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Blog posts, Thought leadership | 09/08/2023

Real-World Assets Tokenization: A Trillion Dollar Opportunity?

The shift to Web3 primarily revolves around bringing valuable assets on-chain, but what exactly has been tokenized so far in Web3? Primarily, assets known for being untied to “hard,” “real-world,” “tangible” value (of course, we strongly disagree with the argument that bitcoin and other digital assets are tied to nothing, but we’ll leave this debate for another newsletter.)

Many people and businesses are betting that crypto’s future lies in bringing “real world” assets, including stocks, bonds, equities, metal, or gold, on-chain. This week alone, significant crypto players including Coinbase, Circle, and Aave, launched a “Tokenized Asset Coalition” with a strong focus on education. “Two years ago, the majority of people (…) thought about crypto as a crazy volatile asset class, but over the last few years, the visionaries have understood that no, actually, this is the internet for finance,” said Lucas Vogelsang, CEO of Centrifuge. For BCG, a consulting firm, the “real-world’s market’s total size could reach $16.1 trillion by 2030, as “a large chunk of the world’s wealth today is locked in illiquid assets” and could become much more liquid thanks to blockchain-enabled technologies.  

The benefits of bringing real-world assets on-chain could be manifold. Per Sebastien Badault, VP of Revenue at Ledger Enterprise, “It could turn into a structural trend at the intersection of TradFi and DeFi, and usher in great opportunities to increase liquidity, democratize investments, and create more ownership across traditional markets.” He also believes today’s “siloed, fragmented, and opaque financial markets are in great need of a technical update.” Badault adds, “While this new wave of digitization could take some time to develop due to regulatory matters, it is bound to impact how traditional investors manage their assets forever.” 

At the core of this tokenization wave lies another key idea known as “fractionalization.” Imagine you’re not wealthy enough to buy a Picasso (don’t worry, it sometimes happens); with tokenization, you could own a tiny share of this Picasso, prove you’re its sole owner, and trade it on newly formed liquid markets. This new way of partially owning something could flourish in other fields, too. Venture capital funds, patents, or even copyrights, traditionally accessible to a select few, could be tokenized and made accessible to a broader range of investors, reshaping the very concept of ownership itself. 

In 2023, we’re undoubtedly living in a crypto winter that is reminiscent of that of 2018. The next crypto cycle, however, could bring the virtues of blockchains to traditional markets rather than seeking to replace them outright.  

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