What is Tokenization of Real world Assets-

1. Tokenization of Real World Assets (RWAs) Dr. Ravi Chamria

2. What To Discuss? Things we have in the real world, what if we could move them to the BLOCK? What if we Tokenize everything?

3. Tokenized RW Assets Could Be A $16T Market by 2030 The Potential Market For Today's Discussion • This represents a growth of more than 50,000% compared to $310 billion in 2022 • Furthermore, tokenized assets are expected to comprise 10% of global GDP by the decade’s end. BCG Report So, it's worth discussing…

4. Tokenization of global liquid assets estimated to be a $16 Trillion business opportunity by 2030

5. Is This Something Very New? No. Asset fractionalization has already existed for several years, before even the advent of blockchain.

6. Problems? Low Liquidity Inaccessibility Lack of Monetization The Solution = Assets Tokenization

7. But Before We Jump Into Tokenization, Let's brush up our knowledge on Tokens..

8. The Token Economy UTILITY TOKEN SECURITY TOKEN Token = NON-FUNGIBLE A Unit of Value in the Blockchain Everything mentioned here are transferable. Means, you as an owner enjoys all the benefits. But you can pass on that to others. Hence, Tradable in nature. Asset token Use for services, access and subscriptions NFTs for identity and ownership (decentralized identity) With the emergence of Decentralized Societies, a new type of NFTs emerged that are non-transferable and attached to one's souls: Hence Soul Bound Tokens. Asset tokenization PAYMENT TOKEN SECURITY TOKEN This public-verifiable digital token can serve as a representative of the social status of an individual on web3, a CV kind of. FUNGIBLE The non-transferable NFTs can offer the foundation for developing web3 networks which do not rely completely on money-centric frameworks. Direct expression of crypto-liquidity. Used for payments Used to represent (on-chain) off-chain assets

9. What Are Tokenized Assets? What can't be tokenized? Asset tokenization is the process by which an issuer creates digital tokens on a distributed ledger or blockchain, which represent either digital or physical assets. Evolution of Digital Assets Fiat Currencies (or other means of payment/trade) Use values (i.e. vouchers, tickets) Assets/Securities (i.e. equity shares, debts/bonds) Traditional Assets Tokenization Tokenization Tokenization Payment tokens Utility tokens Assets/security tokens Digital Assets - Cryptocurrencies - Stablecoins - CBDC - Access to services - Access to use a platform - Equity tokens (i.e. stocks) - Debt tokens (i.e. bonds) What can be tokenized, will be tokenized in a few years from now.

10. Types of Asset Tokens Token Representing a Pre-existing Real Asset Tokens Native to the Blockchain Exist and can be traded on-chain and off-chain Exist and can be traded on-chain. • Financial assets: any conventional security transferred on DLT • Financial assets issued on DLT • Debt securities (easier as bearer instrument) • Non-financial assets (i,.e. real estate, art etc.) • Equity securities • Commodities (i.e. gold, silver) • STOs marketed as “regulatory compliant” successor of ICOs, depending on the specific issuance. • In theory, everything Backed by real assets existing outside the ledger Defined by their existence on the ledger, independent by the external market

11. What Are Real World Assets? Real World Assets (“RWAs”) are assets that exist off-chain but are tokenized and brought on-chain to be used within DeFi. Any real-world asset that has a well-defined monetary value can be represented by RWAs Examples of real-world assets Tangible Assets Intangible Assets Real Estate Brand Equity Art and Luxury Items Government/Corporate Bonds Commodities Rights/Quotas Sports teams & Collectibles Intellectual Properties

12. Benefits of Real-World Assets Increased liquidity Enabled Accessibility Transparency & Security Automation & Efficiency Tokenizing assets unlocks liquidity by enabling fractional ownership and allowing investors to buy/sell smaller portions of assets. RWA tokenization opens up investment opportunities to a broader range of investors, including those with limited capital. Blockchain technology ensures transparent ownership records, reduces fraud, and enhances security. Smart contracts, integral to RWA tokenization, automate asset management processes, streamlining transactions and reducing administrative overhead. By reducing the minimum investment size and enabling fractional ownership, individuals can now participate in markets that were historically reserved for institutional investors or HNIs Every transaction and ownership transfer is recorded on an immutable ledger, eliminating the need for intermediaries and increasing trust in the system. This fractionalization unlocks liquidity and broadens the investment potential for a wider range of individuals, eliminating the barriers associated with high capital requirements. These self-executing contracts enable automatic distribution of dividends, facilitate the payment of rental income, and simplify the transfer of ownership.

13. How Do Real World Assets Work? The process of RWA tokens becoming legitimate bearer assets can be conceptualized as three phases: (1) Off-Chain Formalization (2) Information Bridging (3) RWA Protocol Demand and Supply. Off-Chain Formalization Information Bridging RWA Protocol Demand and Supply Representation of Economic Value Tokenization Origination of RWAs Ownership & Legitimacy of Title Regulatory Facilitate Demand for RWAs Technology/Securitization Real World Assets RWA Token Initial Coordination with Off-Chain Formalization Legal Backing Oracles

14. RealT Real Estate RWA RWAs Tokenization: Real-Estate RealT, a platform that creates a DeFi market around fractional ownership of US real estate properties. Investors on RealT are able to obtain exposure to real estate investing, without owning the entire property. Real estate owners on RealT, can sell fractional shares of ownership in their properties to diversify away from complete ownership.

15. RWAs Tokenization Moves by Traditional Institutions EY launches EY OpsChain ESG, to provide a trusted platform for emissions and carbon credit traceability through tokenization Developed on the Ethereum blockchain, the new solution will provide a single, verifiable view of CO2 emissions (CO2e) to address the needs of enterprises that struggle to accurately measure and track their carbon footprint. With net-zero targets under more scrutiny than ever before, this solution presents enterprises with the opportunity to tell their organization’s ESG story on a digitally trusted platform.

16. TWAs Tokenization Moves by TradeFi Institutions: Digital Bond: Goldman Sachs launched €100 million digital bonds Siemens issues first digital bonds First digital bond on a public blockchain in accordance with Germany’s Electronic Securities Act (eWpG) Goldman Sachs has launched its digital asset tokenization platform, GS DAP, with the issuance of a €100 million ($104m) digital bond for the European Investment Bank (EIB) on the private GS blockchain. The bond has a volume of €60 million and maturity of one year and sold directly to investors (Classic payment via bank account) The 2-year syndicated bond issuance was settled instantly in a delivery versus payment transaction that used experimental central bank digital currency (CBDC) tokens issued by the Banque de France. The bond and the CBDC tokens live on different blockchains. For instance, it makes paper-based global certificates and central clearing unnecessary. What’s more, the bond can be sold directly to investors without needing a bank to function as an intermediary. Goldman sachs believes, most institutions are comfortable with permissioned blockchains as of today, as regulations provide more clarity, they will move towards public blockchains because of greater liquidity and a larger investor base.

17. RWAs Tokenization Moves by TradeFi Institutions: Physical Equity: Hamilton Lane's $2.1 Billion Flagship Direct Equity Fund Individual investors can now access Hamilton Lane’s flagship direct equity fund, Equity Opportunities Fund V through a new Securitize feeder fund tokenized on Polygon. The new tokenized fund will significantly increase access to this historically high-performing asset class, with minimum investments reduced from an average of $5 million traditionally to $20,000 → democratization of the private markets

18. RWAs Tokenization Moves by TradeFi Institutions: Alternative Investment SWIFT is experimenting Tokenized Value Transfer KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. SWIFT will collaborate with more than a dozen major financial institutions and FMIs to test how firms can leverage their existing Swift infrastructure to efficiently instruct the transfer of tokenized value over a range of public and private blockchain networks. KKR's Health Care Strategic Growth Fund II ("HCSG II") tokenized on the Avalanche public blockchain. This is the first time KKR's alternative investment strategies has been offered in a digital format in U.S. Australia and New Zealand Banking Group Limited (ANZ), BNP Paribas, BNY Mellon, Citi, Clearstream, Euroclear, Lloyd's Banking Group, SIX Digital Exchange (SDX) and The Depository Trust & Clearing Corporation (DTCC) taking part in the initiative. KKR's HCSG II Fund, to which the Fund provides exposure, invests in innovative health care companies in North America and Europe with proven products and services that are seeking a partner to commercialize and scale.

19. RWAs Tokenization Moves by Crypto-Native Platforms MakerDAO Adopts Real-World Assets The Aave Market for Real World Assets MakerDAO investing $500 million worth of stablecoin DAI into US Treasurys and corporate bonds. Voters agreed to 80% of the funds would be allocated to US short-term Treasurys and 20% into investment-grade corporate bonds. RWA Market on Aave allows businesses to finance their tokenized Real Estate Bridge Loans, Trade Receivables, Cargo & Freight Forwarding Invoices, Branded Inventory Financing, and Revenue Based Financing using crypto. This proposal was an attempt for the DAO to generate yield from its DAI holdings with professional bond managers and to diversify counterparty risks, ultimately strengthening the DAO's balance sheets. Embracing real-world assets can help maintain DAI's peg to the US dollar.

20. RWAs Tokenization Moves by Crypto-Native Platforms: Agriculture Harvest Tokenization: LandX LandX allows farmers to obtain capital in exchange for a percentage of the future production from their fields. In other words, they can tokenize their future harvests and sell these tokens as they see fit. Insurance Tokenization: Opium Finance Opium Insurance offers tradable, tokenized insurance position against smart-contract hacking or against stablecoin default. Tailored for DeFi traders, Opium insurance covers smart contract exploits, credit default events, stablecoin custodian insolvency, impermanent loss, price volatility, SAFT risks & off-chain risks.

21. Industry-Wise Demand RWAs: Fiat-based stablecoins are the original and by far the most notable underlying instruments for RWAs. Beyond stablecoins, the asset class which serves as the most popular underlying for RWA is real-estate. This is followed by climate-related underlyings (e.g. carbon credits) and public bond/stock underlyings. Next, emerging market credit (mainly corporate debt) underlyings and so on.

22. Popular RWA Tokenization Platforms Across Industries

23. Various Token Standards for RWA Tokenization The information collected in the Off-Chain Formalization phase is translated into code and represented by the metadata of a digital token. This metadata can be accessed via the blockchain, providing full transparency into an asset’s economic value and ownership. As previously mentioned, this process is called “tokenization.” As shown below, there are numerous token standards to create a DeFi standard for asset tokenization. Proposal Asset Coverage Features Most popular standard in tokenizing assets. Wide DeFi support. Lacks legal specificity. ERC-20 Broad Commonly used to represent unique goods ex. Art. Some adoption in DeFi. ERC-721 Broad Specific to assets that are deemed as securities. Has encoded compliance. ERC-3643 Securities Standard for assets that are claims on future cash flows. No legal compliance. ERC-2222 Dividend-Bearing Standard for assets that use DeFi's yield bearing vaults. No legal compliance. ERC-4626 Yield-Bearing

24. How A Tokenized Asset Marketplace Looks Like: Network-agnostic tokenization platform Front-end Connect Tokenization Platform Distribution Network Aggregate Date Manage Centralized trading platforms The ERC3643 smart contract Decentralized exchanges Back-end DeFi Protocols All the platforms on the same network of the digital securities EVM Networks

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