RWAs: Rethinking Commerce for High-Value Assets

Almost everything we own or do might be turned into digital tokens on a blockchain, including commerce. Here's why this is relevant to brands.

Mar 20, 2024

Hey, it’s Marc. ✌️

Blockchain is poised to change the way we exchange value and store information.

A key area set for substantial improvement is the trading of goods, now tokenizable on a blockchain.

Justin Banon, the Founder of Boson Protocol, a frontrunner in facilitating trust-minimized exchanges of real-world assets without the need for centralized intermediaries, has recently introduced "Fermion," a protocol tailored for transacting high-value assets.

The market potential is enormous, with the assets expected to be tokenized over the next decade reaching into the trillions, opening vast opportunities for brands.

Today, we’re going to look at:

Why tokenization
Rethinking commerce
Boson vs Fermion
Take-aways for brand leaders
The big picture.

Let’s jump in.

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This article is published in collaboration with Boson Protocol.1

Why Tokenization

Those of you who’ve been around for a while will remember that “tokenization” was already a big narrative in 2019, after which it fell asleep again.

In 2023, The narrative around “Phygitals”, or the tokenization of “real world assets” (RWAs), emerged with new momentum.2

Bold predictions:

AB Bernstein projects $5 trillion in assets could be tokenized over the next five years.
Boston Consulting Group (BCG) estimated tokenized assets could reach $16 trillion by 2030.
Roland Berger projects it to reach $11 trillion by 2030.

BlackRock thinks that tokenization will be the “next generation for markets” and “monumental in shaping our ecosystem.”

Zoom out: This momentum was driven by several factors.

Growing institutional interest: Major financial institutions, including Goldman Sachs, J.P. Morgan, Franklin Templeton and Vanguard, have announced initiatives or investments in tokenized assets. This signals increasing institutional confidence in the technology. Catch a full breakdown here.
Real-world asset (RWAs) classes gaining traction: Tokenization is not limited to cryptocurrencies; it is being applied to a wide range of RWAs, including real estate, commodities, private equity, and art. This diversification is attracting more investors. RWA protocols, such as Centrifuge, Truefi, Goldfinch, Clearpool, or Maple Finance have attracted substantial interest in 2023.
Regulatory advancements: Regulatory bodies worldwide are developing frameworks to support RWAs, which is further encouraging institutional participation (cf. MiCA in Europe).

The big picture: Tokenization could redefine asset ownership, lower transaction costs and bring greater liquidity to otherwise illiquid assets.

Rethinking Commerce

“Tokenization” means nothing else than linking a physical product to a unique token on a blockchain.

As soon as a physical good is connected to a token (NFT), it can be freely traded “on-chain,” i.e. without the need of a centralized platform.

A tokenized good becomes:

More liquid: Assets can be traded freely on centralized and decentralized exchanges. Fractionalization breaks down an asset into tradable tokens, making ownership more accessible.
More transparent and secure: Blockchain provides an immutable and transparent record of ownership and transactions.
Programmable: the token can be programmed with smart functionality.
Interoperable and standardized: Unified token standards3 allow seamless integration into marketplaces.

This works as long as someone guarantees that the NFT can be redeemed for the physical good at all times.

So what?

This is why Web3 (blockchain) is poised to play a significant role in the future of eCommerce and has the potential to revolutionize the way we buy and sell products and services online.

Boson Protocol does exactly this.

It allows brands (and literally anyone) to sell physical things as NFTs online, in virtual worlds and on NFT marketplaces.
Users are guaranteed to either get the product or their money back.

Boson Protocol already provides the foundational infrastructure for bringing commerce RWAs onchain with low transaction costs and minimized trust.

For example: A watch brand equipping its watches with a digital ID (NFT), they could:

start selling NFTs online / in virtual worlds
log secondary market transactions by checking for a corresponding transaction on-chain. If done right, the brand could even earn a royalty fee on that.

The problem: The whole phygital experience – i.e. redeeming virtual to physical – isn’t yet trustless and isn’t yet “real” Web3. This problem is referred to as the physical asset oracle problem.4

Go deeper: If users want to buy (or sell) an NFT connected to a physical product, they have no guarantee that they’ll get the physical items. They must trust the sellers (the brand) or a trusted marketplace to enforce the deal.

Boson solves that. But what about high-value goods?

High-value verified physical real world assets – a trillion dollar segment of the RWA market – require more robust verification at the expense of increased cost and trust.

This is why Justin Banon, the Founder of Boson, recently announced the launch of Fermion Protocol.

Fermion Protocol

Fermion is designed for “verified physical real-world assets (RWAs)”.

What’s that?

These are goods that demand distinct mechanisms for exchange and economic models compared to standard commercial goods, such as high-value collectibles and commodities.

These goods necessitate rigorous verification processes facilitated by trusted entities.

Collectibles, defined by their rarity, historical value, and other unique features, represent a key segment of this market.

Their potential to appreciate over time positions them as an attractive investment alternative to conventional assets like stocks or real estate.

Why verified physical real-world assets (RWAs)?

Fragmented Market Structure: The market for unique physical assets is diverse, involving various suppliers from individual collectors to auction houses, making it difficult for buyers to efficiently locate specific items.
Poor Price Discovery: The rarity of trades for identical physical assets leads to opaque pricing, where the value of these assets is often subjective, complicating the negotiation process between buyers and sellers.
Excessively Extractive Intermediaries: While essential for authentication and facilitating transactions, intermediaries like auction houses and brokers often impose high fees, extracting significant value from transactions at the expense of buyers and sellers.

Fermion vs Boson

Fermion is focused on verified, high-value assets.

Boson focuses on everyday commercial goods.

Together, they enable the trust-minimized exchange of most of the goods – without intermediaries.

Let’s compare the two:

Boson Protocol:

Focus: Enables secure trading of physical and digital goods using redeemable NFTs (rNFTs).
Think of it as: An eBay or Amazon, but built on blockchain technology, eliminating the need for trusted intermediaries.
Mechanism: Utilizes optimistic fair exchange protocols, meaning transactions are assumed valid unless challenged.
Benefits: Streamlines decentralized trade, reduces transaction costs, and allows for more efficient exchange of physical goods.

Fermion Protocol:

Focus: Facilitates fractional ownership of verified physical assets represented as Real World Assets (RWAs) on a blockchain.
Think of it as: A way to co-own a rare car, a piece of real estate, or any valuable physical asset, similar to how stocks allow fractional ownership of companies.
Mechanism: Relies on trusted third-parties for verification and custody of assets, prioritizing security and capital efficiency.
Benefits: Makes traditionally illiquid assets like real estate more accessible to a wider range of investors and unlocks new investment opportunities.

Again, the big difference:

Fermion uses trusted verifiers and custodians to enable more robust verification and higher capital efficiency.5 Fermion addresses the challenge of bringing on-chain billions, possibly trillions, of dollars of illiquid verified physical RWAs.
Boson’s founding vision was: "To be the world's open, public infrastructure layer for commercial transactions and their data".

Why is This Relevant to Brands?

Tokenization of assets allows brands (and literally anyone):

to sell physical things as NFTs online, in virtual worlds and on NFT marketplaces.
Buyers are guaranteed to either get the (verified) product or their money back.

Here are the key advantage for brands for tokenizing products:

Data on ownership and secondary sales
Royalty revenues on resales
Genuine limited editions
Authenticity & protection against counterfeits
Programmable, post-purchase marketing activations

The big picture for brands: In 2024, phygitals will gain more traction. Users will demand an easy way for reselling their products and brands will need to address this question.

The Big Picture

We're heading into a “computable” economy where illiquid assets will live onchain, become tradable and programmable – and unlock exponential wealth.

This will enable a new era of trust-minimized commerce. Boson and Fermion are forming a physical RWA super-system which can become the foundational infrastructure for this.

Soon, it's not just going to be about physical things we can sell.

Almost everything we own or do might be turned into digital tokens on a blockchain. Our behavior will become tradeable, trackable, measurable and tied to onchain digital identities.

Imagine a world where everything is programmable and in which we have digital rules for everything.

We’ll have protocols for almost anything: social interactions, money, commerce, content, marketplaces, identity…

On their most fundamental level, these protocols provide a new organizing and governance mechanism to organize actors in an ecosystem – in a completely permissionless and decentralized way.

They’ll make our world more efficient and frictionless, and generate a wealth of data.

The big opportunity for brands and corporations is to leverage that data to create hyper-personalized consumer experiences and become more efficient.

We’re early. Today, we’re seeing the early innings of this. It will take another decade until this fully takes off.

But it will.

– Marc

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