Tokenization of Real-World Assets: A Guide

‍Why Tokenization Matters

Tokenization is a big buzzword right now - and for good reason. It means taking a real-world asset (RWA) such as wheat, real estate, gold, or bonds and representing it as a digital token on a blockchain.

Why tokenize? 

Because digital tokens are:

• Easier to trade → no middlemen, instant settlement
  
  
• Fractional → split a building or a ton of wheat into smaller pieces anyone can own
  
  
• Programmable → smart contracts automate transfers, payouts, or redemptions
  
  
• Transparent → ownership and movement are visible on-chain
  
  

But here’s the catch: creating tokens is the easy part. The real challenge is building a bridge between the physical world and the blockchain with legal frameworks, custody, metadata standards, and oracle connections.

How Cardano Tokenization is Different

On many blockchains, tokens live inside smart contracts. That adds complexity and risks.

On Cardano, tokens are native to the ledger. This means:

• Tokens (fungible or NFTs) exist at the same level as ADA itself.
  
  
• No smart contract is required to create or send them.
  
  
• The ledger guarantees accounting and security.
  
  

This architecture makes Cardano especially attractive for tokenizing RWAs: it’s simpler, more secure, and less costly.

Metadata: The Digital Label of a Token

A token without context is just numbers. Metadata gives tokens meaning: what asset they represent, who the custodian is, and what legal documents back them.

On Cardano, we have multiple standards to attach and update metadata:

CIP-25: The Classic Standard

• Metadata is included in the minting transaction under label 721.
  
  
• Wallets and explorers already support it widely.
  
  
• Updating metadata requires a remint & burn procedure: you either mint new tokens or burn/re-mint under the same policy with updated metadata.
  
  
• Great for collectibles, simple NFTs, or RWAs that don’t change often.
  
  

CIP-68: Dynamic Metadata with Reference Tokens

• Introduces a reference NFT that carries metadata in an on-chain datum.
  
  
• The user token points to this reference, meaning metadata can be updated without touching the user’s holdings.
  
  
• Perfect for RWAs where values, audits, or legal information change over time.
  
  
• More complex to implement, but future-proof for serious financial applications.
  
  

CIP-86: Metadata Oracles (Emerging; N/A in NMKR Studio yet)

• Allows assigning a metadata oracle that can update token data without reminting.
  
  
• Still new, but promising for use cases where continuous off-chain data (like audits or asset valuations) needs to flow on-chain.
  
  

Updating Metadata: Remint vs. Dynamic Models

When tokenizing RWAs, you need a strategy for updating metadata:

• Remint & Burn (CIP-25)
  
  
  • Issue tokens with initial metadata.
    
    
  • Burn and remint tokens if data changes.
    
    
  • Simple, but supply policies must stay open and users must trust issuers.
    
    
• Dynamic Updates (CIP-68 / CIP-86)
  
  
  • Metadata is stored in reference tokens or updated via oracles.
    
    
  • User tokens remain untouched.
    
    
  • Cleaner for legal, audit, and compliance-heavy RWAs.
    
    

Both approaches have trade-offs: reminting is simple and widely supported, while dynamic metadata is modern, more flexible, and better for long-term trust.

The RWA Tokenization Stack on Cardano

Tokenization on Cardano typically involves four layers:

1. Asset Layer (off-chain)
   The physical or financial asset — wheat, a building, a bond.
   
   
2. Legal & Custody Layer (off-chain)
   Who holds the asset, how it’s verified, and which contracts back the token.
   
   
3. Token Layer (on-chain)
   The native token itself, governed by a minting policy (CIP-25, CIP-68).
   
   
4. Oracle & Integration Layer (on/off-chain)
   Trusted feeds that bring real-world data (proof-of-reserves, audits, prices) onto the blockchain.
   
   

If any layer is weak, trust in the token breaks down.

Why Cardano is Strong for RWAs

• Native tokens → No complex smart contracts needed for basic token logic.
  
  
• Metadata flexibility → Multiple standards (CIP-25, CIP-68, CIP-86) fit different needs.
  
  
• Security-first design → Extended UTxO (EUTxO) model ensures deterministic transactions.
  
  
• Cost efficiency → Lower fees compared to smart-contract-heavy chains.
  
  
• Evolving standards → Cardano community continues to refine token metadata standards for real-world use cases.
  
  

Challenges to Consider

Even with Cardano’s advantages, challenges remain:

• Custody risk → Who ensures the real asset is safe?
  
  
• Legal complexity → Tokens must be backed by enforceable contracts.
  
  
• Tooling adoption → Not all wallets and marketplaces support newer standards yet.
  
  
• Regulation → Compliance requirements vary by jurisdiction.
  
  

Conclusion: Building Trust, Not Just Tokens

Tokenization on Cardano is more than minting assets. It’s about creating a trustworthy system that links real assets with digital tokens in a secure, transparent, and compliant way.

For RWAs, this means:

• Choosing the right metadata standard (CIP-25 vs. CIP-68)
  
  
• Designing minting policies that balance trust and flexibility
  
  
• Using oracles to keep data reliable
  
  
• Backing everything with legal and custodial frameworks
  
  

At NMKR, we’re building the tools and infrastructure that make this possible. Whether you’re tokenizing commodities, property, or financial instruments, NMKR helps you bridge the gap between the real world and the blockchain.

Want to Learn More?

• NMKR Studio Documentation
  
  
• NMKR x CIP-68 Blog
  
  
• Join the NMKR Community