This is my 343rd column article.

Recently, a friend outside the industry shared a piece of news with me:

On August 28, 2024, in the Ensemble project sandbox announced by the Hong Kong Monetary Authority, the Real-World Assets (RWA) issued by Ant Chain and Langxin Technology based on mainland charging pile assets became one of the first four use cases of the Ensemble project of the Hong Kong Monetary Authority.

In the first attempt of RWA, Langxin's Xindiantu, as the operator and service provider of the new energy digital platform, will anchor some charging piles operated on the platform as RWA assets, and issue "charging pile" digital assets on the blockchain based on credible data. Each digital asset represents a portion of the income rights of the corresponding charging pile.

Regular readers of this column will surely be familiar with the term RWA, which refers to real-world assets converted into Web3 through blockchain technology. The tokenization of tangible assets as RWA usually relies on the DePIN (Decentralized Physical Infrastructure Network), which combines AIoT and Web3.

I am delighted to see that more and more people are interested in the field of RWA and DePIN!

'We have transitioned from listing the company to listing assets. Ant Chain supported Langxin's first RWA case, raising 100 million yuan, which is equivalent to a mini-IPO, listing assets.' Zhao Wenbiao, CEO of Ant Chain, pointed out the essence of this cooperation in his comment.

'One significant difference between RWA and IPO is that the financing subject changes from enterprises to high-quality assets. Similar to corporate financing, which requires due diligence, financing for tangible assets also necessitates credible investigations. However, Web3 technology addresses the issue of credibility for tangible assets.'

'RWA serves as a bridge connecting the digital and physical worlds, embodying the essence of finance returning to its roots and serving the high-quality development of the real economy.' said Xiao Gang, member of the 13th National Committee of the CPPCC and former chairman of the China Securities Regulatory Commission.

The issuance of tangible assets as RWA, also known as asset tokenization, is particularly milestone-significant. Therefore, this article will focus on this case to interpret the innovative path of Web3 technology going global.

RWA bridges financing bottlenecks in traditional industries

In the foreseeable future, 10 charging piles, dozens of cars, and 100 batteries will no longer be ordinary hardware; they could all become digital assets, financing projects.

According to Xu Changjun, Chairman of Langxin Technology, 85% of current charging service providers are small and medium-sized enterprises, with over 82% of operators having less than 10 charging piles, and over 50% investing less than 1 million yuan. Currently, Langxin Technology's third-party aggregated charging service platform integrates 1,600 new energy operators, with 140,000 charging stations and over 1.4 million charging guns/piles.

In the above case, Langxin Technology issued and raised 100 million yuan by using more than 9,000 new energy charging piles as anchored assets on the blockchain.

Exploring the technical principles behind this case is not complicated. Langxin's Xindiantu used some charging piles on the platform as anchored RWA assets. By integrating Web3 and AIoT technologies through Ant Chain's AntBlockchain, they formed a DePIN, with each digital asset representing a portion of the income rights of the corresponding charging pile.

What does RWA include?

RWA is generally divided into two categories: tangible assets and intangible assets.

Tangible assets encompass real estate, artwork, precious metals, and transportation means. Intangible assets, on the other hand, include stocks and bonds, intellectual property, investment funds, synthetic assets, revenue-sharing agreements, cash, and accounts receivable.

Whether tangible or data assets, as long as they are high-quality, they have the potential to obtain financing through RWA, even if the company itself is not large enough or does not meet the financial requirements for listing or bank financing.

What is asset tokenization?

Many may be unfamiliar with this concept. To better understand it, we can compare it to 'asset securitization.'

The term 'securitization' implies tradability in the secondary market, i.e., exchanges, while 'tokenization' is literally understood as a negotiable instrument.

So, where is tokenization applied? The answer lies in the Web3 space.

Combining these two concepts, asset tokenization means transferring real-world assets to the blockchain through unique identifiers for operation, financing, and trading.

Langxin Group's main business includes new energy supporting services such as charging piles and virtual power plants. Typically, such enterprises have limited financing channels in the primary market, primarily including mortgage financing loans, corporate bond issuance, and trust product issuance. Moreover, as a listed company, Langxin Group exercises caution in primary market financing due to concerns about potential stock price volatility. However, significant funding needs arise for expansion and development, leading to innovative financing methods like asset tokenization.

The financing subject in asset tokenization is no longer the company but the corresponding tangible assets. However, ordinary tangible assets lack property rights certificates, making them difficult to finance. This is where DePIN comes into play.

Take charging piles as an example. Traditionally, financing them requires mortgaging ownership and operational rights. Unlike assets with property rights certificates like real estate, charging piles cannot be directly mortgaged due to their lack of such certificates. It is impractical to transfer charging piles to warehouses and lock them up, especially considering the costs and complexities involved. This deters many financial institutions from investing in such projects.

Currently, blockchain technology enables the creation of 'property rights certificates' for individual or batches of charging piles, facilitating their use as collateral for financing. This process allows for batch and quantity-based mortgage financing.

This innovative financing model, driven by technological advancements, bridges the gap between the real economy and capital markets, diversifying and practicalizing financing methods.

How large is the RWA market?

A report released by Citibank in 2023 predicts that RWA will be the game-changer driving the blockchain industry into the tens of trillions of dollars, with almost any asset that can be valued potentially being tokenized. The tokenization of private sector/unlisted company assets is expected to grow by over 80 times, reaching approximately $4 trillion by 2030.

According to BCG and ADDX research, the tokenization of global illiquid assets will create a $16 trillion market (which would be close to 10% of global GDP in 2030).

The digital infrastructure built by AIoT+Web3 is the cornerstone of asset tokenization

The DePIN digital infrastructure, constructed jointly by AIoT and Web3, provides a solid foundation for asset tokenization.

In this digital age, AIoT technology collects vast amounts of data through smart devices and sensors, seamlessly connecting the physical and digital worlds. Web3, as the new-generation internet technology, utilizes blockchain, decentralized applications (DApps), and smart contracts to ensure data credibility and security.

DePIN, integrating AIoT and Web3, not only facilitates efficient asset management and real-time monitoring but also converts physical assets into digital assets through tokenization.

Tokenization streamlines the circulation and trading of physical assets, reducing transaction costs and enhancing market efficiency. Additionally, tokenized assets enable decentralized management, minimizing intermediary involvement and enhancing asset transparency and security.

Behind tokenization lies the power of financial innovation.

Financial innovation has always been a vital driver of economic growth. Across different historical periods, various capital forms have played pivotal roles in the economic arena. For instance, in the mechanization era, financial group capital played a significant role. In the electrification era, financial capital became the core driving force for economic development. During the information age, venture capital emerged as a crucial engine for innovation and economic growth. Nowadays, with the advent of the digital age, cryptocurrency is gradually making its mark and exerting profound influences on economic development.

Each technological wave has brought forth financial innovations. From early asset securitization, which converted traditional tangible assets into tradable securities, to current asset tokenization, which transforms various assets into digital tokens, financial innovations continue to propel economic transformation and development. These innovations not only enhance capital mobility and efficiency but also provide investors with more investment opportunities and risk management tools.

Asset tokenization is not the end; CHIP (Community Hardware Incentive Program) or IMO (Initial Miner Offering) may be more innovative financing methods aligned with the rise of cryptocurrency.

In my article 'Innovative Fusion of Technological Revolution, Financial Innovation, and Organizational Transformation: DePIN+CHIP,' I introduced CHIP.

It incentivizes community members to purchase and operate hardware, participating in network construction. Community members contribute to the physical infrastructure of the network by purchasing and operating DePIN hardware, earning corresponding functional token rewards. This mechanism emphasizes the role of incentives in promoting community participation, guiding more members to join the network construction through positive reinforcement.

In traditional equity financing, investors purchase shares in the project company, thereby acquiring a share of the company's future earnings. In contrast, under the CHIP model, investors purchase computational devices such as DePIN hardware, gaining the right to participate in project consensus and earn token rewards.

It is crucial to note that since DePIN is highly relevant to the physical world, the operation of these assets directly impacts people's basic needs such as clothing, food, shelter, and transportation. Therefore, to safeguard public interests and maintain market stability, transactions involving these assets must occur on compliant exchanges.

Compliant exchanges, as crucial venues for DePIN asset trading, bear significant responsibilities. Firstly, they must rigorously vet and conduct due diligence on every listed project to ensure its authenticity, compliance, and feasibility. Secondly, they must provide a secure, fair, and transparent trading environment, safeguarding investors' legitimate rights and interests. Lastly, they must maintain close communication and collaboration with regulatory agencies, adhering to relevant laws and regulations to jointly maintain market order.

Only under the protection of compliant exchanges can the value of DePIN assets be truly reflected, investors' interests be effectively safeguarded, and this new infrastructure form develop healthily and orderly, empowering the real economy and contributing to a better life for all.

DePIN represents a new mode and choice for technology exports of real enterprises

As the global economy slows down, investment and financing activities decrease. In 2023, financing activities in Southeast Asia dropped to a six-year low, with 88% of investors perceiving a more challenging exit environment. This has led to funding difficulties for many Chinese enterprises expanding overseas.

Today, Chinese enterprises expanding overseas have shifted from merely exporting products to manufacturing and branding overseas. This means that Chinese enterprises must deeply penetrate overseas markets and establish local roots. Inevitably, this entails demands for overseas investment and financing. However, the supporting overseas financing services lag behind, making overseas financing difficult and expensive, posing a significant challenge for the development of Chinese enterprises abroad.

Is there a solution to this problem?

Absolutely, there is.

As a crucial application of Web3 in the real economy, DePIN leverages token economics to incentivize and coordinate the construction and operation of globally distributed physical infrastructure, bridging the gap between the virtual and real worlds.

The case of new energy asset tokenization jointly developed by Langxin Technology and Ant Chain serves as an exemplary illustration of Web3 technology's unique value in going global. Amid the new wave of Chinese enterprises' globalization, this case holds immense potential, addressing numerous practical funding challenges.

In the future, DePIN will continue to build a digital asset circulation network, bridging technological gaps for more real enterprises. As more enterprises engaged in the real economy join, Web3 will enter a turning point in serving these enterprises.

After DePIN facilitates the tokenization of tangible assets, the digital assetization flow of the real industry will complete the last mile—digitizing physical assets and monetizing expected returns in real-time. This represents a turning point in the digital age for the real industry, shifting from productivity enhancement to production relationship reconstruction.

On one hand, DePIN provides a solid foundation for data on-chain and asset digitization in the real world. Data collected by IoT devices can be encrypted and stored through DePIN, enabling secure cross-chain and cross-domain circulation, thereby contributing to the prosperity of the data factor market.

On the other hand, DePIN imparts real-world applications to digital assets such as cryptocurrencies. By participating in DePIN ecosystem construction, community members can earn corresponding token rewards through labor and resources, extending digital wealth to a broader population.

According to Messari Research, the total addressable market space for DePIN is projected to reach $3.5 trillion by 2024, tripling the current total market capitalization of cryptocurrencies. It can be said that DePIN is emerging as another great attempt after DeFi to break through traditional barriers and serve the real industry within the crypto economy.

Closing Remarks

Amidst the DePIN wave, a brand-new economic ecosystem is taking shape. This ecosystem not only presents digital transformation opportunities for traditional industries but also provides vast development space for the emerging Web3 field.

The rise of DePIN is ushering in a new era of development. In this wave of change, more and more AIoT enterprises are shifting from traditional centralized platforms to the decentralized DePIN ecosystem, exploring innovative paths for overseas expansion.

With the integration of massive IoT devices and data, DePIN will spur more data-driven innovative business models. Enterprises can not only leverage data to enhance their products and services but also empower other participants through data trading and services, fostering diversified profit models and promoting cross-boundary innovative business formats.

References:

Zhao Wenbiao, CEO of Ant Chain: The company's DNA is blockchain, and RWA is like a mini-IPO. Source: Metaverse

The door has been opened for mainland assets to be tokenized and issued in Hong Kong. Source: 01 Finance