Real world assets on blockchain (hereinafter referred to as RWA) use digital tokens to represent physical assets as well as traditional financial assets, including currencies, commodities, securities, and bonds.

RWA tokens are one of the biggest market opportunities in the blockchain industry, with a potential market size that could reach hundreds of trillions of dollars. In theory, any valuable asset can be turned into a token and put on the chain.

At present, RWA tokens are developing rapidly in the digital asset industry, and more and more projects are exploring how to tokenize various assets such as cash, commodities, and real estate.

This article will explore the definition, creation methods, and how to provide comprehensive solutions for these token assets in a unique way to meet the needs of RWA tokens.



What is RWA?

RWA token is a digital token on the blockchain that can represent various physical assets and traditional financial assets, such as cash, commodities, securities, bonds, credit, art, and intellectual property. The tokenization of RWA marks a key breakthrough for assets in terms of channels, transactions, and management models, bringing new opportunities for blockchain financial services and various non-financial use cases based on encryption and decentralized consensus.

Asset tokenization is one of the most promising blockchain use cases, with a potential market size that could cover almost all human economic activities. The future of finance lies on blockchain. At that time, there may be hundreds of blockchains simultaneously, with RWA tokens worth trillions of dollars, and these blockchain networks and distributed ledger technology networks are connected together by a universal interoperability standard.

Tokenize real-world assets

To tokenize real-world assets, ownership of assets needs to be represented in the form of on chain tokens. In this process, corresponding digital assets will be created for the target assets, so that ownership of the assets can be managed on the chain and a connection can be established between physical assets and digital assets.

Compared to traditional assets, token assets have higher liquidity, wider coverage, transparent on chain management, and smoother processes. Transforming financial assets into RWA tokens can also integrate distribution, trading, clearing, settlement, and custody processes, achieving a more streamlined and efficient on chain financial system and reducing counterparty risk. In this way, capital can be utilized more efficiently.

How to tokenize real-world assets?

To tokenize real-world assets, the following steps need to be taken.

Choose assets: Determine which real-world assets to convert into tokens.

Define token specifications: Define token types (homogeneous or non-homogeneous), token standards (ERC20 or ERC721), and other key attributes.

Choosing blockchain: Deciding whether tokens should be issued on public or private chains. After integrating the Cross Chain Interoperability Protocol (CCIP), RWA tokens can be issued on any blockchain.

Access to off chain resources: Most token assets require access to oracle machines to obtain reliable and secure off chain data. Use verification services to validate the underlying assets of RWA tokens. This is crucial as it ensures transparency for users.

Issuing tokens: Deploying smart contracts in the blockchain network of one's choice, minting tokens for users to use.

RWA for DeFi

RWA tokens have the potential to completely disrupt the decentralized financial landscape. DeFi can provide concept validation for on chain finance in many ways, serving as a superior technical layer to assist in its financial and economic activities. However, there are still a large number of assets in the world outside of blockchain, and these assets can also enjoy the value brought by blockchain technology. Therefore, RWA tokens are crucial for the rapid development of the digital asset industry, as they can connect large-scale assets outside the blockchain ecosystem to the on chain ecosystem.

The integration of traditional assets into the blockchain ecosystem will give rise to a new financial system, which will have higher liquidity and transparency, lower systemic risks, and no conflicts of interest. Therefore, we will see a more fair environment where there are no few people who abuse their power for personal gain.

RWA has always been a constantly evolving niche market in the DeFi ecosystem. According to DefiLlama, the total lock up volume (TVL) of RWA reached around $5 billion in December 2023.

RWA can also be used to create innovative financial products. For example, MakerDAO, one of TVL's highest DeFi protocols, uses various real-world assets as collateral for its stable coin DAI. MakerDAO has adopted an innovative approach by combining traditional assets with blockchain assets to create new financial assets.

The value of RWA tokens

RWA tokens have numerous advantages, including:

Liquidity: RWA tokens are based on universal cross chain implementation, unlocking the entire blockchain ecosystem and connecting liquidity, thus injecting liquidity into traditional assets with low liquidity.


Transparency: As token assets are placed on the chain, the transparency and auditability of the assets can be guaranteed. This approach can more accurately assess the leverage and risk of the entire system, thus reducing systemic risk.


Low threshold: RWA tokens can lower the threshold through blockchain applications, dividing assets into smaller parts and covering more user groups that were previously unable to be covered, thereby expanding the application scenarios of assets.

Risk of RWA Token

RWA tokens also have some risks, mainly in the custody of physical assets and interaction with the off chain world. In addition, smart contracts may also have various vulnerabilities. Finally, simply releasing assets is not enough, high liquidity and market demand are also needed as support.