Real world assets are one of the hottest properties in the crypto world, and some very serious people are convinced they represent a multi-trillion dollar opportunity. 

A recent report by Deloitte forecasts that the market for RWAs, as they’re known, could hit $4 trillion by 2035, but if that seems like a lot, its estimate is actually a rather conservative one. In contrast, Polygon’s global head of institutional capital Colin Butler told Cointelegraph last year that the market could explode to more than $30 trillion in the coming years. 

RWAs refer to capital assets that are represented as digital tokens that live on blockchains. Examples include loan portfolios, stocks and shares, treasury bills and bonds, and also things like real estate, fine art and even bottles of vintage wine. In fact, almost any asset that has value, including cars, lottery tickets and racehorses, can potentially be “tokenized” and traded on the blockchain. That’s why the potential is rated to be so incredibly huge.

At present, data from RWA.xyz shows that around $21.9 billion has so far been invested into tokenized private credit instruments already, with big traditional financial institutions such as BlackRock and Franklin Templeton throwing their hat into the ring on the Avalanche blockchain.

Why Tokenize?

By tokenizing capital assets, investors and markets can enjoy many benefits, including greater liquidity, increased accessibility, lower costs and more transparency. Existing financial transactions are essentially black boxes: they involve opaque deals conducted by greedy middlemen, and they’re extremely inefficient, with tons of paperwork required. The highly efficient, borderless and decentralized nature of blockchain provides a stark contrast. By using smart contracts, it cuts out money-grabbing intermediaries, and transactions can be processed in a matter of seconds. 

Tokenization also enables fractional ownership of previously illiquid assets such as real estate. Traditionally, selling something like a luxury penthouse apartment takes many months, because it’s incredibly expensive and there are very few interested buyers. But by tokenizing that penthouse, it’s possible to split ownership among thousands of individual token holders. That reduces the cost of access, meaning greater participation and faster sales, and in turn that brings much more liquidity into previously restricted markets. 

Top Ecosystems Driving RWAs 

Although RWAs are still a new idea, there are hundreds of projects working to bring these benefits to investors. Some are focused on specific markets, such as real estate, while others are racing to build the infrastructure required to support RWAs, and progress has come on in leaps and bounds. 

Blocksquare

Real estate is one of the most obvious industries that stands to benefit from RWAs, and Blocksquare has helped to establish a number of thriving marketplaces where anyone can buy and sell tokenized real estate. 

Example projects include Pieme, which has built a tokenized hotel in the Ugandan capital Kampala. More recently, Blocksquare established a partnership with Florida-based Vera Capital to create fractional real estate investment opportunities in a number of commercial properties in the U.S. They plan to create a marketplace that will ultimately host property valued at more than $1 billion, spread across seven U.S. states, including a retail plaza in Dania Beach and a three-storey office building in Fort Lauderdale. 

To date, Blocksquare has already tokenized more than 150 properties in 28 countries, valued at over $145 million, and its ambition is to bring $1 billion worth of real estate on-chain in the coming years. 

COTI

On the infrastructure side, COTI stands out for its privacy-focused technology that utilizes Garbled Circuits to anonymize RWA transactions. The idea is to address some of the privacy concerns that prevent institutions from dealing in tokenized assets. 

The transparent nature of blockchain, where all transactions are public, can be problematic when dealing with sensitive assets in certain industries. Additionally, many investors want to keep information regarding their investing strategies private. 

With its Garbled Circuits-based infrastructure, COTI provides secure multi-party computation for RWAs, paving the way for selective information disclosure and verifiable computations on private data. With this, transactions can be audited without the details being made pubic, and tokenized asset owners can selectively control who gets to see their data, enabling them to prove regulatory compliance without compromising their privacy. 

Surprisingly, COTI has emerged as one of the key supporters of an initiative known as the Saudi Arabia AI and Blockchain Centre, or SAAIBC, which was set up to promote the adoption of AI and blockchain in the Middle East and Africa (MENA) region specifically. SAAIBC is especially keen to explore the benefits of tokenization in areas such as land registries, government bonds and commodities, and the fact it’s collaborating with an Israeli company on this demonstrates the urgent need for privacy preserving technologies to bring these tokenized markets to fruition. 

Some might say the partnership with SAAIBC also highlights the maturity of COTI’s technology, which was chosen ahead of various competing blockchain privacy technologies, despite Saudi Arabia’s lack of official recognition for Israel. It also shows Saudi Arabia’s commitment to becoming a leader in AI and blockchain within the MENA region. 

On a higher level, the partnership underscores the borderless nature of blockchain technology and how it’s able to break down geopolitical boundaries that prevent cooperation in other areas. At the very least, it’s a reason to be optimistic of future progress and collaboration. 

Mavryk

Armed with $5 million in funding, Mavryk has created a bespoke Layer-1 blockchain to support tokenized assets, and it’s putting a lot of effort into establishing partnerships with traditional finance to increase adoption. 

One of its main initiatives is the Digital RWA Fund, which is likened to a digital REIT and designed to support capital onboarding for asset acquisition and tokenization. The revenue from these tokenized assets ensures it has a sustainable operational capital stream, from which it can pay royalties to investors. 

Mavryk also stands out for its customized infrastructure, with one of the most interesting aspects being its validator-less consensus mechanism. Whereas other blockchains rely on validators or miners to validate and verify transactions, Mavryk utilizes a trust-minimized model that doesn’t require third-parties. This helps to eliminate problems around centralization. 

It also introduces the concept of Mavopoly Points, which is an incentivization scheme designed to reward engagement within its ecosystem. Participants can earn rewards from staking, providing liquidity or engaging with the ecosystem in other ways, increasing their standing in the community and obtaining more benefits the more involved they become. 

Centrifuge

We can’t complete this article without a nod to Centrifuge, which is one of the earliest RWA platforms around. Centrifuge dates back to 2017, and it launched its first RWA marketplace, then known as Tinlake, back in 2021. 

It’s the creator of an on-chain ecosystem for structured credit, where small business owners can collateralize assets such as invoices, IOUs and real estate to obtain funding. Since its launch, it has helped to finance more than $317 million worth of assets through thousands of small, short-term loans.

Centrifuge is known for its numerous collaborations with DeFi platforms, which help to increase its exposure and expand the available liquidity on its platform. For instance, MakerDAO is said to provide around 80% of all of the funding on Centrifuge, by marketing its lending pools to its own users. In addition, Centrifuge has partnered with Aave to create a financial pool exclusive for RWAs, bringing more traffic to its marketplace.