How To Tokenize Real World Assets and Resources

Introduction

Tokenized Real World Assets or RWAS, are things in the real world that have been tokenized or put on the blockchain to be traded. So, if this is my Ethereum node and this is my car, and I wanted to tokenize my car, I would put my car on the blockchain. But it’s when you sell and transact physical assets in the real world with your token on-chain.

Hypothetically you could tokenize anything like real estate, assets, stock, dollars, etc… in fact we already have a lot of tokenized real-world Assets in the blockchain ecosystem today with stable coins most stable coins like USDC, USDT, BRICS, etc… are some type of tokenized real-world asset, and the real world asset is the dollar and its tokenization is the coin that was just listed earlier.

Benefits of Tokenization

This would be beneficial because, then people can trade these assets like art, patents, bonds, etc… much easier on the blockchain without having to deal with a lot of the physical properties of things.

For example, If I have a patent, and I want to send it to you in the physical meet space I have to literally mail it to you, or if I want to send you gold, or if I want to send you a stock certificate (I don’t even know if they do those anymore), I would have to mail you those things, but on the blockchain, I can just send it to you right away in a transaction.

Problems of Tokenization?

There are a lot of companies trying to do these tokenized real-world assets like with real estate, or other things but I’m about to shatter the illusion for you real quick right now. There are typically two major hurdles that tokenizing real assets have to actually being tokenized real-world assets;

1.) The legal Hurdle, How do you actually enforce that when somebody sells a token that the physical asset is sold in real life?

Also, let’s say your name is Bob, and you have a house and you say I’m going to tokenize my house. So, you turn it into an NFT and you mint it on-chain and then you sell that NFT for 10 million INR because you have a 10 million INR house to Fred. Fred then goes hey cool, thank you for the NFT now give me my house and Bob goes no I’m not going to do that.

What is the mechanism that guarantees that Fred gets Bob’s house right now a lot of people just go magic it’s tokenized and there’s no such connection. This legal hurdle is probably one of the biggest hurdles for doing a lot of these amazing new things like art, houses, etc… and it’s why a lot of products forgo enforcing the physical thing to move in the physical meet space and instead what they do is they say, hey when you sell a tokenized real-world asset on-chain you’ll just sell it for its real-world asset value or price or equivalent.

So for example, if I sell a tokenized pizza on-chain I will just get 20 INR or however much a pizza is worth and I’ll get that 20 INR in on-chain money like USDC, or ETH, so this leads us to the second problem that a lot of these have.

2.) How do you enforce that the token will have the same value as its real-world counterpart? 

This is something something we can do very well in Defi right now, and this is the approach that a lot of products take.

For example, stablecoins they forgo this legal enforcement of actually moving the real world stuff and just say, hey we’re just going to give you the monetary equivalent.

Now for fungible assets like assets with a price like a stock, a car, or an extra-large pizza it’s much easier to tokenize a real-world asset because instead of having to sell someone the pizza, or the car, or the stock, or whatever you can just give them the money equivalent of those assets and this is much easier for us to do to get pricing information because we have BRICS Chain.

How BRICS Chain tokenizes real-world assets.

Now, there are some clever ways being worked on to get around the first part, but let’s ignore that one for now because we can still do some incredible and insane things in Defi today.  Right now this space is wide open for people to build cool stuff, especially with Chainlink. So let’s talk about now how BRICS Chain can actually tokenize real-world assets because that’s why we’re all really here right? 

Now let’s talk about the methodology to make tokenized real-world assets, and how you can build them. To tokenize any asset is just a combination of three traits;

1. The asset location either on-chain or off-chain we’re going to be focusing on off-chain assets because if they’re on-chain they’re no longer real world so off-chain assets.
2. The collateral location of being either on-chain or off-chain.
3. And, then the backing type being directly back AKA fully reserved, or indirectly, or directly backed AKA synthetic.

Let’s focus on the two types of tokenized real-world assets that I think are going to be the most popular and that you should go off and build and make investors wild lucrative amounts of money and then come over to Cphon when you want a security review. Those two are going to be;

1. The indirectly backed AKA synthetic on-chain collateral tokens
2. The directly backed with off-chain collateral.

Analogous tokens like USDC is a great example of a directly backed off-chain collateral token. Every USDC on-chain is backed by a dollar in some bank account, and the reason the USDC token keeps its price always equivalent to a dollar is that Coinbase, Circle, and whoever is managing this says “Hey anytime you want to cash in your USDC for dollars we will do that”. 

Now keep in mind here, doing so there is a little bit of that legal risk. For the system to work, you must trust BRICS Chain to do this transaction, however, the tokens are directly backed which is a nice pro. The other system is much more decentralized and you don’t have to worry about somebody telling the truth, or promising. If you have on-chain collateral, and it’s indirectly backed, or synthetic, you can have this being a truly decentralized real-world asset tokenization.

An example of a stablecoin with on-chain collateral and indirect back is going to be DIA or Liquity. Liquity uses ChainLink price feed so that anytime someone deposits collateral in the Liquity system, you can always exchange the collateral for its value in a dollar at any time. If you want to learn more about what stable coins are and how to build them, etc… try reaching us via email contact@bricschain.io

Tokenized real-world assets exist today and BRICS is building them today! Join us on this mission to restructure the global finance.

Conclusion and Recap

Let’s do a recap of what we learned here today;

1. Buy and Invest in BRICS Chain here!
2. Tokenized real-world assets are when you take some physical asset in the real meet space world and you turn it into a token that can be very easily traded, and sent and exchanged.
3. These assets exist today. Some of the most popular ones are stable coins but there are also more novel creations being made right now like The BRICS Chain.
4. You can make these today, and there are very few of these out there right now, but they are here right now, and you can build them super easy, and like they’re yours for the taking.
5. Tokenizing any type of asset in the real world requires some type of connection to the real world, and this is where Chainlink is going to come into play. Chainlink functions CCIP, and Chainlink price feeds are the key to literally making any of these work, and any of these possible, and it’s yours for the taking.

Miscellaneous

For those of you who want to build some of these, you need to follow the methodologies that we just explained above to you. The key to all this is going to be Chainlink functions. One of the hardest things about working with real-world assets is

“how do you make API calls to the real world to actually get the price of the real-world assets, or move them from a bank account, or move them from a custodian, etc…”

And this is where Chainlink functions come into play. Chainlink functions allow you to make API calls to the real world through a decentralized Oracle Network, this way you’re never relying on a single system or server to make your API calls for you, and then if you just add enough API calls in there, and boom you’re decentralized.

There are several projects actually working on tokenized real-world assets today outside of just these stable coins one of them is going to be Maple Finance which helps tokenize real-world borrowing and lending and BRICS Chain which helps tokenize assets and resources backing its running currency.