a16z: 7 Images to Understand How Tokenization Changes the Nature of Assets

This article is from: a16z crypto

Compiled by: Moni, Odaily Planet Daily

Tokenized Assets, often referred to as "Real World Assets (RWA)," are changing the form, liquidity, and construction of financial systems.

Just last month, the market size of tokenized assets surpassed $30 billion and is currently stabilizing around $34 billion (excluding stablecoins). This scale is roughly equivalent to that of a regional bank or a top university endowment fund. Although it remains quite small compared to the global financial system, it is already significant enough to have a real impact.

It's worth noting that two years ago, the market size of tokenized assets was less than $3 billion, but since then, the market has undergone a dramatic transformation: the U.S. GENIUS Act has provided a clearer framework for stablecoin regulation, institutional-level on-chain infrastructure has gradually matured, and many financial institutions began deploying blockchain technology around the same time—these factors have driven the tokenized asset market to grow tenfold in less than two years. (Note: Although stablecoins are not included in the above statistics, they have significantly driven overall market growth by greatly simplifying on-chain payments and settlements.)

This article will analyze the reasons for the rise of tokenized assets and their future direction using seven charts.

The Takeoff of Tokenized Assets: U.S. Treasuries Become the Largest Growth Engine

U.S. Treasuries are the main driving force behind the recent growth of the tokenized asset market.

The advantages of tokenized U.S. Treasuries are clear and intuitive: investors can hold stable income-generating assets in digital form, and trading is more efficient and flexible; financial institutions can enhance settlement and collateral asset allocation efficiency, smoothly connecting to the digital financial market.

Crypto investors can also leverage tokenized Treasuries to activate idle stablecoins and earn returns from traditional currency markets, with asset management firms like BlackRock and Franklin Templeton positioning themselves accordingly, creating a market worth hundreds of billions.

It is important to note that the growth rates of various types of tokenized assets vary significantly, stemming from the technical and compliance challenges of bringing different assets on-chain, as well as the market acceptance of products after they are launched.

• Asset-backed credit assets lead in growth rate, primarily including home equity credit line tokens, lending vault tokens, reinsurance contracts, and unique financial assets like Bitcoin mining receipts, which have reached a market value of $1 billion within two years.
• Venture capital assets took over seven years to break the $10 billion market value, with actively managed strategy assets taking a similar amount of time. These assets have complex structures, long investment cycles, and higher operational and regulatory thresholds.
• The on-chain pace of Treasuries and commodities is moderate, breaking the $10 billion market value in 2 to 3 years, and they have now become mainstream categories in the market.

By early 2024, Treasuries and commodities will almost entirely account for the market share of tokenized assets. After 2024, shares of credit, unique financial products, stocks, and other categories will steadily increase, but market concentration will still be relatively high. Currently, U.S. tokenized Treasuries and commodities together occupy about two-thirds of the market share.

Segmentation of the Tokenized Asset Market

The commodity tokenized asset sector is highly concentrated, with gold tokens dominating the vast majority of the share, totaling about $5.1 billion, of which gold tokens account for $5 billion. Silver and other category tokens only total $57.6 million, making up less than 0.01%.

Gold naturally fits the tokenized asset model; currently, the commodity token market is primarily dominated by gold because: gold has a globally unified standard, is easy to store, is not easily damaged, and has long relied on rights certificates for trading.

Moreover, crypto market investors have historically favored gold assets, with Bitcoin being dubbed digital gold in its early years. Products like Tether's gold token XAUT and Paxos' gold token PAXG map the ownership of vault gold to the blockchain, converting physical gold rights into digital tokens that can be held in on-chain wallets.

The market share of tokenized assets for crude oil, agricultural products, and emerging categories like energy and computing power is extremely low, as the industry is still in its infancy.

From the perspective of underlying public chain layout, the ecosystem of tokenized assets is more diverse. Ethereum, leveraging its first-mover advantage in decentralized finance and institutional landing foundation, still holds a leading position, carrying an asset scale of $15.7 billion and accounting for over half of the market.

The remaining tokenized asset market is distributed across multiple public chains: BNB Chain's tokenized asset market size is about $4 billion, Solana about $2.2 billion, Stellar about $1.7 billion, Bitcoin sidechain Liquid Network about $1.5 billion, and XRP Ledger, ZKsync Era, and Arbitrum's tokenized asset scales are all close to $1 billion.

The tokenized asset industry has not been uniformly aggregated to a single public chain; assets are distributed across major blockchain ecosystems based on transaction costs, liquidity, compliance requirements, and business relationships. However, the most telling data point is not the scale of the tokenized asset market... but how these assets are used.

Let's continue the analysis------

Most Tokenized Assets Currently Lack "Composability"

Market size is not the only core indicator; the actual application value of assets is more meaningful.

Bonds are the largest category of tokenized assets, with a market value of $15.2 billion, but only 5% of the circulation is applied to DeFi protocols, amounting to about $800 million. The utilization rate of precious metal tokenized assets is similarly low, with most tokenized assets only used for on-chain storage and not yet becoming freely combinable and reusable financial building blocks.

In contrast, niche tokenized asset categories perform quite differently: the reinsurance token, with a market value of $362 million, has an on-chain protocol usage rate of 84%; private credit tokens have a usage rate of 33%, as both asset types were designed from the outset to fit on-chain combinable application scenarios. In contrast, head tokenized assets like Treasuries and gold primarily aim to simplify on-chain holding and transfer of assets without changing the original operational logic of the assets. This situation highlights a core divergence in the tokenized asset industry: the on-chain native degree of various tokenized assets varies widely.

Some assets can flow freely across chains, while others only use blockchain as a bookkeeping tool, limiting asset transfer and combination functions. Currently, most tokenized assets are essentially just digital representations of assets, merely migrating records to the chain without unlocking the potential for asset combinations. Composability is the core value of on-chain finance and is key to upgrading the financial system.

The Pantera Capital token native index shows that over 70% of tokenized assets have the lowest level of on-chain native degree. A large number of tokens are merely digital certificates of offline physical assets, with actual asset control still relying on offline ledgers and intermediary institutions.

The tokenized asset industry is still in its early development stage: one type consists of assets that are only formally on-chain digital records, while another type consists of deeply integrated on-chain assets that align with blockchain characteristics.

The infrastructure for on-chain composability technology is already complete, and asset categories are gradually enriching, but deeply integrated applications are just beginning.

Future Development Trends of Tokenized Assets

Industry forecasts for the long-term scale of the tokenized asset sector vary, but overall, the market is expected to continue expanding.

• McKinsey predicts that the market size of tokenized assets will reach $2 to $4 trillion by 2030;
• Ark Invest estimates the market size of tokenized assets at $11 trillion;
• Boston Consulting, in collaboration with Ripple, estimates that the market size of tokenized assets will reach $9.4 trillion by 2030 and climb to $18.9 trillion by 2033;
• Standard Chartered predicts that the tokenized asset market will exceed $30 trillion by 2034.

Based on the estimates from these institutions, compared to the current market size of $34 billion, the long-term growth potential of the tokenized asset market could reach a hundredfold. Of course, the numerical differences do not stem from differing predictions on the speed of industry adoption, but rather from different statistical definitions. Each institution has different statistical scopes, covering asset categories, whether stablecoins and deposits are included, and the definition of tokenization varies, for example: McKinsey focuses on bonds, credit, funds, and stocks; Standard Chartered adds commodities and trade finance; Boston Consulting and Ripple additionally include deposits and stablecoins. However, despite differences in statistical criteria, the industry unanimously recognizes that the scale of tokenized assets will experience exponential expansion.

Looking at the global financial landscape, the current scale of tokenized assets remains minuscule.

• The total global bond market exceeds $140 trillion, with tokenized bonds only at $15.2 billion, accounting for 0.01%;
• The global market value of physical gold reaches several trillion dollars, with tokenized gold at $5 billion, accounting for less than 0.02%;
• The global stock market value exceeds $100 trillion, with tokenized stocks at $1.5 billion, accounting for only 0.001%.

Now, emerging sectors have steadily taken shape, with U.S. Treasuries, gold, private credit, and other assets that have clear pricing, stable demand, and simple ownership being the first to complete their on-chain landing. At this stage, tokenization has not yet disrupted the underlying attributes of assets but has only optimized the methods of asset settlement and transfer. The deep integration of assets with the digital financial system is still being explored.

Currently, tokenized assets remain largely at the digital level, making it difficult for assets to achieve programmable combinable applications. The next stage of the industry faces a hardcore challenge: to bring more complex parts of the financial system on-chain and to integrate tokenized assets more deeply into composable, internet-native financial infrastructure.

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