A real-world asset (RWA) token is a type of blockchain-based token that represents ownership, rights, or economic value tied to a physical or off-chain asset. These assets can include real estate, commodities such as gold or oil, bonds, invoices, carbon credits, artwork, or even intellectual property. By tokenising real-world assets, traditional items are brought onto the blockchain, allowing them to be traded, tracked, and managed digitally.

RWA tokens work by linking a physical asset to a digital token through legal agreements, custodians, or special-purpose entities that ensure the token accurately reflects ownership or entitlement. Smart contracts automate processes such as transfers, interest payments, or revenue distribution, increasing transparency and reducing the need for intermediaries. In many cases, assets are divided into smaller tokenised units, enabling fractional ownership and making high-value investments more accessible to retail investors.

One of the key advantages of RWA tokens is improved liquidity, as traditionally illiquid assets can be traded more easily on blockchain platforms. They also offer faster settlement, global access, and enhanced transparency. However, RWA tokens face challenges, including regulatory compliance, legal enforcement, valuation accuracy, and reliance on trusted third parties. Despite these hurdles, real-world asset tokens are seen as a major bridge between traditional finance and decentralised finance, expanding blockchain adoption and investment opportunities.