Tokenizing Real World Assets: A Report from Outlier Ventures

Outlier Ventures (OV), a veteran organisation within the digital assets, crypto and web3 ecosystem, recently launched a report on Tokenization of Real World Assets. Before we jump into the report, a bit about OV.

Very few organizations across the world can compare with OV when it comes to how native they have been to the web3, crypto and digital assets space. They have been arguably the most versatile investor in the space and incubating top firms like Brave , Boson, Fetch.ai , Fluf and more. Across 34 Cohorts, 278 firms have started their journey here.

The report does a fantastic job of codifying and providing a simple framework for tokenizing real world assets (RWAs). But why do we need to tokenize our homes, our tickets, our bank accounts, our money, our markets or even our content? Tokenization of assets can help achieve digitalization and financialization of assets.

The report goes into several reasons why Tokenization has been grabbing headlines in recent times. One of the mind boggling stats around tokenizing fiat currencies through CBDCs (Central Bank Digital Currencies) is that over 114 countries (95% of the world's GDP) are working on a CBDC. Some countries focus on the economic advantages of CBDCs, while others due to strategic and political advantages.

Let us focus on the advantages (digitalization and financialization) of tokenizing RWAs with an example. As per a private equity report from 贝恩公司 , tokenization of private real estate is a $317 Trilliion market.

Imagine tokenizing properties we own. An on-chain ledger of real estate is not a new concept. From a digitalization perspective, this offers a historical record of ownership and transactions of the property. With digitalization, property transactions can settle instantly, properties could be broken into smaller units to democratize ownership.

While these are broadly advantages of digitalization achieved through tokenization, financialization is another critical aspect. As properties can be tokenized into smaller units for purchase, more accredited investors can afford the investments. Tokenization also increases the 'transaction velocity', where units of a property can be bought or sold by more stakeholders more frequently, there by creating a liquid market.

As participation in a property investment increases, the number and frequency of transactions on units of the property increases, that data can help better pricing of the asset. A NYC based startup Parcl is focusing on creating rich pricing data for the real estate market, where investors can be long or short real estate in Florida, San Francisco or London.

Therefore, tokenization is not just about digitalization, but is also about financialization. That was one of the biggest takeaway for me from the report. This infographic from the OV report really summarizes the benefits and applications.

Realising these benefits are not without its challenges. A lack of good quality data, user adoption and a lack of industry standards will all be headwinds as this space evolves. Unpacking these challenges would be another article.

This is some brilliant work from the OV research team in putting together this high quality report and framework on Tokenization of RWAs.