Top 9 RWA Tokenization Use Cases - Going Beyond Buzz Words

 

Owning high-value assets like fine art or real estate has traditionally been riddled with roadblocks and high entry barriers.

By representing physical assets as digital tokens on the blockchain, RWA tokenization offers benefits like increased liquidity, fractional ownership, and enhanced transparency. The potential is enormous – according to Boston Consulting Group, the market for tokenized assets could reach $16 trillion by 2030.

This shift away from legacy systems opens up a world of possibilities, and innovative use cases are constantly emerging.

In this article, we uncover nine transformative use cases of RWAs and how they are reshaping the way we invest and interact with the real world. 

1. Real Estate

The massive growth in the property market this decade will add more demand for tokenized real estate assets. The global real estate market will be valued at over $4.3 trillion in 2024, with an expected CAGR of 7.1%.

Tokenization adds more liquidity to the illiquid asset, real estate. When this asset is converted into digital tokens, users can easily buy and sell tokens without a long waiting period. 

In addition, tokenized real estate allows retail investors to own a smaller portion of property, apartments, or commercial stores. For example, a plot in California worth $1 million can be tokenized into 100,000 tokens, each worth $10. 

Moreover, real estate tokenization attracts global investments as investors can buy tokens to obtain ownership without even stepping out of their houses. As a result, an investor from a developed country can explore the opportunity to invest in developing countries that can provide a higher return in the future. 

RealT is a prominent example of a project that offers fractional real estate ownership in the form of tokenized assets. Investors can visit their online marketplace to buy tokens starting at $50.

2. Fine Art and Collectibles

The fast-growing global art market is estimated to surpass $889 billion by 2032 with a CAGR of 6.15%.  In that case, tokenized fine art and collectibles will gain more buyer's attention in the coming years.

Tokenizing art will record the ownership details on blockchain and ensure its originality. Moreover, the ownership history is also available to potential buyers.

Popular artwork is expensive, like Salvator Mundi by Leonardo da Vinci, which was sold for over $450 million. However, the fractionalization of such expensive art shares its ownership with multiple investors for owning a piece.

Finally, tokenized art or collectibles facilitate trading opportunities similar to trading cryptocurrencies on various supported marketplaces. This trading platform, in turn, creates price appreciation for artwork with high demand. 

Maecenas is a perfect example of a blockchain platform that allows users to buy, sell, or trade tokenized fine art. This platform supports payment in fiat currencies and cryptocurrencies with global access 24/7.

3. Commodities

The global commodities market is projected to reach $139.3 trillion by 2028. Therefore, tokenizing prominent commodities like gold, oil, iron, and other precious metals provides global market access, enabling better price discovery for users. 

Tokenized communities also enable the tracking of ownership and movement of commodities, which simplifies the supply chain. This transparency feature of the blockchain ledger adds more trust when it comes to trading commodity tokens. 

Investors can also use commodity tokens as collateral to lend from DeFi platforms without selling their tokens. Moreover, traders and investors can use their commodities for hedging to avoid potential losses on their portfolios. 

Tradewind is an online platform offering digital tokens representing precious metals. This platform offers fractional ownership of gold and silver to global customers around the clock.

4. Trade Finance

The global trade finance market size is expected to reach $87.81 billion by 2031, following a CAGR of 7.5%. Tokenizing trade finance leads to automating and reducing friction in trade documentation with the help of smart contracts in the settlement process. 

Tokenizing invoices or receivables also gives the company faster access to working capital. Moreover, tokenized trade finance can significantly reduce the cost and paperwork that existed during the traditional process. 

In addition, smaller businesses can explore financing options that were limited during the pre-tokenization era. Also, business owners can choose such options from financial entities without geographical limitations. 

Tradeteq provides trade finance assets backed by TRADA tokens to provide liquidity to the trade finance sector. Here, this firm fractionalizes trade finance assets on the XDC blockchain network to offer its digital tokens to global investors.

5. Carbon Credits

The global carbon credit market is predicted to attain a valuation of over $1.6 trillion by 2028 at a CAGR of 31%. Each carbon credit represents the reduction or avoidance of one ton of carbon dioxide or an equivalent amount of other greenhouse gases. 

Tokenizing carbon credits can help create a verifiable and transparent carbon offset market for individuals and companies. Moreover, converting these credits into tokens allows tracking credit creation and its usage. 

The world is moving towards a greener approach with increased participation lately. Here, Tokenized carbon credits incentivize companies and individuals to trade and invest in carbon credits to reward them for their eco-friendly actions.

Tokenization also paves a path for a wide range of user participation, including small businesses and retail investors. People can also get the chance to access a global marketplace that offers a liquid market for their carbon-offsetting efforts. 

Toucan is a bridging protocol that converts carbon credits into Tokenized CO2 or TCO2 tokens. These ERC-20 tokens can be integrated with any supported DeFi platform to offer tokenized carbon credit-based services.

6. Intellectual Property (IP)

The intellectual property (IP) service market is forecasted to attain a revenue of $5.8 billion by the end of 2030. Tokenizing IPs such as patents, trademarks, and copyrights can help users streamline licensing agreements and automate royalty payment and its management. 

Typical high-valued IPs can be expensive and are affordable only for wealthy investors. At the same time, tokenization helps retail investors and creators to own and benefit from high-value fractional IPs.

IP-backed NFTs that belong to popular artists or other creators can be unique digital assets tradable at marketplaces. Moreover, such NFTs offer new forms of monetization, such as fixed royalty for every NFT resale and tickets for various events. 

IPwe is a blockchain-powered patent platform that helps enterprises understand, manage, and transact their IP assets. Notably, this platform has extensive data on 80% of the world's patents on its system.

7. Infrastructure Projects

The global infrastructure market is expected to reach $5.9 trillion by 2028 at a CAGR of 11%. Tokenizing the demand for rich infrastructure projects like energy, transportation, and communication can attract a wider range of investors and facilitate a wide range of funding options. 

Tokenized infrastructure projects can offer governance options for their token holders. As a result, investors can vote on important decision-making processes around the development and management of the invested projects. 

The stakeholders of tokenized infrastructure projects, such as investors, users, and project developers, can also earn rewards for their contributions. This incentive system facilitates the project's development and success.  

SunContract is a blockchain project that offers electrical power trading between producers and consumers through their platform. To facilitate this trading, they have established an energy pool for registered users to trade electricity using SunContract tokens (SNC).

8. Debt Securities

The global debt security market is expected to reach $2.8 trillion by 2032 at a CAGR of 7.8%. For this reason, tokenization of debt securities like traditional bonds can increase efficiency, reduce settlement times, and open access to a broader investor pool.

In addition, tokenization can lead to the creation of new asset-backed securities on blockchain, like green bonds from environmentally friendly projects. The introduction of new debt instruments expands the range of fixed-income products for investors. 

Tokenized bonds can also be programmed using smart contracts to execute specific terms and automate interest payments and other functions. This programmable bond allows users to explore products with varied interest rates and tenure. 

HSBC Orion has helped the Hong Kong Monetary Authority (HKMA) in issuing its digital green bond on the private blockchain. This bond issuance is the largest-ever digital bond deal valued at over $760 million.

9. Natural Resources

According to a Statista report published in 2021, the top five leading countries' contribution to natural resource value is $214 trillion. Tokenizing the ownership of natural resources like timber, water rights, or mineral deposits helps to democratize investment opportunities. 

Converting digital tokens that represent various natural resources allows the creation of transparent records for tracking resources and ensuring ethical and sustainable sourcing practices. Moreover, with smart contracts, resources can be allocated with minimal possible wastage. 

Tokenizing natural resources also helps develop projects that promote an eco-friendly mode of operations. For example, projects can develop RWA-linked 'green bonds' or other sustainability-focused investment products.

Stobox is a digital platform that offers solutions to tokenize energy and natural resources like oil, gas, or plantations. The value of the digital tokens is tied to the chosen resource and offers investors an opportunity to own a fraction of valuable natural resources.

Conclusion

While the initial excitement surrounding RWA tokenization might have focused on increased liquidity and fractional ownership, it's clear this technology's true power lies in its potential to reshape industries and foster a more equitable,sustainable world.

From transforming the way we fund infrastructure projects to democratizing ownership of natural resources, RWA tokenization provides a critical tool for addressing complex economic and social challenges. This shift unlocks opportunities for both institutional investors and everyday individuals to participate in initiatives aligned with their values.

The nine use cases discussed are just the beginning. As the technology matures and adoption grows, we can anticipate a surge of innovation across industries yet to be fully disrupted.

Get deeper into the weeds by exploring these 12 projects leading the charge in RWA tokenization.