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Why are Real World Assets Making Waves On-Chain?

Blockchains are digital entities, so what impact can they have on real world assets? And what are "real world assets" anyway?
Oct 11, 20234 min read1587 views

It has been said that decentralized blockchain technology will impact a wide array of industries and markets through tokenization and the speed and financial efficiency with which they can operate.

Real world assets, also known as RWAs, are currently a part of the buzz in many blockchain ecosystems. But what does this term mean? What are the benefits brought by incorporating them with blockchain technology? And is this being done on Cardano?

What are RWAs?

Real world assets are exactly what the name suggests: assets that have a physical presence and exist in the real world. Specifically, it refers to anything in the real world that can be assigned a tangible value. But, a large part of the physical world is not represented digitally. When we talk about RWAs, we are typically talking about unique assets, such as:

  • Property (both houses and land)
  • Vehicles
  • Pieces of art
  • Precious gems
  • Unique collectibles

Other RWAs have already been digitally represented. These are often less unique, and although already represented digitally, they can still benefit from being brought on-chain. These assets include:

  • Precious metals, e.g., gold and platinum
  • Company stocks
  • Yield-bearing investments, e.g., government bonds

These lists are not complete, and RWAs are anything that exists outside the digital realm that has a market value that can be represented on-chain.

The Benefits of Real World Assets On-Chain

Different assets might have unique benefits that they get from being brought on-chain. However, some benefits can apply to almost all RWAs.

Proof of Ownership: Tokenizing RWAs and bringing them on-chain allows those who own them to easily and unequivocally prove that they do so. This brings many benefits, one of the most exciting being the ability to leverage their financial value.

Unlocking Liquidity: Bringing previously illiquid assets on-chain allows the owner to bring their asset to the market, thus unlocking the liquidity locked in that physical asset. This also allows others to diversify their investment. The very nature of the blockchain allows these assets to be transferred faster and cross geographical boundaries with ease.

Simplifies Asset Exchange: Utilizing the blockchain to exchange assets removes the need for the middlemen in the exchange process. Not only does this make asset exchange more efficient, but it also makes it cheaper, as these middlemen often charge a fee for the services they provide.

RWAs on Cardano

There are many projects bringing RWAs onto many of the top blockchains. Some of projects doing this on Cardano include:

  • Landano - Bringing land ownership on-chain
  • Tvvin - Bringing Gold on-chain, followed by other precious metals.
  • Optim - Tokenizing real world financial assets on-chain.
  • Pet Registry - Cardano’s first RWA, representing the ownership, and home, of a pet on-chain. Showing the diversity of assets this can include.

This is, again, not an exhaustive list, and there are many projects and people working to bring RWAs onto Cardano.

RWAs: Increasing Blockchain’s Profile

Blockchain and the cryptocurrencies built on them have long been seen as “not real.” However, the growing popularity of RWAs on-chain is showing that they are, in fact, real, and, for the first time, this is showing that this technology can have a positive impact on the real world.

In bringing RWAs on-chain, projects are leveraging the blockchain to its maximum effect, and doing so not only brings the benefits mentioned above but can help to widen the reach of this technology, significantly increase its visibility, and the general public’s understanding of its application and benefits.