What are Real World Assets or RWA?

In the field of finance and investment, real world assets (Real World Assets or RWA) They represent a new category of assets that seek to strengthen ties between the real and digital economies, thereby playing a crucial role in portfolio diversification, income generation and risk mitigation in various industries. This article provides a detailed exploration of RWA, its importance in the financial context, and concrete examples of its application in different sectors.

Definition of Real World Assets (RWA)

The Real World Assets (RWA) or real-world assets, are a category of assets that comprise physical goods and rights with tangible or intangible economic value, but that have an existence or application in the real world, outside the digital realm of the blockchain.

Unlike native digital assets (such as cryptocurrencies or tokens), which exist only in electronic or virtual form, RWAs have a concrete presence or represent rights to resources, physical assets, or real income streams. The importance of RWAs lies in their ability to offer financial benefits, such as income generation, diversification of investment portfolios, and protection against inflation.

Among its main characteristics we can mention:

• Tangibility. RWA can be physical assets, such as real estate and commodities, or intangible assets, such as copyrights and patents, but always with a direct link to the physical or real world.
• Economic value. They have intrinsic value that can be quantified and that generates financial benefits, either through income production, value appreciation, or both.
• Diversity. RWAs cover a wide range of assets in different sectors, including real estate, infrastructure, commodities, and intellectual property, among others.
• Practical Utility. Beyond their financial value, many RWAs have a practical function or utility in economic activities or everyday life.

How do you create a Real World Assets?

To generate a Real World Assets A series of processes can be followed that can either be automated (using a platform that facilitates this type of tasks) or starting the process from scratch to create your own RWA generation space.

In any case, you should know that in this process the main protagonist is blockchain tokenization, since what an RWA does is transform real-world assets into an intangible asset that is represented by a digital token on the blockchain. This token represents ownership or a stake in the underlying asset, allowing it to be traded or transferred efficiently and securely in the digital environment.

Knowing this, below is the process to create a Real World Assets platform from scratch:

Asset selection

• Asset identification process. This is the first step is to identify the real-world asset that you want to tokenize. It can be anything from real estate, works of art, shares in companies, to commodities such as gold or oil.
• Evaluation of the asset, its market, potential, weaknesses and threats. At this point, we seek to evaluate the asset to ensure that it is suitable for tokenization. This includes considering its value, potential liquidity, legality, and how it will be tokenized.

Due Diligence and Regulatory Compliance

• Legal review process. This point is crucial to perform a thorough legal review to identify any legal restrictions or requirements associated with the tokenization of the asset. This ensures that the process complies with all relevant laws and regulations, including those regarding securities, taxes and property.
• Regulatory compliance. All necessary licenses and permits must be obtained. Additionally, it is important to implement compliance measures, such as KYC (Know Your Customer) and AML (Anti-Money Laundering), for investors. Remember that RWA are assets that seek to be 1:1 with respect to real assets, so regulation and compliance are essential for their proper development.

Project Structuring

• Blockchain platform selection. Choosing the right blockchain technology is essential. The platform must be secure, scalable and compatible with the tokens that are issued.
• Generation of the platform token and its tokenomics. At this point it is time to develop the platform token that will be in charge of the RWA tokenization management process (and not the RWA as such).
• Generation of smart contracts. Program smart contracts that will govern the operations of the token, including the issuance, transfer, and, if applicable, investor rights and distribution of dividends or income. Likewise, the necessary smart contracts must be created that will allow the management of the issued RWAs.

Valuation and Tokenization

• Valuation of the asset. Determine the value of the asset through a professional evaluation. This will help set the price of the tokens. Additionally, this will help decide how the asset will be divided into tokens. This may vary depending on the type of asset and the investment structure.
• Token issuance. At this point the tokens are issued on the selected blockchain. This involves creating the tokens and distributing them to initial investors or making them available in a public offering.

Finally, we come to the part of the listing of the token and the management of the platform, which includes the evolution of the platform's service offering to make it grow along with the interest and the desired business direction. As you can see, it is not an easy process, even though here we are simplifying the entire process that must be followed to successfully launch a real asset tokenization platform.

Importance of RWA in the fintech world

But thanks to all this, Real World Assets (RWA) play a fundamental role in offering innovative solutions for portfolio diversification, income generation and risk mitigation within the fintech sector. And, as this sector continues to evolve, the integration and use of RWA has become crucial for the development of more accessible, transparent and efficient financial products.

Portfolio Diversification

Firstly, RWAs are able to offer investors in the fintech space an excellent opportunity to diversify their portfolios beyond traditional financial assets such as stocks and bonds. Diversification with RWA can help reduce overall portfolio volatility and improve risk-adjusted returns.

We can see this type of utility in real estate investment fintech platforms. These platforms allow investors to participate in the real estate market with smaller investment amounts than would be necessary to purchase a property directly. This not only democratizes access to real estate investing, but also provides an avenue for portfolio diversification.

income generation

Another example of the use of RWAs can be seen in their ability to offer stable and predictable income streams, which is especially attractive in the fintech context, where investors are looking for alternatives to traditional investment products.

An example of this could be fintech platforms that facilitate investment in infrastructure, such as wind or solar farms, which allow investors to benefit from the income generated by the sale of energy. This provides a relatively stable source of income thanks to long-term contracts for the purchase of the energy generated.

Risk mitigation

Finally, including RWA in fintech portfolios can help mitigate risks, especially during times of turbulence in financial markets. Many RWAs, such as real estate and precious metals, have a low correlation with stock markets and can act as a safe haven during economic downturns.

A good example could be fintech platforms that offer the possibility of investing in commodities (gold, silver, lithium, oil, gas) allowing investors to protect themselves against inflation and stock market volatility.

You might ask yourself why not go for cryptocurrencies directly? But in this case you must keep in mind that: first, not all investors are interested in cryptocurrencies and second, diversifying portfolios is something that even cryptocurrency investors do. In that sense, having a fintech platform that uses tokenization and blockchain to facilitate this approach is a success and something necessary for the evolution of the crypto sector in general.

Real World Assets Examples

To illustrate the diversity and application of RWAs, here are some examples:

Loans and credits

Goldfinch is a decentralized credit protocol that enables the lending of cryptoassets without the need for cryptocurrency collateral, instead using real-world assets as collateral. This innovation allows companies to access financing in a more flexible and broader way, opening new opportunities for decentralized credit.

Private financial markets

ADDX provides fractional access to world-class private markets that were traditionally only available to wealthy investors via the blockchain. This platform democratizes access to investments that were previously exclusive, allowing a greater number of investors to participate in high-caliber investment opportunities.

Digital asset exchange and custody platforms

Archax is a regulated global digital asset exchange, as well as a brokerage and custody service based in London. It facilitates the issuance, listing, trading, settlement, servicing and custody of digital securities, playing a crucial role in connecting traditional financial markets with investment opportunities in the digital realm.

Investments in precious metals

Aurus accelerates the digital transformation of precious metals through blockchain technology, allowing the tokenization of these assets. This provides a new avenue for investing in gold, silver and other precious metals, combining the security and transparency of blockchain with the stability and intrinsic value of precious metals.

As you can see, Real World Assets are a diverse and vital investment category that offers unique opportunities for income generation, portfolio diversification and protection against market volatility. Its application in multiple industries demonstrates its importance and versatility in the modern financial context. As the financial world evolves, understanding and effectively using RWA will be critical to the success of investors and businesses alike.