The intersection of blockchain technology and real world assets (RWAs) is not just a financial innovation. It has the potential to redefine social service delivery and bring us closer to a world where basic needs are met for all of society. The basic characteristics of blockchain–transparency, immutability, and decentralization–can provide the foundation for such a transformative shift in service delivery, going beyond the usual business use cases to something with more impact on bigger overall goals.

The tokenized economy is not exactly new. Stablecoins and NFTs introduced us to the benefits of digitizing assets such as fiat currencies and collectibles. According to CoinGecko research, stablecoins met a meteoric rise from just $5.2 billion at the start of 2020 to a peak of $125.1 billion by March of 2022 and settling to around $134.6 billion as of February this year, for instance. The main rationale beyond stablecoins is to have digital currencies backed by real-world or fiat currencies, thus making them “stable” as compared to purely digital cryptocurrencies.

However, tokenization goes beyond stablecoins. With RWAs, any commodity can be tokenized, and along with it the benefits such as virtually frictionless transactions across the globe and transparency of such transactions. Going beyond this, RWAs do not only give us the opportunity to digitize real-world assets into tokenized representations, but it also has the potential benefit of digitizing the delivery of social services toward making a bigger impact.

Here are some potential use cases.

Financial inclusion and microfinance

The World Bank Group’s International Finance Corp. estimates that there is a financing gap of $5.2 trillion for both formal and informal Micro, Small, and Medium-Sized Enterprises (MSME) in developing countries. Addressing this gap will be key to ensuring inclusive development in these emerging economies. “Savings, insurance, and basic payment services improve livelihoods, increase growth, and foster innovation,” says the IFC report. “Financial inclusion, particularly microfinance, enables the poor to start saving, build businesses, and strengthen communities.”

RWAs have the potential to provide solutions for these challenges, especially in encouraging participation across sectors that may not necessarily have access to formal finance. For one, tokenized assets such as property, accounts receivable, and the like, can be used as collateral for microloans. In a trustless framework, it will no longer be as important for borrowers to have traditional credit scores from rating agencies or banks. Meanwhile, repayment mechanisms can already be built into smart contracts.

Supply chain transparency and ethical sourcing

Traditional supply chains can often obscure the origin of goods, which makes it difficult to ensure ethical and sustainable production practices. There are criticisms, for example, of the way carbon credits work, in that there is no clear assurance that the “offsets” are doing their job at ensuring sustainability.

“Some studies show efficacy, while others argue that, in many cases, the activities underlying the carbon credit’s value are dubious or faulty and, in some cases, lead to higher emissions,” writes Michael Sheldrick, Co-Founder and Chief Policy, Impact, and Government Relations Officer of Global Citizen. He notes the importance of being able to dig deeper into the data involving these mechanisms. “Nonetheless, more data and research is ultimately required to demonstrate the extent of proceeds already being provided to communities in addition to the carbon market’s future potential.”

To address this, the tokenization of assets throughout the supply chain can provide an immutable record of provenance, which can ensure fair trade practices and thus enhance consumer trust.

Efficient distribution of aid and resources

Going beyond commercial applications, RWAs also have the potential to enhance the delivery of social services. This can help overcome the challenges of slow and opaque delivery of aid, for example, which can be susceptible to inefficiencies and even corruption.

“Greater adoption of digital technology can improve the efficiency and transparency of government services, empowering individuals who were previously far away from decision-making centers,” said Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, the Philippines, and Thailand. “Digitalization can also drive productivity growth, by reducing operating costs for firms and enhancing their resilience and preparedness for future crises.”

According to Anthony Diaz, Founder and Chief Executive Officer of Go! SmartChain AI, blockchain technology can enhance the delivery of universal basic services. “By tokenizing assets and services, these platforms can facilitate equitable access to essential resources like healthcare, education, and financial services. This approach democratizes access, allowing for more inclusive participation and fostering economic empowerment by giving individuals in these communities a stake and a voice in ecosystems that were previously beyond their reach.”

This can be done by ensuring clear and immutable records of ownership. Diaz says that blockchain technology can guarantee that all transactional and ownership data are securely recorded, immutable, and accessible worldwide. Such transparency builds trust among users and enhances the integrity of the market, leading to a more robust and fair financial ecosystem.

Inclusive community-driven development

Traditional models of service delivery in development can often lack genuine community input, resulting in top-down decision-making. RWAs can be integrated into decentralized governance structures, therefore changing the dynamic of participative development.

For instance, by tokenizing assets such as land and water rights, or other community-owned resources, the communities involved gain a verifiable and tradeable stake in their own development. This can unlock new economic opportunities and enable the communities to be empowered with their own “skin in the game.”

Decision-making can also be democratized through decentralized autonomous organizations or DAOs, which can be powered by RWAs to enhance how communities manage their resources, vote on projects, and ensure accountability from service providers. As an example, a DAO can decide how water is allocated between irrigation and drinking, and the surplus can even be sold to generate income.

By placing the decision-making in the hands of the community through automation, an RWA-powered model fosters true ownership, leading to more sustainable and impactful service delivery. Such a shift embodies the core principles of universal basic services: ensuring that essential needs are not met through a top-down structure, but through an empowered self-determining community.

“Ownership rights of the underlying assets are embedded in digital tokens, such that token holders can participate in decision making by executing their voting rights,” wrote Yifeng TIAN, et al, in a paper entitled Asset Tokenization: A Blockchain Solution To Financing Infrastructure In Emerging Markets And Developing Economies. “Tokenization creates a sense of local ownership of the public infrastructure facilities and provides a platform to galvanize social acceptance.”

The takeaway

The promise of RWAs for social good is not just an incremental improvement. By reimagining asset ownership, streamlining transactions, enhancing transparency, and fostering community-driven development, this technology can usher in a world that empowers everyone to have access to essential resources. The next challenges to overcome will involve technical hurdles, regulatory concerns, and genuine community involvement to ensure that RWAs can dismantle barriers, empower the underserved, and build a more just and sustainable world.

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