiss entity, we benefit from the protections and legal framework provided by the Swiss DLT (Distributed Ledger Technology) Act. This legislation recognizes ledger-based securities as a form of uncertificated securities, essentially, a ledger-based security is defined as an entry on an electronic register.
Under this Act, both the issuer and the recipient of a ledger-based security must enter into a registration agreement. This agreement stipulates that the rights associated with the ledger-based security are transferable and exercisable exclusively through the electronic ledger. As a result, these ledger-based securities are accorded the same level of trust and legal standing as traditional public faith securities. Furthermore, the electronic ledger in which the security is recorded is required to meet specific minimum standards to ensure its reliability and justify these legal effects.
About Real World Assets Tokenization
The integration of real-world assets (RWAs) into cryptocurrency and traditional finance is emerging as a significant trend, potentially leading to a new era of economic growth. Historically, technology adoption has followed a pattern of initial excitement, followed by setbacks, and finally, stabilization into periods of sustained growth, as seen in the dot-com era. In the current phase of Web3 technology, decentralized finance (DeFi) and non-fungible tokens (NFTs) have laid the groundwork for transformative changes in financial systems, focusing primarily on digital assets.
However, the next growth phase is anticipated to revolve around the tokenization of RWAs, which could bring substantial value to the cryptocurrency sector. Major financial institutions and startups are exploring the use of blockchain technology to tokenize tangible assets like commodities, art, and financial instruments. This movement aims to reduce the reliance on intermediaries, leading to more efficient and transparent transactions.
Despite the potential, challenges exist, particularly in ensuring the reliability of tokenized assets. A proposed solution involves using smart contract-based protocols to secure commitments for commercial exchanges, paving the way for a more trustworthy and programmable economic system. This advancement could lead to what is referred to as a “Turing-complete economy,” where programmable commerce becomes a norm. This shift in asset management and investment signals a significant evolution in both the crypto and traditional finance sectors.
Real-world asset (RWA) tokenization is revolutionizing how we view and interact with tangible assets. By leveraging blockchain technology, various sectors are experiencing a paradigm shift in asset management, ownership, and investment. Let’s delve into a few illustrative examples of how RWA tokenization is being applied across different industries:
Real Estate
In the real estate sector, tokenization is transforming property investment. By breaking down expensive assets into smaller, more affordable digital tokens, a wider range of investors can participate in real estate markets. This democratization of property investment allows for fractional ownership, where multiple investors can hold stakes in a property, thus diversifying their portfolios without the need for substantial capital.
Art and Collectibles
The art world is embracing tokenization to address issues related to provenance and ownership. By tokenizing artwork and collectibles, artists and collectors can ensure authenticity and track ownership history through blockchain. This not only simplifies the process of buying and selling art but also opens up opportunities for fractional ownership of expensive artworks, making art investment more accessible.
Commodities
Commodities like gold, oil, or agricultural products are being tokenized to streamline trading and investment processes. Tokenization of commodities allows for fractional ownership and eliminates many logistical challenges associated with physical storage and transportation. Investors can buy tokens representing a share of a physical commodity, facilitating easier and more transparent transactions.
Financial Instruments
Bonds, stocks, and other financial instruments are being tokenized to enhance liquidity and market efficiency. Tokenization in this area simplifies the process of buying, selling, and transferring securities, making the financial markets more accessible to a broader range of investors. It also reduces the time and cost associated with traditional securities transactions.
Luxury Goods and Collectibles
Luxury Goods and Collectibles: High-value items like luxury watches, cars, or rare collectibles are being tokenized to allow fractional ownership. This approach not only makes luxury items more accessible to a broader audience but also creates a new avenue for investment. For instance, a rare vintage car can be tokenized, and shares of it can be sold to multiple investors, democratizing the ownership of otherwise inaccessible assets.
Infrastructure and Public Projects
Tokenization is also being applied to fund infrastructure and public projects. By issuing tokens representing a stake in a project, such as a new energy plant or a public transport system, communities can raise funds more efficiently. This approach also allows for community participation in projects that directly impact them, fostering a sense of ownership and responsibility.
Intellectual Property
Intellectual property, including patents, trademarks, and copyrights, can be tokenized to manage and monetize these assets more effectively. This allows creators and businesses to gain funding by selling a portion of their intellectual property rights, while still retaining control over their creations.
Debts and Loans
The tokenization of debt instruments and loans is streamlining lending and borrowing processes. By issuing tokens representing debt, borrowers can access a wider pool of investors, while lenders can trade these tokens, thereby enhancing liquidity in the lending market.
Carbon Credits and Environmental Assets
Tokenization is being used to trade carbon credits and other environmental assets. This approach facilitates the buying and selling of carbon offsets and supports investment in environmentally beneficial projects, contributing to sustainability efforts.
Sports and Entertainment
In the sports and entertainment industries, tokenization is enabling fan engagement and investment. Fans can purchase tokens representing a stake in a sports team, music rights, or film projects, allowing them to be more directly involved and potentially benefit from the success of their favorite teams or artists.
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