Real-world assets are the value drivers for a web3 marketplace to successfully tap into the traditional marketplace and create consistent value for web3 users.
These assets allow web3 business leaders to provide unique benefits to the typically stagnant traditional financing landscape, offering more control. Additionally, these assets are more dynamic and accessible, ensuring the growth of financial markets and making web3 businesses more profitable. Tokenized assets are only growing in value, with the market potentially reaching the $10 trillion mark.
Courtesy of OneSafe, here’s a breakdown of real-world assets and why they should matter to you right now.
What are Real-World Assets for Web3 Companies?
Real-world assets in a web3 marketplace are fungible or non-fungible tokens representing traditional assets on blockchains. Using tokenization, real-world assets bridge the gap between decentralized and traditional finance, creating on-chain representations or real-life items.
As a result, companies and consumers can invest in commodities, real estate, and alternative assets, such as art, while receiving real-world asset representation on a blockchain.
Real-world assets don’t have to represent ownership of a full asset, allowing you to fractionalize parts of it, such as having a stake in a property or its revenues.
The tokens have more liquidity and availability to a wider range of investors within web3 and banking. With the blockchain world operating 24/7, having tokenized assets allows web3 companies to leverage liquidity and capitalize on their affordability to maximize value.
The total value locked (TVL) in real-world assets as of last December stands at $6.5 billion, showing how essential they are becoming in today’s financial landscape. Real-world asset tokenization has been described as the next generation of markets by experts, and for good reason.
Tokenization will continue to gain momentum as more traditional assets transition become available digitally, facilitating the merger of centralized and decentralized financial systems.
Benefits of Real-World Assets
As mentioned above, real-world assets allow for fractional ownership, letting investors diversify their portfolios by owning parts of different asset classes ranging from properties to collectibles. The assets have more liquidity and affordability, creating a more diversified web3 marketplace.
The investment landscape becomes democratized, creating more opportunities for a larger audience, including those from lower-income classes. Furthermore, tokenized real-world assets can be quickly transferred into cash when needed, improving the speed and efficiency of transactions, and thus, optimizing asset management.
Real-world assets also offer traditional financial institutions groundbreaking technological opportunities by partnering with web3 businesses. Such instruments allow the traditional sector to adopt web3 infrastructure, increasing efficiency, eliminating middlemen, and relying on round-the-clock markets, adapting to real-life changes in value.
As a result, a traditional institution can conduct business with a global crypto bank and enjoy the same web3 benefits decentralized entities do, creating more collaborative opportunities.
Also, real-world assets provide more transparency thanks to the use of an immutable public ledger, ensuring all transactions on the blockchain are visible to all network users. Additionally, cryptography is used to secure tokenization on a blockchain, protecting ownership and reducing the risk of fraud. Tokenized assets remove barriers associated with traditional asset investment, leading to borderless accessibility.
Furthermore, the use of smart contracts or transaction protocols, which have grown in the post-pandemic era, ensures the immutability of ownership.
Why Web3 Companies are Embracing Real-World Assets
Web3 and banking are becoming well-acquainted with real-world assets and their infinite potential. As a CEO, CFO or COO, real-world assets can help you improve the flow of your business operations and help you to embrace a more inclusive, flexible model. Additionally, you can make your business more scalable with the help of a constantly active web3 community and with the guidance of real-time insights.
Income-raising possibilities leveraging real-world assets include tokenizing revenues generated by assets with high upfront costs, such as a data center. Tokenization enables you to offer pieces of such assets to investors and improve communication with them, leading to better business outcomes and potential deals, both in traditional and decentralized spaces.
Web3 companies are also embracing real-world assets because they deliver meaningful capital efficiencies in capital market use cases, with money market fund redemptions and repurchase agreements happening within minutes.
The reduced settlement times triggered by tokenization jumpstart significant cost savings and open up more business use case possibilities. Since 2017, when tokenization was made possible amid the initial coin offering boom, real-world assets have ballooned in value, creating a financial market with unprecedented opportunities.
How Can Web3 Businesses Leverage Real-World Assets Going Forward?
To successfully capitalize on a growing web3 marketplace by leveraging real-world assets, leaders must optimally navigate the potential and, sometimes, unavoidable pitfalls. The biggest hurdle to overcome with real-world assets is regulatory compliance. Given that they are financial instruments, they are subject to financial guidelines in their respective jurisdictions.
A more unified approach among regulators and their perception of digital assets is needed for the web3 industry to maximize its prospects.
Additionally, for the web3 marketplace to become more productive and financially viable, web3 businesses must considerably increase their transaction-processing capabilities.
Thanks to the introduction of Layer 2 technologies and an increased understanding of web3 and banking, the possibility of bridging decentralized finance and established markers becomes more realistic. The current conditions surrounding adoption must improve as they present challenges to market maturity, implementation, and infrastructure.
Real-world asset tokenization is poised to break out in 2024 because it’s a reliable counter against market volatility, with the high-yield environment creating more opportunities to digitize financial assets. Web3 businesses must successfully navigate a comprehensive tokenization process to reap the benefits of real-world assets, including asset sourcing, trading and asset servicing, digital asset issuance, and reconciling data. Success with tokenization starts with structure.
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