Understanding Real-World Assets (RWAs)
Real-world assets (RWAs) are tangible or intangible traditional financial assets that are represented as tokens on a blockchain. These tokens can be fungible or non-fungible, allowing assets like real estate, government bonds, or carbon credits to be digitized and exist in decentralized form.
What is Real-World Asset Tokenization?
Tokenization refers to converting real-world assets into blockchain-based security tokens, which are managed on-chain. This process increases liquidity, transparency, and accessibility in asset management. Virtually any asset with value can be tokenized and used for on-chain transactions.
Types of Security Tokens for RWAs
Custodial Tokens: Represent off-chain assets managed by custodians (e.g., tokenized real estate held by a management entity).
Direct On-Chain Tokens: Represent real-world assets themselves, such as bonds issued and maintained entirely on the blockchain.
Importance of RWAs in Decentralized Finance (DeFi)
Tokenized RWAs, backed by traditional asset classes, create sustainable digital assets that position DeFi as a viable alternative to traditional finance. This innovation bridges the gap between digital and physical asset ecosystems, offering more reliability and security in digital transactions.
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