Tokenized real-world assets have the potential to revolutionize the way we think about ownership and investment – especially when it comes to Decentralized Finance.
Tokenized real-world assets are digital representations of physical assets that have been verified and authenticated. They are often referred to as “security tokens.” These tokens can be bought and sold on digital asset exchanges, and they represent ownership of a specific asset, such as real estate, art, or even a share in a company.
By digitizing physical assets and making them tradable on DeFi protocols, these assets can be more easily accessed by a wider range of investors, unlocking new sources of capital and liquidity.
The key benefit of tokenized real-world assets is their potential to help DeFi achieve sustainability. Traditional financial systems rely on intermediaries, such as banks and brokerage firms, to facilitate the buying and selling of assets.
These intermediaries charge fees for their services, which can cut into profits and reduce returns for investors. By contrast, DeFi protocols are decentralized and operate on blockchain technology, allowing them to facilitate asset trading without intermediaries. This can reduce costs and increase efficiency, making DeFi a more sustainable model for asset trading.
As we all know, 2022 has proven brutal for investors in crypto—the Terra Debacle, FTX crash, crypto dot com layoffs, and more. The bear market spared no one and has left many to question DeFi’s sustainability.
Tokenizing real-world assets unlocks cashflow that’s not affected by Crypto’s volatility. This could give back confidence and can potentially upstart DeFi once more.
Examples of Tokenized real-world assets
Real estate
Tokenized real estate assets represent ownership of a specific piece of property, such as a building or a plot of land. These tokens can be bought and sold on DeFi protocols, allowing investors to easily trade ownership of real estate assets.
Art
Tokenized art assets can also be ownership of a specific piece of artwork, such as a painting or sculpture. They can be found in a few DeFi protocols.
Commodities
Tokenized commodities also can represent ownership of physical goods, such as gold or oil. This can allow investors to easily trade ownership of commodities within the web3 space.
Stocks and bonds
Tokenized stocks and bonds represent ownership in a company or a debt obligation. These tokens can be bought and sold on DeFi protocols, making it easier for investors to trade ownership of these assets.
What they bring to the table for DeFi
Tokenized real-world assets can also help to mitigate the volatility of cryptocurrencies. While crypto prices can fluctuate significantly over short periods, tokenized assets are backed by physical assets that have a more stable value.
This can provide investors with a hedge against the volatility of cryptocurrencies and increase the overall stability of DeFi platforms.
In addition to increasing sustainability and stability, tokenized real-world assets can also improve transparency, capital efficiency, and liquidity in the asset markets. Because DeFi protocols operate on blockchain technology, all transactions are recorded on a transparent, publicly available ledger.
This level of transparency can increase trust in the asset markets and make it easier for investors to track their investments.
Furthermore, tokenized assets can increase capital efficiency by allowing investors to easily buy and sell small fractions of an asset, rather than having to purchase the entire asset outright. This can make it easier for investors to diversify their portfolios and access a broader range of investment opportunities.
Final Thoughts
Tokenized real-world assets have the potential to transform the way we think about ownership and investment. By leveraging the power of DeFi protocols and blockchain technology, these assets can increase sustainability, stability, transparency, capital efficiency, and liquidity in the asset markets.
Edmond is a passionate writer for Video games, GameFi and Web3. He has worked for top GameFi companies and video game/crypto news websites.
