Real World Asset Tokenization (RWAs)

In the most abstract form, tokenization converts the value stored in tangible or intangible object into a token that usually can be manipulated along a blockchain system. In simple words, tokenization can turn almost any asset, either real or virtual, into a digital token and enables the digital transfer, ownership and storage with out the necessary need of a central third party/ intermediary.

A digital token can thereby be described as a piece of software with a unique asset reference, properties and/or legal rights attached. Even though, similar pieces of software can be done the fact that a token runs on blockchain differentiates it from other digitization methods. Using a blockchain to create a digital token enables the collaboration of different companies, which in turn allows the aggregation of otherwise fragmented information into one digital token. Moreover, all parties can update information seamlessly and verify their correctness.

Benefits of tokenizing assets

• By streamlining IT systems, sharing the infrastructure between all participants and without requiring the involvement of a central third party, transaction costs are significantly  The digitization and automation of manual work along with the reduction of a part of the reconciliation / compliance work also enable to cut inefficiencies.
• In addition, simple send/ receive transaction settlement and clearance can be automated and allow fast transactions of down to seconds, where traditionally hours or days were required.
• Both options lead to an increase in efficiency of single transaction handling and allow an optimization of the market. Handling tokenized assets creates a more efficient market and optimizes the way assets and services can be exchanged.
• By allowing to fictionalize assets and to own and perform actions over only a portion of an asset, blockchain enables a greater liquidity. By cutting down barriers to investment, a wider range of people can buy/ invest in assets. In traditionally rather illiquid markets (e.g. real estate, fine art) this technology
  can help sellers to find more easily an counterpart to perform a transaction.
• It also supports inclusive finance by opening up the invest market to a wider range of investors. As no intermediary function is required any more, investors have now access to investing opportunities whose participation used to be limited due to geographical and infrastructural reasons or due to high minimum investment thresholds. Now, the access to financial markets and a variety of new kinds of assets has been enabled regardless of the location of an investor and with much lower minimum capital requirements.
• It also supports inclusive finance by opening up the invest market to a wider range of investors. As no intermediary function is required any more, investors have now access to investing opportunities whose participation used to be limited due to geographical and infrastructural reasons or due to high minimum investment thresholds. Now, the access to financial markets and a variety of new kinds of assets has been enabled regardless of the location of an investor and with much lower minimum capital requirements.
• Blockchain introduces transparency by de- fault, as all transactions occurring on a Blockchain infrastructure are accessible to all its participants (limited to the perimeter of a blockchain, meaning that everyone can see it on public Blockchains while only authorized participants can have access on private Blockchains). This property is inherited by all tokens representing assets on Blockchain.
• For physical assets, this transparency allows to an improved traceability and to provide trust over the provenance and origin, by allowing any user to review the whole history of activities performed over the asset. Ownership over a given asset, and the associated chain of ownership can therefore be easily be identified.
• However, transparency is not systematically acceptable, and is even antagonistic with the mere goal of some use case, for instance in the asset management industry or when competitors use the same infrastructure. In these cases, some privacy enhancing technologies can be used to avoid leaking any sensitive information to other participants to a network.
• In the past and current world, corporates obtain a significant amount of data for each asset, but it appears to be constantly challenging to map and inter-link data points such as intellectual properties, rights, licenses, ownership to individual products. Thereby, mostly fragmented data points are accessible. These fragmentation makes it economically unmanageable and generates avoidable efforts.
• As blockchain introduces a single IT layer of trust for allowing business partners or competitors to share together their data, multiple actors of an ecosystem can interact with the same digital representation of an asset, driving efficiency all along the value chain or industry and introducing new ways of collaboration.
• For instance, multiple initiatives have emerged in the trade finance industry over the last few years to enable companies to share information about assets that are being transferred around the world, automating and simplifying the process for high volume trading through smart contracts.