Author: Robert Hackett, special editor of a16z crypto; Source: a16z crypto; Compiler: Shaw, Golden Finance

The market for tokenized assets - also often referred to as the market for real-world assets (RWA) - topped $30 billion last month and has since remained in the $34 billion range, excluding stablecoins. This volume is equivalent to the size of a regional bank or a top university endowment fund. It already has actual market influence, but it is still small compared to the global financial system.

As of mid-2024, tokenized assets are less than $3 billion. Since then, the growth rate of the industry has increased sharply: The U.S. "GENIUS Act" has been implemented, and the regulatory rules for stablecoins have become clearer; institutional-level on-chain infrastructure has become increasingly mature; a large number of financial institutions have simultaneously completed blockchain pilots and officially launched commercial systems. Although stablecoins are not included in this statistics, they have greatly simplified the on-chain payment and settlement process, providing support for industry growth.

Driven by multiple factors, the size of the tokenized asset market has surged tenfold in less than two years.

Tokenization is experiencing explosive growth

U.S. Treasury bond assets are the core driver of the recent increase in market size.

The appeal is clear and intuitive: investors can hold such familiar income-generating assets in an efficient and flexible native digital form; institutions can use this model to improve the efficiency of settlement and mortgage asset transfer, and better connect with the digital financial market.

For crypto investors, tokenized government bond products can not only revitalize idle stablecoins, but also obtain traditional money market returns. A number of asset management institutions such as BlackRock and Franklin Templeton quickly responded to market demand and created a multi-billion-dollar market around this category.

The growth rates of various tokenized assets vary greatly, which not only reflects the differences in the difficulty of putting different assets on the chain, but also reflects the varying market acceptance of early products.

Asset-backed credit categories, including tokenized home equity lines of credit and lending vault tokens, took only 185 days from the first on-chain transaction record to exceed $1 billion in market capitalization, a growth rate far ahead of all tokenized asset categories.

Specialized financial assets ranked second in growth, covering categories such as tokenized reinsurance contracts and Bitcoin mining bonds, and exceeded the US$1 billion mark in less than two years.

Venture investment assets have the slowest growth rate, taking more than seven years to reach US$1 billion; active strategy assets also take a similar time. This type of asset structure is more complex, the investment cycle is longer, and operation and compliance supervision are more difficult.

Tokenization of Government Bonds and Commodities The business has grown relatively quickly, exceeding US$1 billion in two to three years, and is now a mainstream category in the market. At the beginning of 2024, the two will account for almost the entire tokenized asset market.

Since 2024, the market share of asset-backed credit, special finance, stocks, active strategies and other categories has steadily increased, but industry concentration is still high. Currently, tokenized U.S. Treasuries and commodities combined account for approximately two-thirds of the market share.

In-depth analysis of the tokenized asset market

The concentration within the commodity sector is also extremely high: gold accounts for almost all the shares, with a tokenized scale of approximately US$5 billion, while the total size of the commodity token market is approximately US$5.1 billion. The volume of silver and other categories of products is very small, totaling only US$57.6 million, accounting for only 0.01%.

Gold is naturally adapted to the tokenization model: it has the characteristics of a globally unified standard, easy to store, and not easy to lose, and is generally traded in the form of equity certificates. Crypto investors have always favored gold assets. Even before the advent of gold token products, Bitcoin had been positioned as “digital gold.” Products such as XAUT and Paxos' PAXG launched by Tether migrate the mature gold holding model to the blockchain system, converting the ownership certificate of the gold in the vault into on-chain tokens that can be stored in digital wallets.

The market shares of emerging categories such as oil, agricultural product tokens, energy, and computing power are extremely low and are still in their infancy. The current commodity token market is basically dominated by the gold category.

The blockchain ecosystem carrying various tokenized assets presents a diversified landscape. Ethereum still dominates by virtue of its first-mover advantages in decentralized finance (DeFi) and institutional applications, with related assets reaching US$15.7 billion, accounting for slightly more than half of the market.

The rest of the tokenized assets are distributed across multiple public chains: BSC Network with $4 billion, Solana Network with $2.2 billion, Stellar Network with $1.7 billion, and Bitcoin sidechain Liquid Network with $1.5 billion. XRP Ledger, ZKsync Era, and Arbitrum are each close to US$1 billion.

Affected by transaction costs, liquidity, compliance requirements and business partnerships, tokenized assets are not concentrated in a single public chain, but are gradually spread across major blockchain ecosystems.

However, the most valuable reference is not the market size, but the actual application scenarios of this type of assets.

Most tokenized assets have not yet achieved composability

Bonds are the largest tokenized category, with a market value of US$15.2 billion, but only about 5% of the asset volume (about US$800 million) is invested in decentralized financial protocol applications.

The utilization rate of precious metal tokens is also low. Most of the assets are only stored in on-chain accounts and are not used as composable financial components to achieve functional expansion, reorganization and cross-asset linkage.

Niche categories perform very differently. The market value of reinsurance tokens is only US$362 million, but 84% of the shares are invested in decentralized financial protocols, and the proportion of applications on the private credit token chain is 33%.

The logic behind this set of data is clear: the category with the highest usage rate of DeFi has been adapted to the composable features on the chain from the beginning of its design. Typical projects include protocols such as Nexus Mutual and Maple Finance. On the other hand, the core original intention of leading tokenized assets such as treasury bonds and gold is only to facilitate on-chain holding and transfer, and does not change the basic operating model of the assets themselves.

This difference reflects the deep differentiation of the tokenized asset market:The degree of on-chain nativeness of various assets varies.

Some assets can be freely transferred and can be used in various on-chain applications; there are also many assets that only use the blockchain as a certificate storage system, with limited transfer and combination capabilities. For example, the data platform RWA.xyz divides assets into two categories: distributed assets and certificate-based assets.

Most of the current so-called tokenization is more of a digital certificate deposit: Only migrating asset records to the chain does not release composable value. Composability is the core advantage of the on-chain financial system, which can significantly expand financial service capabilities.

Other analyzes that measure attributes on the asset chain have reached similar conclusions. The token nativeness index launched by Pantera Capital is used to judge the degree to which assets fit the on-chain ecology. The results show that over 75% of assets are rated at the lowest level. In practical applications, most of these tokens are only equivalent to digital vouchers, and the corresponding physical assets are still controlled by off-chain ledgers and intermediaries.

One type of assets is only reproduced in digital form and has an on-chain shell, while the other type makes extensive use of the unique characteristics of the blockchain to run on the native chain. The gap between the two is enough to show that the industry is still in its early development stage.

The infrastructure and underlying assets supporting asset portfolio applications are already in place, but the implementation of deep integration has just begun.

The future direction of tokenized assets

The industry has different forecasts for its market size, but there is a consensus on the growth trend: the industry as a whole will continue to expand.

McKinsey Benchmark Forecast sees the market reaching $2 trillion to $4 trillion by 2030. Ark Invest has an estimated size of $11 trillion. Boston Consulting Group (BCG) and Ripple forecast that the market size will reach US$9.4 trillion in 2030 and further increase to US$18.9 trillion in 2033. Standard Chartered Bank predicts that the scale will exceed US$30 trillion in 2034.

Mainstream forecasts indicate that the industry is expected to grow hundreds of times compared to the current market size of approximately US$30 billion. The differences between the parties mainly focus on the scope of statistical caliber.

The numerical gap between US$2 trillion and US$30 trillion is not due to differences in judgments on the speed of penetration, but more to different statistical definitions. There are differences in the statistical scope of each institution: the asset categories included, whether to count stablecoins and deposits, and the definition of the concept of tokenization are all different. McKinsey mainly counts bonds, loans, funds and stocks; Standard Chartered Bank additionally includes commodities and trade finance; Boston Consulting Group and Ripple also count deposits and stablecoins on the basis of traditional assets.

Despite differences in statistical methods, all institutions have consistent judgments on the overall development trend: The market size of asset tokenization will usher in substantial expansion.

Looking at the global financial landscape, the current tokenized asset market is still insignificant. The total size of the global bond market exceeds US$140 trillion, but the scale of tokenized bonds is only about US$15 billion, accounting for 0.01%; the value of global gold in circulation reaches trillions of US dollars, and the scale of tokenized gold is about US$5 billion, accounting for less than 0.02%; the total market value of global stocks exceeds US$100 trillion, and the scale of tokenized stocks is about US$1.5 billion, accounting for only 0.001%.

This emerging market is gradually taking shape. Assets with clear pricing, stable demand, and simple ownership structures, such as treasury bonds, gold, and private credit, were the first to successfully complete on-chain conversion and became the first popular categories to be implemented.

Tokenization at this stage has not yet reshaped the nature of the assets themselves. It has only changed the methods of asset circulation and settlement. The in-depth connection between assets and digital financial infrastructure has only just begun. Most of the current market remains at the level of digital certificate storage, and has not truly realized combinable applications on the chain. Although many assets rely on blockchain to operate, they cannot yet serve as programmable financial basic components.

The industry will face greater challenges next:Promote more complex assets in the financial system to be put on the chain, and deeply integrate tokenized assets into the Internet-native financial system with combined characteristics.