Decentralised Finance (DeFi) – What Is Meant by The Tokenisation of Real World Assets (RWA)

Physical assets like real estate properties, artworks, commodities are often referred to as real world assets (RWA) in the crypto and blockchain language. Unlike cryptocurrency Bitcoin and Ethereum, real-world assets are tangible in nature. RWA tokenisation concept took off, several real world asset tokens are already trading on open markets.

Tokenisation is the process of converting real world assets into virtual tokens that exist on the blockchain is called RWA tokenisation or Real World Asset tokenisation. It makes real world assets to be easily traded without any geographical or high-initial investment limitations. It is, in effect, a virtual fractionalisation of assets.

Asset tokenisation is the new concept made possible by the blockchain technology. Whenever an investor would like to acquire a traditional asset like real estate properties, there can be hurdles to overcome. While geography can be a major one, others like high initial investment amount can also prove a barrier to making an investment.

However, the asset tokenisation technology allows investors to easily purchase a part of the real-world asset without the hassle. The decentralisation characteristic of blockchain connects buyers and sellers across the globe, increasing the accessibility of RWA investment. Additionally, fractionalizing real world assets helps increases the liquidity of RWA trading.

The evolution of blockchain is remarkable throughout the years. While Bitcoin enabled electronic peer-to-peer transactions, Ethereum opened gates for applications with decentralised Applications or d'Apps. From enabling the development of d'Apps to blockchain-based games, non-fungible tokens (NFT's), DeFi, blockchain has come a long way.

However, initially tokenisation was only limited to digital assets like non-fungible tokens. Stablecoins made it possible to represent a stable unit of value on the blockchain. USDC and USDT are the best examples of Stablecoins, each token representing the value of 1 US dollar at any given time.

From the development of blockchain, the real world asset tokenisation was able to emerge bringing asset tokenisation concept to real world assets reducing some of the limitations of investment into traditional assets. Now any physical asset, whether it is stocks, shares, investment funds, real estate, artworks, commodities, can be converted into digital tokens that exist on the blockchain.

(Source: Coin Gape)