Asset tokenization: unleashing the revolutionary power of revitalizing low liquidity assets

Introduction: In the fast-growing Blockchain industry today, asset tokenization is becoming an undeniable revolutionary force, especially for assets traditionally considered to have poor Liquidity. This article will delve into how asset tokenization injects new vitality into these assets, reshapes the market landscape, and creates unprecedented opportunities for investors.

By 2030, the market size of tokenized assets may reach $10 trillion. Asset tokenization refers to the process of converting physical or financial assets into digital tokens on-chain. This process makes assets that were once difficult to divide and trade more flexible and easily transferable. According to the latest report from Chainlink, the current value of tokenized assets is approximately $118.57 billion, with the Ethereum network accounting for 58% of the market share. This number may seem quite impressive, but in reality we have only touched the tip of the iceberg. The World Economic Forum estimates that there is potential for about $867 trillion worth of assets to be tokenized globally. In addition, Chainlink predicts that the global tokenization asset market could skyrocket to $10 trillion by 2030. The driving forces behind this rise trend include increasing interest from institutional investors, continuous improvement of blockchain technology, and gradual improvement of regulatory frameworks in various countries.

How does asset tokenization improve low Liquidity assets Traditionally, assets such as real estate, private sale equity, art, etc., are often considered to have poor liquidity. These assets typically have high barriers, are difficult to divide, and have long transaction cycles, all of which limit their liquidity. However, asset tokenization is fundamentally changing this situation: a) Splitting Ownership: Through tokenization, large assets can be divided into smaller units, lowering the investment threshold and allowing more investors to participate. b) 24/7 All-weather Trading: The uninterrupted operation of the Blockchain network enables the trading of tokenized assets at any time, greatly improving transaction efficiency. c) Global Market: tokenized assets can be traded globally, breaking geographical restrictions and expanding the potential investor base. d) Smart Contract Automation: Through smart contracts, the management and distribution of assets can be automated, reducing operating costs and human errors.

Take real estate as an example. Traditionally, investing in a commercial building requires a large amount of capital, and once invested, the funds will be locked up for a long time. Through tokenization, the ownership of this building can be divided into thousands or even tens of thousands of tokens, and investors can purchase any number of tokens according to their needs and abilities. This not only drops the investment threshold but also greatly improves the liquidity of the asset.

The rise of the market for asset tokenization

Let's take a look at the current situation of the RWA zone. According to the latest data from RWA.XYZ, the on-chain real world assets (RWA) market is showing a remarkable rising trend. Currently, the total on-chain RWA assets have reached $12.42 billion, with 63,216 asset holders. In contrast, the stablecoin market is much larger, with a total value of $172.54 billion and a staggering 122 million holders. The chart shows that the value of RWA assets has been slowly rising since 2021, but the pace has significantly accelerated after 2024, entering a rapid rise phase.

The rapid rise of the asset tokenization market is not accidental, but the result of multiple factors working together: a) Increased institutional participation: A survey by BNY Mellon and Celent showed that 97% of institutional investors believe that tokenization will "completely change asset management". This high level of recognition reflects the strong interest of traditional Financial Institutions in tokenized assets. b) Technological advancement: The Ethereum network has provided strong technical support and market foundation for tokenization assets with over 6 million active users daily. With the continuous development of blockchain technology, the tokenization process will become more efficient and secure. c) Regulatory support: Regulatory authorities around the world are beginning to actively explore and support asset tokenization. For example, the Monetary Authority of Singapore's (MAS) Project Guardian has piloted the tokenization of bonds and deposits based on blockchain under regulatory support, providing strong institutional support for the industry's development. d) Market demand: Investors' demand for more flexible and diversified investment vehicles continues to rise. Asset tokenization precisely meets this demand, providing investors with the opportunity to access asset classes that were traditionally difficult to invest in.  Challenge and Prospect Despite the bright prospects for asset tokenization, achieving the $100 trillion market size predicted by Chainlink still faces many challenges and opportunities:

1. Increased institutional participation: In early 2023, financial giants such as BlackRock and Fidelity entered the Blockchain economy, greatly enhancing the legitimacy of the encryption industry and narrowing the gap between TradFi and the Blockchain industry. This participation not only brought funds, but more importantly, brought confidence and recognition. For example, the digital Liquidity fund 'BlackRock USD Institutional Digital Liquidity Fund' launched by BlackRock in March 2024 quickly became a Market Maker in the tokenization government bond market, fully demonstrating the enthusiasm of institutional investors for this emerging market.

2. Regulation and Compliance: With the rapid development of the market, the improvement of the regulatory framework has become particularly important. Finding a balance between encouraging innovation and protecting investor interests will be a challenge faced jointly by the industry and regulatory agencies. In particular, more unified and transparent standards need to be established, especially in cross-border trading and asset valuation.

3. Technological Innovation: The continuous progress of blockchain technology has provided a solid foundation for asset tokenization. However, how to ensure the security, scalability, and interoperability of the system is still the key direction of technological development. The audit and optimization of smart contracts will also become a key factor in ensuring the security of tokenized assets.

4. Market education and popularization: Despite the increasing participation of institutional investors, asset tokenization is still a relatively novel concept for most individual investors. The key to driving market development lies in popularizing relevant knowledge and increasing investors' acceptance and participation.

5. Product Innovation: The explosive rise of tokenization in the bond market reveals investors' strong demand for low-risk, high-liquidity tokenized assets. In the future, we may see more types of traditional assets being tokenized, such as commercial real estate, art, and even intangible assets like intellectual property. This will provide investors with more diversified investment portfolio choices.

6. Cross-Chain Interaction: As the tokenization assets on different Block chains increase, how to achieve seamless interaction and transfer of Cross-Chain Interaction assets will become an important issue. This involves not only technical issues but also Compliance issues under different regulatory systems.

Conclusion: Asset tokenization is injecting new vitality into low Liquidity assets, reshaping the global financial market landscape. Despite the challenges on the road, its potential is enormous. With the advancement of technology, improved regulation, and matured market, we have reason to believe that asset tokenization will become an important force driving financial innovation and inclusive finance, creating more value for investors and asset owners.