In this Real World Asset Tokenization Development guide, I will be explaining you what RWA tokenization is, the types of real world assets which can be tokenized, step by step process involved in Real World Asset Tokenization Development, Future of RWAT and finally my experience with live Real World Asset Tokenization Projects.
What is Real World Asset Tokenization development?
Real World Assets (RWAs) are physical assets present around us like Real Estate property, Commodities, Luxury items like watches, Bonds, Equities, Art etc. Real World Asset Tokenization are digital representation of real-world assets (RWA) on Blockchain. This can either be represented as Tokens or NFTs on Blockchain depending on the use case. Remember RWA tokenization can be completely legal by using blockchain as a technology and also involving the crypto side of blockchain.
Types of Real World Asset Tokenization Development
A. Real Estate Real World Asset Tokenization Development –
Real Estate assets like lands, commercial properties etc can be brought on blockchain to bring in more liquidity and raise funds. Basically, bringing on blockchain provides trust and traceability for real estate ownership. Also with blockchain, we can bring in fractionalized ownership of the asset. Under fractionalized ownership, multiple investors can own a piece of asset which brings in multiple retail investors who can invest with a small amount. All these transactions are tracked on the Blockchain.
B. Luxury Items Real World Asset Tokenization Development –
Luxury items like watches etc can be tokenized and collateralized. They can be brought digital by tokenization and used to get loans. The complete cycle of lending and borrowing of luxury items can be done by real-world tokenization on blockchain. It simplifies the borrowing and repayments. The complete history of the process can be tracked on blockchain.
C. Commodities Real World Asset Tokenization Development –
Real world Asset tokenization can also be done with commodities like Gold, Silver, Nickel etc where these can be moved to custodians and equivalent liquidity of tokens as erc20 or erc-721 can be minted. And once tokenized this opens up multiple use cases like lending, borrowing, staking, investments etc.
D. Bonds & Equity Real World Asset Tokenization Development –
Similarly, how the company’s equity and bonds are traded in traditional stock exchange, the bonds and stocks can be collateralized to bring in more liquidity to the company. RWA Tokenization also opens up the gates to bring in more investors outside the country as blockchain can be accessed anytime anywhere which cannot be achieved with current stock markets.
E. Art Real World Asset Tokenization Development –
Art RWA Tokenization Development has already been in the crypto market with NFTs – ERC-71 and ERC-1155 standards. Multiple artworks are being sold on blockchain and the physical art is being shipped. This particularly is a boom for the art industry by opening up the market wider with easier accessibility.
Process of Real World Asset Tokenization
A. Choosing the Real World Asset to Tokenize
Look for the asset which truly has value in the real world. The RWA Tokenization process requires some investment across multiple players like legal, custody, blockchain development etc. So choosing the right real world asset to tokenize wisely will be the first decision to make to save time and money in future.
B. Legal Consultation for Real World Asset Tokenization Development
Legal consultation for real world asset tokenization is much required where you need to check with the authority if the asset can be tokenized, what is the tokenization mechanism, how the RWA assets are moved to the custodians if using Special Purpose Vehicles (SPVs) etc. Once the legal part is confirmed, move to choose the custody and kickstart the development stuff.
C. Choosing the right Custody Solution Company
Custody solution providers are legally registered companies that get the physical assets from you and tokenize the physical asset. Consult with them if they tokenize the type of physical asset which you want to. Also, check with them what blockchains they support for tokenization.
D. Choosing a Real World Asset Tokenization Development Company
- A Real World Asset Tokenization development company will help you with the technical part where they will suggest to you the different types of blockchain which you can choose for your use case and also the type of tokenization required for the requirement. Depending upon the use case, normal tokens – ERC-20 (Fungible tokens) or NFTs – ERC-721 or ERC-1155 (Non-Fungible) will need to be finalized. A Dapp will also need to be developed and integrated with the smart contracts which need to be handed over to the custody solution provider for minting.
- Also, if you want to develop a marketplace to trade the tokenized physical asset or to create a platform for real world asset tokenized lending/borrowing the web3 development company will be able to assist you with it to create the ecosystem for your project. There is no use in just tokenizing the real world asset. After bringing in the liquidity, growing the ecosystem of the project is required. Discuss with the RWA Tokenization company which you are partnering with.
E. Choosing the right blockchain for RWA Tokenization development
There are multiple blockchains actively focusing on RWA tokenization. Ethereum, Polygon, and Avalanche are a few key notable blockchains heavily focusing on RWA development. I will be choosing the blockchain considering factors like:
- Target Ecosystem users volume who are using the blockchain for RWA investments
- Lesser Gas costs
- Faster transactions
- Detailed documentation and simple to use
- Actively participating in RWA developments
- Has a good number of portfolio projects on the blockchain
- If the blockchain has interoperable and cross chain capabilities it can add more advantages for RWA projects by attracting investors across multiple chains.
F. Writing the smart contracts and Dapp development for Real world Asset Tokenization
This is the main piece of the project where the developer or RWA development company needs to completely understand the end requirement and if all legal conditions are met.
Make sure the Dapp (Decentralized application) is easy to use as this might be given to the custodian company that manages the real World Assets.
Guidelines for writing proper smart contracts for RWA Tokenization:
- Firstly understand the requirements and then write down the cases to handle
- Make sure the openzeppelin standards are followed in development to prevent security issues.
- There is a new standard – ERC-3643 coming up which involves regulated asset tokenization. Check if this standard is required for your use case.
- Make sure to use automated security audit tools like Mythx, Mythril etc so that your contract is secure.
- Hire an RWA Tokenization smart contract audit company like Certik to do manual and automated smart contract and dapp code audits to make sure you are on the right path in terms of both security and functionality.
Additionally, Other projects which we can develop with RWA Tokenization are RWA Marketplace for trading, RWA Lending/Borrowing platforms, Staking platforms etc.
New smart contract standards upcoming in Real World Tokenization development:
- ERC-404 – Combines the functionalities of ERC-20 & ERC-721.
- DN-404 – Advanced version of ERC-404 with gas optimisation and more robust architecture.
Projection for RWA in 2024
Real World Asset Tokenization is expected to grow significantly in 2024. The buzz in the market has already started as multiple institutional players have taken steps.
By 2030,
- CitiGroup Predicts RWA tokenization market to reach 5 Trillion. Link – https://www.citigroup.com/global/insights/citigps/money-tokens-and-games
- Boston Consulting Group (BCG) predicts the market cap to reach $16 trillion. Link –
https://media-publications.bcg.com/the-second-wave-resilient-inclusive-exponential-fintechs.pdf
- 21.co predicts the high scenario as $10 trillion by 2030, with a low scenario of $3.5 trillion. Link – https://www.21.co/research/the-state-of-tokenization
Yokesh’s prediction for Real World Asset Tokenization:
- Being an RWA Tokenization Development consultant, My prediction for Real World Asset Tokenization will be around 3 to 5 trillion in the next 3 years. And to achieve this the legal gates across the globe need to open up and the ecosystem needs to grow on a faster scale.
A few Real World Asset Tokenization Development Projects which I’ve been actively involved as Blockchain consultant –
1. Real World Finance – https://www.realworld.fi/
RWFI is into tokenization of real-world assets like wine, Gold, Gems, and watches. We built their marketplace, real-world asset borrow and lending protocol. Platform launching on September 2024.
2. SMETX – Special MetalX – https://specialmetalx.com/
SMETX is into Tokenization of Metals like Nickel etc. We built their tokenization platform, marketplace and we have assisted them on their token sale, referral Dapps.
Partnership Announcement:
3. EKTA –
Real Estate Tokenization on Blockchain project from Bali.
If you looking to get started with your Real World Tokenization project development, reach out to me at [email protected] or get in touch with our Real World Asset Tokenization Development Company – BlockchainX – www.blockchainx.tech
