Tokenized real-world assets are more than a Web3 Robinhood
This is our chance for Web3 to drive actual decentralization, not just cosplay at TradFi with some blockchain sprinkled on top
Peera_stockfoto/Shutterstock modified by Blockworks
It’s hard not to celebrate crypto’s well-needed pivot toward all things real-world — that’s where real value is, after all, not in pictures of stones and monkeys. Who would have thought? That said, at times, it’s also hard to hold back a mirthless smirk at what feels like a massive lost opportunity.
You see, it all comes down to what the industry is coming to understand as real-world assets. In most cases, it’s about the traditional financial instruments like stocks, bonds, ETFs or commodities held by a centralized entity that issues tokens representing a fraction of the said asset. There are some more exotic options out there too, such as art pieces or real estate.
This new real-world asset (RWAs) sector for crypto has emerged as one of the largest DeFi sectors by total value locked, recently at $5.936 billion at the time of writing, as per DeFiLlama.
Still, fundamentally, RWAs are little more than a new way to buy things your everyday investor could already buy through Web2 apps. Sure, it’s always nice to do A++ on anything Web2, but are the oft-ethereal traditional finance tools on-chain the most real-world DeFi can get?
When RWAs get real
Consider this: The number of connected devices is expected to reach almost 30 billion by 2030. And it’s not just consumer devices — businesses around the world, even in industries that were traditionally considered low-tech, are reinventing themselves sci-fi style. From agricultural drones to smart mining, machines are transforming industry after industry, accounting for more and more of the value chain, with the automation market expected to surpass $320 billion by the end of the decade.
While automation is beyond promising, it also comes with a lot of upfront expenses. The same goes for many innovative industries going all-in on smart devices, from green energy to car-sharing and more. In today’s cautious investment climate, fundraising can often be a struggle, after all.
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All of these machines and devices — the drones spraying the fields with fertilizer, the smart solar energy panels and wind turbines, the vehicles in car-sharing fleets — are RWAs, as real-world as they get. They are generating value in the most direct way possible: by actually creating it, not just by mercy of art appraisers, and not through bringing more speculation into the housing market. And the best thing is, we can tokenize this value and redistribute it among investors.
It makes all the sense in the world, really. Tokenization offers businesses a way to raise funds for deploying hardware — pretty much any useful hardware — by tokenizing a portion of the revenues this hardware will generate and offering these tokens to people from all around the world. This makes for faster and more efficient liquidity access than many traditional alternatives. Machine RWA tokenization also offers established businesses a new way of generating revenue as they scale up or reinvent their processes through more automation.
On the investor side, machine RWAs offer something pretty much no other on-chain asset can replicate: a whole new level of access to real-world value creation. An on-chain stock may represent equity in a company involved in the real-world economy, but between the exchanges, custodians and issuers, it involves a lot of intermediation. A stake in a machine creating goods and services right here and right now, to the point where the investors may in fact use it themselves, is a lot more direct and immediate — and the yield it brings in an automated, transparent and trustless manner is as healthy and sustainable as it could be.
Autonomy, not just automation
Another key benefit of machine RWAs is so important that it deserves a more in-depth discussion. Tokenized machine RWAs enable the communities whose livelihood may have been upended by the rise of the machines — such as cab drivers being pushed out by self-driving taxis — to become stakeholders, not victims, in the process. This hints at a more sustainable path toward automation: The more jobs disappear from the market, the more all humans earn. This doesn’t have to be a paradox.
Furthermore, tokenized machine RWAs are not just a prerogative of businesses. Communities in need of hardware — a remote village looking for Web access, let’s say, or a group of farmers with an appetite for an upgrade — can leverage this mechanism to get around the upfront costs.
Finally, the hardware itself can be community-owned and operated. This brings us to another recent Web3 trend: decentralized physical infrastructure networks, or DePIN. DePINs are projects that crowd-source the deployment of hardware rendering real-world services, such as mobility, data collection or computation, through token incentives. With most DePINs, it’s the community that owns and runs the real-world assets, and tokens work as the lifeblood of the ecosystem, enabling governance and community rewards.
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In a DePIN, machine RWAs can act with a near-full autonomy, generating revenue for their owners through their day-to-day operations. The rules of the game are baked into its blockchain backbone and executed automatically. There isn’t even a centralized entity making sure that the revenues are distributed justly, as it happens with top-down machine RWAs tokenized by businesses, since all of the value exchanges take place on-chain, with all the security and transparency that implies.
Tokenized machine RWAs are a chance for Web3 to not just cosplay as traditional finance with some blockchain peppered on top, but to drive actual, real-world decentralization. Not just another speculative playground, but the backbone for real exchanges of value and the engine of real, tangible change. That’s the Web3 we want to see — and we are sure that with some creativity, vision and boldness, it can be all that and more.
Leonard Dorlöchter is the co-founder of peaq, the go-to blockchain for real-world applications, and EoT Labs, a software development and incubation organization supporting open-source projects focused on the Economy of Things. Leonard has built multiple organizations, teams, and products during his five years in the blockchain space. He operates at the intersection between business and engineering and enjoys building disruptive products and ecosystems.
Leroy Hofer is the CEO & Co-Founder of ELOOP, a Vienna-based carsharing provider and blockchain startup. He graduated from the Commercial Academy Bregenz before studying Business Administration at the University of Vienna, from which he soon switched to the field of Journalism and ultimately completed his education with a Bachelor’s degree. Together with his roommate Nico Prugger, Leroy Hofer developed the idea for ELOOP. In the company founded in 2019, he is primarily responsible for the areas of vision, business development, and legal matters.
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