As the once effervescent market of Non-Fungible Tokens (NFTs) dwindles, dropping by a staggering 89% from its previous trading volume of $12.6 billion at the beginning of 2022 to a mere $1.39 billion in 2023, a new trend is picking up steam. Observers are now turning their attention to real-world assets (RWAs), traditional assets tokenized through blockchain technology.
RWAs, which include stocks, bonds, real estate, fine art, music royalties, commodities, and more, are emerging as the nexus between traditional finance (TradFi) and decentralized finance (DeFi), offering a plethora of benefits, including improved liquidity, transparency, efficiency, and reduced reliance on intermediaries. The forecast is bright, with predictions suggesting that the market for tokenized RWAs might rocket to an astonishing $10 trillion by 2030.
The secret that’s not widely known yet is that many of these RWAs require NFTs. Take real estate, for example, a sector with a global value exceeding $3.8 trillion and set to become a significant driver in the NFT market. The uniqueness of each property or parcel of land necessitates the use of NFTs for tokenization if individual investments are being offered rather than fungible tokens.
Tokenization can extend to other financial contracts, such as loans, invoices, or insurance contracts, imbuing them with increased security, efficiency, and operational cost reductions. Once encoded into NFTs, the contracts become unalterable and completely traceable, thereby reducing the potential for manipulation.
In the creative industries, particularly music, tokenising intellectual property rights and revenue distribution is a game-changer. NFTs and smart contracts can ensure fair compensation for creators as per royalty agreements, while investors can earn from the artists’ work. The music industry, valued at $31.2 billion in 2022, can see a paradigm shift in revenue distribution, with artists finally gaining a significant portion of the pie.
Projects like TokenTraxx are already paving the way, collaborating with artists to issue music NFTs, providing them with direct access to fans and freeing them from the shackles of record labels. While the buzz around NFTs may seem to have waned, it’s on the cusp of a resurgence. This renewed vigor comes with the tokenization of real-world assets, encompassing sectors such as trade finance, real estate, and music. The potential is enormous, and the future of NFTs looks brighter than ever.