Tokenized real-world assets could be the next big thing for DeFi, a report by CoinBase suggests. Its views echo other crypto experts, including Ethereum founder Vitalik Buterin.
In a report titled 2023 Crypto Market Outlook, Coinbase revealed its view on where the DeFi space will go next.
“Looking ahead, we believe the evolution of the crypto ecosystem is putting subjects like tokenization, permissioned DeFi, and web3 front and center,” the report wrote.
Asset tokenization refers to a process where traditional securities and assets are converted into digital tokens. These tokens can then be bought, sold, transferred, and used in complex financial operations on blockchain networks.
The operation allows users to tokenize and use real-world assets (RWA) such as stocks, bonds, commodities, precious metals, and more in DeFi applications.
“For some institutions, tokenization is a less risky way of having crypto exposure compared to investing directly in tokens,” the report writes.
The idea of tokenizing RWA is not new. However, it has gained significant traction in recent months among financial institutions, according to CoinBase. These institutions view it as a way of dealing with “inefficiencies inherent in traditional securities settlement.”
Non-fungible tokens (NFTs) seem particularly suited for tokenizing non-fungible assets such as real estate and physical collectibles.
“We are seeing a greater variety of use cases for non-fungible tokens outside of art, like using NFTs to certify and authenticate RWA or as ENS domain names,” the report continued.