Could RWA Tokenization Lower the Gap Between the Wealthy and the Poor?

Real World Asset (RWA) tokenization may well be the most powerful force in terms of the ongoing financial revolution, with the potential to become a trillion-dollar industry. It allows a large asset (such as a real estate property) to be broken up into smaller components for sale.

This increases market liquidity and allows less wealthy individuals to be able to make a purchase. It also provides more creative and potentially lucrative earning opportunities. For instance, an individual could be able to invest in a tokenized share of a larger multi-family housing unit, taking a proportional share of the profits.

Given an ongoing global housing crisis (it’s nearly impossible for first-timers to purchase a home in the modern era), a volatile macro-economic climate, and a growing divide between the rich and poor, RWA tokenization is perfectly poised to grow in prominence and alleviate many existing problems within the wider economy.

A Closer Look At RWA Tokenization

RWA stands for anything that has a physical quality. This includes motor vehicles, gold, silver, art, medical devices, electronic devices, etc. Yet it also includes certain non-tangible items such as financial instruments (stocks, bonds), patents, and intellectual property.

“Tokenization is the largest transformation of finance and markets in over 50 years. Traditional asset tokenization may reach $16tn+, over the next 5-15 yrs.”

Source: Simon Taylor, Twitter.

The main theme is that it allows for increased market access at a low cost. A real estate property that costs $10 million can be broken up into 10 million shares, with a minimum entry of perhaps $10 (or even lower). This means that the market is now available to practically everybody, instead of a small few investors.

It’s also possible to have tokens backed by real-world assets. This is already the case with stablecoins, but it would be interesting to see real estate-backed coins, gold-backed coins, etc.

Main Benefits Of Tokenization

Tokenization has a myriad of benefits to assist with global financial inclusion. The main ones are:

• Liquidity - Tokenization itself promotes increased liquidity. The tokens are easy to trade and are easier to place on the market and exchange.
• Fractional Ownership - Investors can own small tokenized shares of a larger item. This increases financial access and investment opportunities, with a lower entry point.
• Transaction Efficiency - Blockchain is known for its efficiency. Assets can be exchanged at a low cost, at speed, with instant settlement.
• Proof Of Ownership - Immutable NFTs mean that there is little doubt about who owns an asset.

The main hurdle with tokenization is compliance with traditional frameworks. Compliance hurdles can be difficult to surmount, in terms of reconciling much slower systems with modern blockchain databases.

Crypto OGs & Tokenization

The big names in crypto are likely to be very enamored with the idea of RWA tokenization. Originally, cryptocurrencies were designed as a means of increased financial inclusion, but this was done specifically from the point of view of financial payment methods and non-inflatable cryptocurrencies.

It is now much more expansive through tokenization, which can help to democratize all markets - energy, commodities, real estate, technology, finance, etc. Real estate is perhaps the most interesting of all the applications for RWA tokenization. It’s one of the largest markets and it's one that is deeply tied to financial inclusion, given the ongoing housing crisis. And we have seen significant progress in this sector, compared to others.

“The next generation for markets, the next generation for securities, will be tokenization of securities.”

Source: Larry Fink, BlackRock CEO

Propy, for instance, was one of the first RWA tokenization projects to sell house in the US as an NFT. has a fully-fledged ecosystem for buyers, sellers, and agents. This means that both sides of the equation are satisfied - the speed, security, and convenience of a blockchain-based property transfer, as well as the compliance with existing rules and regulations.

The ecosystem caters to crypto, NFT, and traditional payment transfers, offering the world’s first title and escrow service. It’s also possible to mint property addresses as NFTs using PropyKeys, Propy’s ecosystem dapp. This means that individuals can mint their property as an NFT and list it themselves, empowering homeowners in a big way, and streamlining much of the red tape that has traditionally come with property transfers.

What is especially promising is the fact that many large financial institutions and political figures that were once staunchly against cryptocurrencies seem to be warming to RWA tokenization. This includes J.P. Morgan, Goldman Sachs, and KKR.

Conclusion

2024 will likely be a big year in RWA tokenization. In time, assets such as paintings, cars,  precious metals, and fine wines will be traded on-chain.

It’s already happened to a large degree, with many large-scale property transfers having taken place over a distributed ledger - it just has to be rolled out to the public at scale through trusted providers.

Ultimately RWA tokenization could herald a Golden Age in financial equality, helping to deal with existing issues within the broader economy.