What are real-world assets and why do we need tokenization?

What are real-world assets and why do we need tokenization?

Mar 26, 2025
What are real-world assets and why do we need tokenization? What are real-world assets and why do we need tokenization? Video Thumbnail

Imagine owning a slice of a Manhattan skyscraper or a Picasso with just a few clicks, no paperwork and no high minimums. Tokenization is making this possible by converting real-world assets (RWAs), such as real estate, bonds, commodities, and even fine art, into digital tokens on the blockchain. This unlocks fractional ownership, 24/7 trading, and instant settlement, lowering barriers to high-value markets and improving transparency, efficiency, and access.

Tokenized RWAs in decentralized finance (DeFi) have surpassed $10 billion in the total value of assets locked on the blockchain. With projections suggesting a $5 trillion market by 2030, 2025 is poised to be a breakout year for tokenization, ushering traditionally exclusive markets into the digital era.

How does tokenization work?

At its core, tokenization involves converting a real-world asset (stocks, real estate, bonds, commodities, fine art, etc.) into a digital token and issuing it on a blockchain such as Ethereum or Solana. Here’s how the process works:

  1. First, the asset is appraised, and legal ownership is confirmed.

  2. Legal frameworks are established to ensure that the tokenized asset complies with relevant local and global financial regulations. This includes defining the rights each token represents and who can hold them.

  3. Once compliance is in place, the asset is tokenized on the blockchain. Tokens can be fungible or divisible, identical units representing equal ownership (similar to company shares), or non-fungible, where each token is unique and represents a distinct asset, such as a digital certificate for a one-of-a-kind painting.

  4. Finally, smart contracts—self-executing programs on the blockchain—are used to automate the rules for ownership transfer, trading, and income distribution. For example, in a tokenized apartment building, rental income can be distributed monthly to token holders according to their share of ownership.

Blockchain ensures that all transactions are recorded immutably and transparently, with 24/7 availability and instant settlement–something traditional finance can’t match. Most importantly, tokenized assets can be accessed globally without the friction of intermediaries or geographic limitations.

What are the benefits of RWAs?

  1. Liquidity and fractionalization: Assets like real estate, art, or private equity are traditionally illiquid. Tokenization allows fractional trading of these assets on marketplaces, unlocking liquidity.
  2. 24/7 markets and instant settlement: Unlike traditional markets that close after hours, on weekends, or during holidays, blockchain-based assets are accessible 24/7, year-round. Settlements occur instantly through smart contracts, eliminating the need for banking hours or middlemen.
  3. Transparency and trust: Blockchain records are immutable and visible to all participants. Investors can track asset performance, income distributions, and transfers in real time, which reduces fraud and builds trust. 
  4. Efficiency and cost savings: Smart contracts automate tasks such as dividend distribution, settlements, and ownership transfers, reducing administrative overhead and cutting operational costs.
  5. Integration with DeFi: Tokenized assets can be integrated into decentralized finance (DeFi) applications, allowing investors to lend, borrow, or trade while still earning predictable income streams, such as monthly yields from tokenized bonds or real estate. This enables liquidity without sacrificing the benefits of traditional assets, like steady income, principal protection, and defined maturity.

This report has been prepared and issued by 21Shares AG for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however, we do not guarantee the accuracy or completeness of this report. Crypto asset trading involves a high degree of risk. The crypto asset market is new to many and unproven and may have the potential not to grow as expected.Currently, there is relatively small use of crypto assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in crypto assets. In order to participate in the trading of crypto assets, you should be capable of evaluating the merits and risks of the investment and be able to bear the economic risk of losing your entire investment.Nothing herein does or should be considered as an offer to buy or sell or solicitation to buy or invest in crypto assets or derivatives. This report is provided for information and research purposes only and should not be construed or presented as an offer or solicitation for any investment. The information provided does not constitute a prospectus or any offering and does not contain or constitute an offer to sell or solicit an offer to invest in any jurisdiction. The crypto assets or derivatives and/or any services contained or referred to herein may not be suitable for you and it is recommended that you consult an independent advisor. Nothing herein constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise constitutes a personal recommendation. Neither 21Shares AG nor any of its affiliates accept liability for loss arising from the use of the material presented or discussed herein.Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors.This report may contain or refer to material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject 21Shares AG or any of its affiliates to any registration, affiliation, approval or licensing requirement within such jurisdiction.