Ethereum Community Approves Standard for Tokenization of Real-World Assets

What You Need to Know:

The Ethereum community has officially endorsed the ERC-3643 Ethereum Improvement Proposal (EIP) as a recognized standard for compliant tokenization of real-world assets (RWAs). This move is expected to have a significant impact on the growing field of asset tokenization.

The Details:

The ERC-3643 proposal has undergone a thorough review and discussion within the Ethereum community, similar to the process that established popular standards like ERC-20. Approved in 2021, this standard focuses on securities tokenization, RWAs, payment systems, and loyalty programs.

The proposal incorporates a self-sovereign identity (SSI) framework to verify users' eligibility for a token. This framework provides anonymous yet verifiable credentials, ensuring security and compliance. To further enhance security, ERC-3643 includes two permission layers.

The first layer verifies the identity and eligibility of the token receiver using ERC 734/735 standards and trusted claim issuers. The second layer imposes restrictions on the token itself, such as daily volume limits and the maximum number of token holders, ensuring controlled and regulated token circulation.

Why It Matters:

Asset tokenization involves converting the value of physical or digital assets into digital tokens on a blockchain or distributed ledger. This process offers numerous benefits, including increased liquidity, faster settlements, transparency, and accessibility to various markets.

The approval of the ERC-3643 standard paves the way for the widespread adoption of asset tokenization. It has the potential to revolutionize industries by enabling fractional trading of real estate, art, financial assets, and intellectual property.

Management consulting firm Roland Berger predicts that the asset tokenization market will be worth $10 trillion by 2030, a significant increase from its current value of around $300 billion.

Industry Response:

Asset tokenization is gaining traction among both traditional and crypto-native companies. Notable firms exploring this technology include JPMorgan, Goldman Sachs, and Société Générale. Despite challenges faced by the crypto industry, the total market capitalization for RWAs reached $342 billion in September, according to data from VanEck Research.

Overall, the approval of the ERC-3643 standard marks a significant milestone in the development of asset tokenization, unlocking new possibilities and opportunities in the financial world and beyond.