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Uplifting the Potential of RWA Security Tokens Through Data-Driven Valuations

Writer's picture: ISTAISTA

ISTA News is proud to present a thought-provoking column by Matthew Schneider, CEO of Building PropTech Inc, as part of our ongoing series "Key Challenges for the Activation of the RWA Market in 2025." In this insightful piece, Schneider delves into the crucial role of data-driven valuations in the tokenization of real-world assets (RWAs). As tokenization continues to transform traditional asset ownership, understanding the challenges and opportunities presented by dynamic valuations and transparent pricing mechanisms becomes essential. Join us as we explore how blockchain and AI technologies are shaping the future of the RWA security token market.


Uplifting the Potential of RWA Security Tokens Through Data-Driven Valuations


Uplifting the Potential of RWA Security Tokens Through Data-Driven Valuations
Uplifting the Potential of RWA Security Tokens Through Data-Driven Valuations

Introduction


The idea of creating digital representations of physical assets on the blockchain has been thirteen years in the making, beginning with an early, unsuccessful attempt on Bitcoin’s blockchain in 2012. These decentralized ledgers have long been heralded as the next evolution in asset transactions, akin to how Bitcoin disrupted traditional banking infrastructure. By leveraging blockchain, two parties should be able to securely and instantaneously transfer value without intermediaries or excessive fees.


This vision extends beyond cryptocurrency to real-world assets (RWAs) such as real estate, equities, and commodities. The potential to make exchanges quicker, cheaper, and more secure is immense—but achieving this requires overcoming challenges in valuation, compliance, and data integration. In this article, we will explore how tokenization transforms RWAs into globally recognized instruments of value and what it takes to realize this potential.


Understanding Securities
Understanding Securities

Understanding Securities


Before diving into tokenized RWAs, it’s essential to understand how they are brought on-chain. As of January 2025, no country has the infrastructure to directly record RWA ownership directly on a blockchain. For the foreseeable future, tokenization involves creating digital representations of traditional ownership paperwork required for assets like real estate, equities, or commodities.


This process typically relies on legal entities, which not only isolate liabilities but also facilitate fractional ownership—arguably the original form of fractionalization. Once the legal entity is established, stakeholders are recorded, and in some jurisdictions, limited information about the underlying asset’s value may also be documented. However, many jurisdictions allow exemptions from valuation disclosure, highlighting a critical distinction: while ownership stakes are effectively immutable, their value of those ownership stakes remain dynamic.


This dynamism is what allows tokenization to truly thrive. Tokenized assets enable real-time price discovery driven by data, offering stakeholders the ability to make informed decisions about whether to buy, hold, or sell their ownership stakes. By integrating evolving valuations with transparent ownership records, tokenization transforms traditionally static investments into actively managed, data-responsive opportunities.


Data-Driven Valuations & Price Discover
Data-Driven Valuations & Price Discover

Data-Driven Valuations & Price Discovery


Valuation methods vary by asset class. Stocks often use metrics like Price-to-Earnings Ratios, while bonds depend on credit ratings. Private equity focuses on revenue and growth projections, whereas real estate valuation combines construction costs, income, and comparable properties. However, market sentiment frequently takes precedence over calculated valuations. For instance, a company might surpass earnings expectations, but negative investor outlook could trigger a selloff, causing the stock price to decline until it reaches a level attractive to buyers.


This process, known as price discovery, determines the equilibrium where buyers and sellers agree on an asset’s price. While price discovery is a fundamental economic principle, its application is rarely seamless. In markets like commercial real estate, limited transparency, lack of standardization in valuations, and regulatory gaps often result in conflicting assessments of the same asset’s value. When buyers and sellers fail to agree on a price, trades stall, creating illiquidity.


Liquidity—the ease of converting an asset into cash—becomes problematic when stakeholders in commercial real estate cannot exit due to regulatory constraints, the absence of marketplaces, or disagreements on value. In such cases, the common solution is to discount the stake until it attracts buyers. These discounts may also reflect uncertainty about the property’s condition or future performance, prompting buyers to hedge against potential risks.


Tokenization does not inherently mitigate the risks associated with the underlying property, nor does it guarantee valuation accuracy or instantly expand the buyer pool, as is often assumed. However, it does introduce the possibility of dynamic pricing, where token values adjust in real time. This creates an opportunity: by aggregating extensive data to inform valuations, tokenization enables more accurate price discovery. With better insights into asset value, buyers and sellers are more likely to trade at mutually agreeable prices, improving market liquidity and reducing valuation disputes.


Where Blockchain (and AI) Can Enable Price Discovery
Where Blockchain (and AI) Can Enable Price Discovery

Where Blockchain (and AI) Can Enable Price Discovery


At Building, Inc., we sought to address the challenge of price discovery for tokenized real estate assets. While blockchain improves transparency regarding ownership stakes, it has yet to provide a clear view of the health and performance of the underlying assets. The solution lies in leveraging comprehensive data. By collecting extensive information about the asset (ideally consolidated in a data room), standardizing and cleaning the data, anchoring it on-chain, and utilizing it as inputs for valuation models, transparency and accuracy can be significantly improved.


This is where artificial intelligence (AI) and machine learning (ML) complement blockchain technology. Once documents are standardized and anchored to the blockchain, operators face the challenge of interpreting millions of data points, particularly as valuations transition from annual updates to more frequent cycles—weekly or even daily. AI and ML excel at analyzing and extracting insights from these vast datasets, enabling operators to make informed decisions with unprecedented precision.


Another critical role AI and ML play is in standardizing datasets across geographies. For example, tokenized real estate in Vietnam must adhere to the same rigor as tokenized assets in the United States to ensure global interoperability. AI-driven platforms can enforce consistency by working within banking regulations, applying universal accounting frameworks, and adhering to standardized smart contract protocols.


The convergence of blockchain and AI offers a transformative opportunity: integrating immutable transparency with intelligent data processing to refine price discovery. This synergy ensures that tokenized real estate assets achieve greater credibility, liquidity, and global recognition.


The Interplay of Tokenization and Decentralized Finance
The Interplay of Tokenization and Decentralized Finance

The Interplay of Tokenization and Decentralized Finance


As data-driven tokenization matures, the initial excitement around digital ownership has given way to a more nuanced understanding of its value. Institutions are realizing that tokenization alone does not deliver the cost savings many had envisioned. However, organizations like SWIFT and institutions such as JP Morgan recognize the transformative potential of integrating structured data, blockchains, and tokenized assets to create trustless, data-rich global markets.


One of the most promising use cases for tokenized RWAs is collateralization. Traditionally, private market assets like real estate or art have been difficult to use as collateral due to a lack of reliable data for accurate price discovery. Without confidence in an asset's valuation, lenders face significant risks in extending credit. At Building, we address this challenge by mitigating risks through comprehensive asset performance and health data, ensuring greater transparency and trust in the collateralization process.


The scope of tokenized collateral is not limited to real estate. Unique applications, such as tokenized blue-chip art, are also gaining traction. For instance, the startup ArtWise has identified price discovery issues in art auctions, similar to those in real estate markets. To stabilize the asset class, ArtWise leverages networks of advisors and consultants to provide analysis and price projections. By integrating these insights into a tokenized framework, the liquidity potential of blue-chip art portfolios becomes significant. Once lenders can trust the accuracy of valuations and forecasts, the art market unlocks opportunities for collateralization, transforming a historically illiquid asset class into a viable financial instrument.


Tokenization’s integration with DeFi is redefining the collateralization landscape. By combining data transparency with decentralized systems, tokenized RWAs offer not only enhanced liquidity but also new opportunities to leverage assets in ways that were previously inaccessible.



Conclusion


Tokenization has ushered in a new era for real-world assets, transforming traditional ownership and investment models through transparency, data-driven valuations, and the integration of decentralized technologies. By addressing critical challenges such as price discovery, liquidity, and global standardization, tokenized RWAs are unlocking unprecedented opportunities for investors and institutions alike. The convergence of blockchain and artificial intelligence further amplifies this potential, enabling markets to operate with unparalleled efficiency and accuracy.


As data becomes the backbone of valuation and decision-making, tokenization's role as a globally recognized instrument of value will only strengthen. While challenges remain, the ongoing innovation in structured data, compliance, and decentralized finance is paving the way for a future where asset ownership is not only digital but also dynamic, inclusive, and universally accessible. The transformation of RWAs through tokenization is more than a technological evolution—it is a redefinition of trust and value in the global economy.


Sunday, January 18 2025


Matthew Schneider,

CEO of Building, Inc


Matthew Schneider
Matthew Schneider

About the Author


Matthew Schneider is the CEO of Building PropTech Inc, bringing a wealth of experience spanning across various sectors. From his early career as a fiction novelist to his leadership roles in small-cap and derivative trading, Schneider has accumulated a diverse professional background. With 5 years of experience in capital markets and 4 years dedicated to real estate tokenization, he possesses deep expertise in Building Information Management, investments, AI, blockchain, and asset securitization. His career has seen him engaging with investors, innovators, and industry professionals across the globe, contributing to business development, market discovery, and impactful performances such as pitch competitions and keynote presentations.

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