Aurigraph DLT provides cutting edge RWAT solution for Real world applications
Aurigraph DLT offers RWA Tokenization backed by verifiable real-world assets. Aurigraph DLT with its hyper-scalable platform and low latency, with Open Data Integration, offers the most effective solution for RWA tokenization as Aurigraph DLT will convert the underlying asset into its corresponding Digital Twins to offer transparency, traceability, and trust.
Underlying Asset
This is the RWA being represented on the DLT should be directly integrated with the single- source of truth to ensure integrity of the RWA with its digital twin. Examples include real estate, fine art, collectibles, intellectual property, and even financial instruments like loans and invoices. Digital Assets such as Art, Music, Photographs, Videos, documents, text, singularly or combined, may be tokenized to deliver value. They may be connected to an external RWA or service for fulfillment.
Aurigraph DLT Tokenization Platform
This platform bridges RWA and their respective Digital Twin while binding it to their corresponding tokens. Aurigraph DLT facilitates binding of RWA data with the physical asset, token creation and issuance while enabling investor onboarding and compliance with KYC/AML. Aurigraph DLT platform provides integrations with Open Data APIs to determine the Underlying Assets and their corresponding digital record. Aurigraph DLT Tokenization platform enables the creation and management of tokenized assets. The platform provides tools for issuers to create tokens, manage their token sale process, and interact with investors. The opportunities that Aurigraph DLT is powering are physical assets, Digital Assets, Trade Finance, Carbon Markets and Government bonds and other assets.
Real World Asset Tokenization
RWA tokenization involves several key components that work together to ease the process of converting physical assets into digital tokens on a DLT. Here are the main components:
Digital Twin of the Underlying Asset
The Digital Twin is an irreversible digital representation of the underlying real-world asset. It needs to integrate with the single-source of truth that it represents can be anything tangible, such as real estate, art, collectibles, commodities, or even intangible assets like intellectual property or carbon credits. Digital Twinning of a RWA corresponds to integrating verifiable data of the asset to generate the token. This may include data from multiple sources such as property records, ownership records, video and photographic evidence, third-party verifications by assessors and valuers, etc.. A key aspect of Digital twinning is to support the integrity of the Token after generating it. If any aspect of the underlying asset were to change, keeping the integrity of the token is paramount for business.
Token
This is a digital representation of the underlying asset on a DLT. A token can stand for ownership of a portion of the asset, or it can be a derivative that represents a claim on the asset’s value or income stream.
Smart Contracts
These are self-executing contracts stored on the DLT that govern the rights and obligations associated with the tokens. They define the ownership structure, transfer rules, and any other relevant agreements between parties. This is a self-executing code stored on the DLT that governs the rules and conditions associated with the token. The smart contract can automate various aspects of the tokenization process, such as issuing tokens, distributing dividends, and helping the trading of tokens. Smart contracts automatically enforce fixed actions related to tokenized assets upon events pre-defined by token issuers. For example, asset ownership is transferred to the investor upon payment for the asset.
Regulatory Framework
The legal framework that governs the issuance and trading of tokenized assets is still evolving, but it is important to ensure compliance with relevant regulations to protect investors and minimize risk under existing laws and governance mechanisms. Existing legal and financial regulations need to be adapted to address the unique characteristics of tokenized assets for RWA tokenization.
Custodian
A custodian is a regulated entity responsible for holding the underlying asset securely and ensuring its authenticity. This is crucial for building investor trust and keeping transparency. This is a regulated institution that holds the underlying asset on behalf of the token holders. The custodian ensures the safekeeping of the asset and protects it from theft or loss.
Distributed Ledger Technology
This is the distributed ledger technology that provides the foundation for the tokenization process. The DLT ensures transparency, security, and immutability of the token record, making it a reliable way to track ownership and manage the asset.
Exchange
This is a marketplace where tokenized assets can be bought and sold. The exchange provides liquidity and facilitates the trading of tokens between investors. The Exchange can be facilitated by existing exchanges or dedicated platforms built for tokenized assets.
Secondary Market
The secondary market for tokenized assets is still nascent, but it is growing rapidly. As more real-world assets become tokenized and the technology matures, the market is expected to become more mainstream and attract a wider range of investors.
Investor Community
To drive the success of RWA tokenization, a vibrant investor community is necessary. This includes both traditional investors looking for alternative investment opportunities and crypto-native investors seeking exposure to real-world assets.
Investors: These are individuals or institutions who buy tokens with the intention of gaining exposure to the underlying asset or profiting from its price appreciation.
Additional Components
Open Data API integration
Real-world assets need to be represented by real-world data from “single source of truth” with verified and validated records. For example, a real estate property is digitally represented by its property records from the local government, which is the single-source of truth, namely government’s land records. These are third-party services that provide real-world data feeds to the DLT, ensuring correct pricing and asset valuation.
Liquidity Providers
These entities help create and maintain liquidity in the secondary market for tokenized assets, facilitating smooth trading and price discovery.
Technology Providers
These companies develop the tools and infrastructure needed for RWA tokenization, including DLT platforms, tokenization protocols, and custody solutions.
These components work together to create a secure and efficient ecosystem for RWA tokenization, facilitating the transfer of value between the real world and the digital world. As technology matures and regulations evolve, we can expect to see RWA tokenization become a mainstream investment option, unlocking new opportunities for investors and asset owners alike.
Asset Tokenization solutions
Fractional asset ownership
A digital token can be created for a user-defined part of an asset. This introduces the capability for shared ownership of an asset and partial asset trading.
Derivative assets
In certain circumstances, the underlying primary asset itself may not be the provider of value but an derived secondary asset may deliver tangible value which may be tokenized, representing a certain aspect of the underlying asset. For example, a real-estate asset may be tokenized with the derivative asset being the rental income or the lease.
Peer-to-peer asset trading
The ownership of tokenized assets can be transferred directly between asset owners and investors without the involvement of third-party intermediaries, such as governmental entities or financial institutions. Peer-to-peer trading may be facilitated using smart contracts on DLT platforms to ensure governance and prevent fraud.
End-to-end asset traceability
Asset owners and investors can trace the whole history of activities performed over tokenized assets in a distributed ledger. It helps verify asset origin and provenance and prevent fraud and counterfeiting.
Compliance
Tokenized assets can be programmed to comply with AML/KYC, ISO 27001/27002, SEC, GLBA, PCI DSS, GDPR (for the EU), HIPAA (for healthcare), and other required regulations.
Automated recordkeeping
All transactions on tokenized assets, including those initiated by smart contracts, are automatically validated, timestamped, cryptographically encrypted, and recorded in the immutable ledger available to asset owners and investors.
Benefits
RWA tokenization offers a range of exciting benefits, transforming how to own, invest, and trade valuable assets. Here are some key advantages:
Increased Liquidity
Traditional markets for certain assets like fine art or real estate can be illiquid, meaning it is difficult to buy or sell quickly. Tokenization allows these assets to be divided into smaller, digital tokens, making them much more liquid and accessible to a wider investor pool. This can boost trading volume and price discovery.
Eliminates Physical Records
All over the world, asset records are physically held. Physical records carry a prohibitive cost of maintenance and require manual effort to operate. Eventually and in a digital world, it is not sustainable.
Fractional Ownership
Tokenization democratizes asset ownership by enabling fractionalization. Instead of needing millions to buy a piece of art, investors can buy smaller tokens representing partial ownership, lowering the minimum investment amount, and opening opportunities for diverse participation.
Enhanced Transparency
Blockchain technology, the underlying infrastructure for tokenization, provides an immutable and transparent record of ownership and transaction history. This reduces the risk of fraud, improves regulatory compliance, and fosters trust in the market.
Reduced Transaction Costs
By eliminating the need for intermediaries and streamlining paperwork, tokenization can significantly reduce transaction costs associated with asset acquisition, management, and transfer. This benefits both issuers and investors.
Global Access
Digital tokens operate on global, 24/7 markets, removing geographical barriers and offering wider access to investment opportunities previously restricted by location. This facilitates faster, more efficient cross-border transactions.
Programmable Features
Smart contracts on blockchains can be used to automate various aspects of asset ownership and management. For example, they can automatically distribute dividends, manage voting rights, or trigger specific actions based on predefined conditions.
New Investment Opportunities
Tokenization opens the potential for novel asset classes and investment vehicles. This can include tokenized debt instruments, fractionalized ownership of intellectual property, or innovative asset-backed securities.
Potential challenges
Token Integrity
A key aspect of a RWA token is to maintain the integrity of the Token after it has been issued. For example, a real estate property has been tokenized with a certain individual as the owner. A while later, the property is sold to a new owner for consideration. The integrity of the token needs to be retained while the ownership may have changed.
Regulatory uncertainty
The legal and regulatory frameworks surrounding tokenized assets are still evolving, leading to uncertainty for issuers and investors.
Technological complexity
Tokenization platforms and blockchain technology can be complex for beginners to navigate, requiring education and awareness.
Security risks
Like any digital system, tokenized assets are susceptible to cyberattacks and hacking, requiring robust security measures.
Overall, RWA tokenization presents a groundbreaking opportunity to transform asset ownership, increase market efficiency, and democratize access to valuable investments. While challenges remain, the potential benefits are substantial, paving the way for a more inclusive and accessible financial future.
