Tokenization's role in Web3 is a bit confusing to me. Does it make sense to convert real-world assets into digital tokens, or is it just speculation? What do you think the future of tokenization could be? What challenges might we face in practice?
How does tokenization work in Web3 projects?
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Tokenization's role in Web3 goes beyond theory—it addresses a practical need. Tokenizing real-world assets (RWAs) has the potential to increase liquidity and remove geographical barriers, especially in traditionally illiquid sectors like real estate, art, or crude oil. In my recent work with several DeFi projects, I’ve seen how tokenization allows investors to digitally access assets they couldn’t physically reach. For example, a jewelry store owner in the U.S. can sell shares of their inventory to Asian investors through tokenization. While speculation is undeniable, the underlying benefits are hard to dismiss.
The biggest hurdles in practice come from regulation. Decisions like the U.S. SEC classifying certain token projects as securities directly impact tokenization’s scalability. Additionally, cross-chain and smart contract security are critical—just one exploit can lead to the loss of millions in assets. Last month, while analyzing a DeFi protocol on Ethereum, I discovered an integer overflow vulnerability that put the entire project at significant risk. Looking ahead, I believe tokenization will reshape financial systems, but its growth pace will depend on regulatory clarity and infrastructure security.
Well, look, a month ago I didn’t even know what a "token" was 😅. Now I’ve got 3 Ethereum cat NFTs... that are worth less than my pension lol. But hey, only time will tell if it’s genius or madness. One thing’s for sure: if I don’t dig deeper, I’ll end up selling the cats to buy bread 🍞🐱.
Tokenization is indeed one of the most fascinating topics in Web3. Turning real assets into digital tokens makes sense because it provides liquidity and accessibility, but of course, there’s also the risk of speculation. So, which sectors do you think will benefit the most from tokenization?
Comparing tokenization to the real estate sector is quite useful. In the past, if you wanted to buy a house, you had to deal with cash on hand and long bank loans. Now, thanks to tokenization, you can buy small shares of that house as digital tokens, gain liquidity, and avoid waiting for years. The same logic applies in Web3: you can divide an artwork, commodity, or even a company share into tokens and make them tradable on the blockchain. To reduce the level of speculation, the value behind real assets needs to be grounded on solid foundations—just like in real estate.
However, there are also challenges in practice. While real estate records in the land registry are reliable, tokenization faces obstacles such as lack of legal regulations, regulatory chaos, and the absence of reliable infrastructure. Since blockchain technology is not yet fully mature, international standards that guarantee the ownership and transfer of tokens are not yet clear. Therefore, for tokenization to expand in the future, both technological and legal infrastructures need to mature.
In Web3, tokenization compared to real estate is like stocks: it breaks property ownership into smaller shares and increases liquidity. While there’s speculation risk (like with all stocks), it can drive long-term innovation by making real-world assets more accessible. Challenges remain, too—valuation, regulations, and technical security commitments—just like in real estate.
Tokenization compared to real estate assets makes just as much sense in the Web3 space. Turning real-world assets into digital tokens not only boosts liquidity but also opens the door to a wider range of investors—similar to how buying tokenized real estate funds is easier than owning property outright. For example, dividing ownership of a building into 10,000 tokens allows smaller investors to buy in gradually. This not only makes capital more accessible but also has the potential to increase the asset’s value.
However, challenges remain, much like credit risks in the real estate market. The future of tokenization will depend on factors such as regulations, the reliability of smart contracts, and protection against market manipulation. During periods where speculation runs high, token values can skyrocket or plummet rapidly—ultimately making it harder for both projects and investors to survive. Therefore, the long-term value of tokenization will rely on real use cases and a robust infrastructure.