Open-source smart contract blockchain Avalanche could be one of the big beneficiaries of the rise of tokenized real-world assets, or RWAs, on blockchain.
The Real World Assets (RWA) sector or tokenized real-world assets on the blockchain has become one of the most interesting and growing verticals in the decentralized finance (DeFi) ecosystem.
According to the Osmosis platform, RWA is currently among the top 10 verticals in the DeFi world, having surpassed the XNUMX mark. $1.000 billion in total value locked (TVL) this year.
According to Osmosis, RWA TVL has gained $900 million so far in 2023.
The impressive growth that the RWA sector has been experiencing has been driven mainly by the interest that projects such as Avalanche are showing in this sector.
This month, Avalanche developers announced the launch of a $50 million dollar program, called Avalanche Vista, to accelerate the tokenization of assets on this blockchain. The new program will focus on Attracting tokenized asset market activity to the Avalanche blockchain, so this chain could be one of the biggest beneficiaries of this sector, which is making a strong entrance into the digital economy.
What is asset tokenization?
Tokenization is the digital representation of real-world assets, which exist outside the blockchain, through tokens. This process is done in order to Bringing real-world assets into the blockchain, to open up a wide range of opportunities for both businesses and investors.
When a real-world asset is tokenized on-chain, The created token represents the ownership and rights on said asset.
The emergence of real-world assets within the blockchain is unlocking new use cases for digital assets. In fact, major banks such as Citi and Bank of America have analyzed the potential of this vertical in the DeFi sector, highlighting its potential to transform almost all forms of investment, from real estate and loans to bonds, stocks and art.
RWA tokenization revives the DeFi ecosystem
Late last month, cryptocurrency pricing platform CoinGecko published a report in which he highlighted the role of RWA assets in driving value in the DeFi ecosystem.
CoinGecko analysts indicated that the rise of tokenization of real-world assets has become A new source of yield for the DeFi ecosystem, opening up new opportunities for increased returns and diversification for investors.
Following the fall of companies like FTX last year, the total value locked (TVL) in DeFi began to decline dramatically. According to CoinGecko, investors are finding greater appeal and yield in the TradFi sector than in DeFi, so they have been withdrawing their funds from the decentralized finance ecosystem and moving them towards traditional finance, due to the lower risk that this market currently poses.
However, projects within the DeFi ecosystem are leveraging real-world assets to explore new products and solutions that can offer returns to investors and attract their interest back to the decentralized space.
“Real-world assets are huge in the traditional financial industry. However, these assets are barely leveraged in the DeFi world,” CoinGecko analysts noted in the report, so several decentralized projects are taking advantage of this opportunity to increase available liquidity and offer investors a new asset class with which they can participate in the DeFi ecosystem and, at the same time, obtain returns on their traditional investments.
Some of these projects include Ondo Finance, Maple Finance, Goldfinch, and Centrifuge, which are exploring RWA tokenization to bring the market into DeFi.
Also, companies such as Mitsui, Ernst & Young, Franklin Templeton and WisdomTree, and institutions such as State Street and the Central Bank of Italy, are Exploring asset tokenization on the blockchain.
A $16 trillion market by 2030
Projections indicate that by 2030, the market for real-world assets tokenized on the blockchain could exceed $16 trillion.
Financial experts such as Larry Fink, CEO of BlackRock, the world's largest asset manager, believe that The next generation of assets will be tokenized securities. Fink said during the DealBook event, hosted by the New York Times, that tokenization on blockchain is the next-generation future for financial markets.
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