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February 9, 2024

Tokenization of Real World Assets is All the Rage

Tokenization of Real World Assets is All the Rage

"Tokenization of Real World Assets (RWA) is all the rage." - headline today... For Defi to materially finance RWA there must be;

  1. Distributed Ledger
  2. Distributed Compute, and
  3. Distributed Data.

How you structure this is how you scale RWA and DeFi. The most secure ledger by orders of magnitude is #BTC, but there are many ledgers, each with their own value. (We use 13 chains, our newest, Provenance Blockchain Foundation and Hedera each bring unique value and networks)

On-chain compute is enormously valuable and Vitalik Buterin launched this with smart contracts on Ethereum. The issue is we can not do complex compute right now, and I question if we should. We believe relationships and variables should be on chain compute but operations and constants should be off chain. Otherwise you tie yourself to a single chain, financial markets and compute with integrity demand redundancy. I have written about this a lot (most recent post).

Relationships are defined by the ledger you use. Variables are fed into the compute via oracles, as are zero knowledge proofs of operations and constants. For variables, if the data is public you use Chainlink Labs, if it is unique to one location, is covered by GDPR, or is powering meaningful value distribution or calls, you need to ensure you are pulling the right data from the right source. This is one of the reasons Tokeny 's on-chain ID is so powerful, and a major driver of why we invested in them in 2021. There must be a mechanism by which the smart contract can be pointed in the right direction of the right oracle and this is provable.

I have written other posts on operations and constants, so I will leave those for now but distributed compute on chain and off chain and structuring that is critical. The chains will seek to tie all compute to them, to benefit them not the user. This is the exact analogy of free stuff that we all loved with Facebook and Google until we learned that we were the product being monetized...if your enterprise compute is tied to one chain, you are the product the chain is monetizing.

Data is the hard part for RWA. It is unstructured and everywhere. All 46 pages of a commercial lease are important to lawyers, but perhaps only 25 distinct tidbits of information are required for computation. Inveniam allows you to build a data template so an AI agent can find these essential elements of information (EEI) using Inveniam for attribution (with provably no hallucinations). We have already seen (by end of year 2023) nearly a 10x productivity increase. We have had over $90 billion of RWA asset data on boarded as our clients get ready for tokenized RWA. Data automation (DLT+AI) + onchain compute = DeFi.

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