Let’s assume you’d like to build an RWA application using Onvest and choose one of the most promising niches according to our ranking. Where should you start?

There’s no straightforward answer to the question of what’s the best platform for designing a Real-Word Asset tokenization. It depends on numerous factors and requires careful evaluation of your specific needs and goals. Check the following key factors to narrow down your choices:

Blockchain design decisions

1. Transaction processing rate is critical for enabling sustainable liquidity in the market. Platforms like Ethereum, Binance Smart Chain, Polygon, and others have different throughput levels, and considerations must be based on the use case, security requirements, and scalability needs.

1. Gas Fees are like the toll on an information highway. High gas fees can scare away potential users, especially retail investors, hindering platform adoption and limiting liquidity. Imagine buying tiny fractions of real estate – high gas costs may outweigh the benefits. 

1. Consensus algorithm selection (PoS/DPoS). The consensus algorithm plays a crucial role in the design of a Real-Word Asset tokenization platform, impacting everything from security and scalability to sustainability and regulatory compliance.
   • Algorithms like Proof-of-Stake (PoS) with BFT properties ensure data consistency and transaction finality even in the face of malicious actors or network disruptions. This is crucial for safeguarding valuable Real-Word Assets on the platform. 
   • However, some consensus mechanisms, like DPoS, raise concerns about potential centralization, which might clash with regulatory requirements for decentralized finance (DeFi) platforms.
   • Platforms like RealT use PoS to ensure security and scalability for fractionalized real estate ownership, whereas platforms like ADDX use DPoS to enable efficient issuance and trading of tokenized securities with high user participation in governance.

1. L1 vs. L2 chains. Both Layer 1 and Layer 2 blockchain technologies play significant roles in designing Real-Word Asset platforms, each addressing distinct challenges and offering unique advantages. You can check more on this topic in our previous report on the differences between L1s and L2s. Also, it’s vital to look for RWA-focused infrastructure, such as Lisk that aims directly at Real World solutions for emerging markets.

1. Oracles. In Real-Word Asset platforms, oracles play a critical role. They bridge the gap between the blockchain and the external world – the onchain and the offchain space. You will find more on this in the section about the onchain tokenization process.

1. Single vs. cross-chain asset handling. The current RWA landscape is fragmented across chains like Ethereum, Solana, Polygon, Polkadot, and Avalanche. While Ethereum is still the most dominant chain, its TVL share dropped from ~96% in 2021 to ~59% in 2023. 

• Going cross-chain enables RWA projects to tap into capital and liquidity along with more retail and institutional users.
• However, in some cases, a hybrid approach may be adopted, leveraging cross-chain solutions for specific functionalities while keeping the majority of assets on a single blockchain. 

Application-specific design decisions

1. Onchain vs. offchain data storage. The optimal approach often involves a hybrid strategy that leverages both onchain and offchain data storage based on data type and sensitivity. Here’s a general guideline:

• • Store critical data onchain for high security and immutability, for example asset ownership records, transaction history, and governance parameters. Less sensitive data like asset descriptions, legal documents, and price feeds can be stored offchain for efficient storage and processing.
  • Frequently accessed data like asset prices might benefit from onchain storage for faster retrieval, while historical data can be stored offchain.
    • Several tools and technologies can help bridge the gap between onchain and offchain data storage:
      • Oracles,
      • Data layer solutions,
      • ZK-Rollups.

• Public vs. Private Blockchain. Below, you’ll find a table with the main points you should consider. However, note that Hybrid models combining public and private elements may also be worth exploring. For example, you might use a public chain for tokenization and trading while utilizing a private chain for sensitive asset management or regulatory compliance.

Onchain Tokenization process

So far, we’ve discussed how to design a perfect platform for Real-Word Asset tokenization. We have yet to explain how the seamless transition of ownership and representation for these assets is accounted for when transitioning between the digital and physical realms. In this section, we break down the Real-World Asset process into five steps:

After you’ve reached the basic decisions and understood the essential steps, let’s now deep dive into the intricacies of the tokenization process as a pivotal step in structuring your Real-World Assets. From a technical perspective, this process can be deconstructed into the following steps:

1. Selection of tokenization standard

A token standard comprises a predefined set of functions and/or attributes intentionally incorporated to depict the unique features of each asset. The prevalent token standards include the following:

Ethereum-based standards:

Other blockchain-based standards: 

• Hyperledger Fabric: offering several tokenization standards, including the Hyperledger Composer Token and the Hyperledger Fabric Private Data Collection, suitable for confidential and sensitive RWA transactions.
• Tezos: featuring the FA1.2 and FA2 standards, enabling efficient tokenization of both fungible and non-fungible RWAs with a focus on security and governance.
• Solana: with the SPL Token Standard that allows for fast and low-cost tokenization of various asset classes, including RWAs, such as dynamic supply adjustments, minting, freezing, burning, and more.

Emerging token standards:

• ERC-7208: Proposed by AllianceBlock, this standard creates Onchain Data Containers (ODCs) holding data and metadata for RWAs. It aims to improve the efficiency and flexibility of handling non-fungible and fractionalized assets on Ethereum.
• EIP (Ethereum Improvement Proposal) for Tokenized Vault Standards: This evolving proposal introduces asynchronous deposit and redemption flows for yield-bearing vaults holding RWAs. This would enable more flexible investment strategies and liquidity options.
• These emerging standards are still under development and may not be widely adopted yet.

2. Bridging offchain and onchain information: Oracles

An oracle is a mechanism or service that provides external information to smart contracts. Smart contracts on blockchain networks are typically isolated and don’t have direct access to real-world data. Oracles bridge this gap by fetching and delivering real-world data to the blockchain, enabling smart contracts to react to external events.

Potential oracle providers

3. Cross-chain requirements

The final step in determining an appropriate tokenization process relates to the cross-chain requirements. In the realm of blockchain technology, cross-chain asset transfer refers to the movement of digital assets between different blockchains.

Imagine your assets as suitcases. Instead of airports, you have blockchains, and each blockchain has its own set of rules and checkpoints. Cross-chain transfer is like sending those suitcases securely and reliably from one blockchain “airport” to another.

Final thoughts: A call to action

This report has shown that RWAs offer diverse applications, from improving financial inclusion of rural farmers, the digitization of educational credentials, the financing of local infrastructure, or the unlocking of new liquidity channels in fragile economies.

Yet the full potential of RWAs remains largely unrealized. Their promise will only translate into impact if key stakeholders take deliberate action.

What comes next?

For builders: Expand the scope of innovation. While areas like stablecoins and tokenized real estate have gained early traction, emerging sectors such as agriculture, decentralized infrastructure (DePIN), and trade finance hold significant untapped potential. These domains are deeply valuable for the real economy.

For founders: Use the insights in this report as a strategic compass. Our impact ranking highlights where RWAs can drive the greatest change. Identify the segments where your expertise and ecosystem positioning can deliver differentiated value and begin executing.

For policymakers and regulators: The success of RWAs depends on regulatory clarity and supportive frameworks. Forward-looking policies, including regulatory sandboxes and clear compliance pathways, could unlock responsible experimentation in sectors like education, credit, and green finance, especially in emerging markets.

For investors: Focus on real-world traction rather than speculative metrics. The most transformative RWA projects are often those solving structural problems in emerging markets such as capital access, currency volatility, or lack of verifiable records. These efforts may not attract immediate attention, but they lay the groundwork for sustainable, long-term growth.

Ultimately, the promise of RWAs lie in its ability to expand economic participation, modernize legacy systems, and bring meaningful improvements to people’s lives especially where conventional systems have failed.

It is now time to build with purpose and commitment.