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RWA Tokenisation on the Horizon: Understanding Its Impact
- Real-world assets (RWAs) are taking the crypto industry by storm, with Binance and Chainlink just two of the big names heavily involved in this sector.
- Tokenisation involves representing off-chain data (usually a physical asset) on-chain via a fungible or non-fungible cryptocurrency.
- Fractional investing is the main use of tokenisation for now, but its potential use cases are yet to be fully realised.
Real-world asset (RWA) tokenisation is the next big step for the blockchain industry. It, to date, presents the most compelling case for cryptocurrencies to receive widespread adoption among the general populous. The scope for tokenisation – and its flow-on effects – is massive, and several major players have already tapped into its potential. But as businesses like Chainlink and Binance turn their attention to RWAs, it appears the revolution is only just beginning.
What Exactly Is Real-World Asset Tokenisation?
In simple terms, RWAs are digital representations of (often) physical assets stored on the blockchain. These digital representations take the form of crypto tokens – either an NFT or a fungible currency, depending on the asset being symbolised.
Examples of tokenisable assets include:
- Private/public equity
- Fiat currencies
- Alternative assets (lego, vintage cars, boats, wine)
- Art
So, how does this look in practice? Well, there are already many instances of RWA tokenisation that bridge the gap between traditional finance and the crypto industry, a chasm that is slowly but surely narrowing.
Perhaps the most common form of tokenisation is for fractionalising investments. Most serious investors will focus their portfolios on “blue-chip assets” – top market-cap assets with low volatility and a strong history of performance. This is all well and good for stocks and crypto, but what if you wanted exposure to an alternative market like vintage cars?
Providing Equitable Access to Alternative Markets
The top line of vintage cars are often worth millions, so unless you’re already rich, that asset class is basically out of reach for you…until now.
What if the ownership of a vintage car was split into 1,000 tokens, each worth $1,000? Not only does this suddenly introduce liquidity to a traditionally illiquid asset class, but investors of all shapes and sizes can now get involved in this alternative market. It creates a more fair and equitable investment market, on top of a new, more efficient model of ownership.
This is just one of many examples where RWA tokenisation can shape the next era of investment. Chainlink, a company at the forefront of innovation in this sector, has already secured several high-profile partnerships utilising the technology:
Tokenised assets might be the most exciting element of the blockchain industry going forward. Their potential to bridge the traditional and digital finance sectors is currently unmatched – and if a crypto takeover is truly on the horizon, RWAs will play a key role in the revolution.
Author
Ben Knight
Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.
