Ethereum Approves Standard for Tokenizing Real-World Assets

The tokenization of stocks, payment systems, and loyalty programs is facilitated, offering benefits like liquidity and faster settlements.

Ethereum Approves Standard for Tokenizing Real-World Assets
Ethereum Approves Standard for Tokenizing Real-World Assets

The Ethereum community has officially approved the ERC-3643 Ethereum Improvement Proposal (EIP), establishing it as a recognized standard for tokenizing real-world assets (RWAs) consistent with the Ethereum protocol.

On December 15, an announcement stated that the Ethereum community formally reviewed, discussed, and agreed upon the proposal, indicating its final status. It follows a similar method to the production of ERC-20 and other well-known standards in the past.

The standard ERC-3643 enables the tokenization of stocks, RWAs, payment systems, and loyalty programs. According to the explanation provided by the association that is behind the idea, it uses a self-sovereign identification (SSI) framework to verify the eligibility of users for a token, thereby offering credentials that are both anonymous and credible.

The adopted standard, suggested in 2021, constructs on top of ERC-20 and incorporates two independent authorization layers to enhance compliance and security. The first layer is concerned with the identity and eligibility of the person who is receiving the transaction.

The ERC-734/-735 standards are used to determine the presence and authentication of required claims on the identification by reputable claim issuers. For the purpose of ensuring controlled and regulated token circulation, the second layer is responsible for implementing global constraints on the token itself.

These restrictions include limits on the daily token volume as well as the maximum number of token stakeholders. Asset tokenization refers to transforming the value of a physical or digital asset into a digital token that can be stored on a blockchain or distributed ledger.

Additionally, higher liquidity, faster settlements, transparency, and accessibility to a variety of marketplaces are all potential advantages that could result from the tokenization of assets.

Real-world applications include facilitating fractional trading of intellectual property, art, financial assets, and real estate. Roland Berger, a management consulting firm, projects that asset tokenization will expand to a market worth $10 trillion by the year 2030.

This represents a huge increase from the current value of approximately $300 billion. A diverse variety of traditional and crypto-native businesses are currently evaluating asset tokenization, which is considered one of the most important developments in the world of finance.

Companies such as JPMorgan, Goldman Sachs, and Societe Generale are among the notable businesses that are investigating the technology. The overall market value of RWAs hit $342 billion in September, according to data provided by VanEck Research. This is despite the fact that the cryptocurrency industry is experiencing obstacles.