Real World Asset (RWA) Backed Tokens Explained

• You should always ensure that real-world assets (RWA) consist of assets like gold, real estate, fine art, and many more.
• These backed tokens can eventually represent almost everything that you can imagine.

To begin, let’s first understand Real World Assets (RWA) and their relationship to tokenization. Tokenization has been a major transformation in finance and other markets for over 50 years. It’s hard to believe, but tokenization can be applied to various assets, including real-world assets.

There is a huge process that transfers the value associated with any organization into a token. 

What Is Real World Asset (RWA) Tokenization?

Real-world asset tokenization always refers to representing rights and owning a real-world asset. It eventually uses digital tokens on a blockchain or distributed ledger. You won’t believe it involves converting the value or some tangible asset ownership, as mentioned above. 

Some steps of the tokenization process eventually involve, 

1. Identification of the Asset

Firstly, for tokenization asset can be selected, and later its ownership rights and other values are defined. 

2. Compliance With Legal and Regulatory

This aspect of tokenizing the asset is always addressed and ensures that the process complies with some relevant laws and regulations. 

3. Valuation of Asset

You should always know that the value of the asset is very determined. It can be through an appraisal or process of valuation so that it can establish the basis for the insurance of the token. 

4. Creation of Token

We should always know that the creation of digital tokens that too on a blockchain or distributed ledger will always represent ownership or some rights to the real-world asset. 

5. Onboarding of Investor-

Interested investors can purchase the asset, or they can also acquire digital tokens, which represent fractional ownership. 

6. Liquidity and Trading

As always, all the tokens can be traded on some or the other digital assets platforms, and they also provide liquidity which always allows investors to buy or sell, and on the other side, it also allows investors to trade with each other. 

Nowadays, tokenization allows for any asset to be traded on the blockchain. For those unfamiliar with the term, tokens are digital representations of real value. Tokens make it possible to divide assets into fractions, which is not achievable through traditional digital means.

Real World Asset (RWA) Backed Tokenization

Real estate tokenization has emerged as a promising application of blockchain technology, allowing digital representation of real estate assets while ensuring their security. However, while there is much discussion about its potential, actual use cases remain limited. 

Also, you should know that the revenue participation models are the next upcoming iteration of real-world asset tokenization, as they are the ones that offer an investment into the revenue of the asset that too via participation tokens.

Many companies issue a participation token which eventually grants the holder and gives the right to a percentage of the future profit.