Hedera Q3 2024 Overview

The way assets are owned, traded, and managed are being redefined by tokenization. Blockchain-powered platforms are replacing complex traditional systems with more efficient and transparent solutions. Tokenization helps streamline settlement, cut operational inefficiencies, and remove intermediaries, making processes faster and more cost-effective.

Converting real-world assets (RWA) into digital tokens recorded on blockchain markets can unlock unprecedented opportunities that are traditionally constrained by liquidity and high barriers to entry. With tokenization, ownership of high-value assets, including real estate and financial securities, becomes accessible to a broader range of investors through fractional ownership. This opens up new avenues for wealth creation, strengthening both the financial and digital economies by enhancing liquidity and broadening market participation.

This report examines the evolving tokenization landscape, highlighting its role in democratizing investment, promoting financial inclusion, and reshaping the global asset ecosystem. The report will also take a deep dive into Hedera's strategic initiatives, including the Asset Tokenization Studio, which is facilitating tokenization through enterprise-grade solutions.

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Why Tokenization?

Put simply, tokenization involves the conversion of ownership, or rights to an asset, into digital tokens stored on a blockchain. This process allows for the representation of traditionally illiquid assets—such as real estate or financial securities—as digital tokens, making them more easily tradable. One of the most significant benefits of tokenization is the democratization of asset ownership. By enabling the fractionalization of assets, tokenization allows investors to purchase small portions of high-value assets, which lowers barriers to entry that have been historically restrictive in certain markets due to high capital requirements. For example, tokenized real estate allows a broader pool of investors to engage in property markets that once required large capital commitments. By lowering entry barriers, investors can participate with as little as a few hundred dollars. This accessibility unlocks millions of new participants, driving greater market liquidity and creating a more dynamic, inclusive investment ecosystem.

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How It All Works

The tokenization process begins with asset selection, where an asset—such as real estate, bonds, or equity—is chosen for digitization. Once selected, the specification definition outlines the asset's digital parameters. This includes value, token quantity, compliance rules, and associated metadata. Token issuance then follows, where the security tokens are minted on the blockchain, ensuring they meet regulatory standards. Finally, after issuance, the tokens enter the trading and management phase, where they become tradeable on digital exchanges, with transactions recorded transparently and immutably on the blockchain.

Efficiency and Automation

At its core, tokenization automates financial processes. It reduces operational inefficiencies by eliminating intermediaries like custodians and clearing houses and enables faster, cheaper settlements. Traditional asset trading relies on multiple computer systems and manual reconciliations, often resulting in trade settlements taking two to three days. Tokenization, by contrast, offers instantaneous bilateral settlement whilst simultaneously reducing the risk of human error, fostering a more efficient trading environment.

Blockchain’s Role

Decentralized infrastructure such as blockchain or hashgraph supports tokenization by enabling programmable assets, real-time trading, and continuous liquidity. Most importantly, assets issued on a distributed ledger benefit from a shared source of truth. This reduces the reliance on disparate record-keeping systems and marks a similar shift from paper-based financial records to digital platforms—a new chapter in financial operations. Tokenization is not merely a theoretical concept; it is already proving beneficial in areas like asset management, securitization, and trading by cutting costs and accelerating processes.

Market Impact

The tokenization of assets is poised to reshape global markets, with forecasts projecting a substantial impact on a significant portion of the $500+ trillion in global assets. Research from firms like BCG and Standard Chartered suggests tokenization will play a transformative role in the financial ecosystem whilst considering realistic expectations.

Although tokenized assets are currently around $150 billion (mainly stablecoins), major institutions such as BNY Mellon, JP Morgan, and BlackRock are heavily investing in tokenization initiatives, underscoring its potential to streamline traditionally complex payment and settlement processes. Boston Consulting Group suggests real-world assets' tokenized value (RWAs) will exceed $16 trillion by 2030. These institutions clearly recognize tokenization’s value potential due to its ability to streamline payment and settlement processes, which are traditionally complex and prone to delays.

Growth in RWA Tokenization

The tokenization of RWAs, excluding stablecoins, has been gaining traction since 2021, with the total value of tokenized assets exceeding $13 billion as of late 2024.  Private credit products lead this segment at $9.1 billion, followed by U.S. Treasury debt at $2.2 billion and commodities at $1 billion. This marks a substantial growth, with more than a 50% increase since early 2023 and a 250% rise since 2022, reflecting the growing appeal and adoption of tokenized assets in financial markets.

Source: rwa.xyz

The growing involvement of traditional financial players underscores the seriousness of tokenization’s potential. Industry leaders such as Guggenheim have issued tokenized commercial papers on the Ethereum blockchain, while WisdomTree has launched a tokenization platform targeting institutional investors. These developments further indicate increasing confidence in RWAs and blockchain as the foundation for integrating traditional financial instruments with modern technology.

Hedera’s Role in Tokenization

Hedera is a distributed ledger technology built to meet enterprise needs for high-speed, secure, and cost-effective transactions. At its core is the Hashgraph consensus algorithm, which can handle thousands of transactions per second, making it a strong foundation for enterprise-ready decentralized applications (dApps). Hedera also integrates an optimized Ethereum Virtual Machine (EVM) to support smart contracts and widely used Ethereum-based frameworks. This enables complex programmable logic and offers native tokenization services for issuing and managing digital assets, along with Non-Fungible Token (NFT) support. In addition to these features, in Q3 2024, Hedera announced the launch of its Asset Tokenization Studio, an open-source toolkit for configuring, issuing, and managing tokenized bonds and equities on the Hedera network.

Hedera’s Asset Tokenization Studio (ATS)

Hedera understands that tokenizing assets can be complex and daunting, with regulatory demands that issuers must carefully navigate. In response to these challenges, Hedera created the Asset Tokenization Studio (ATS), an open-source solution designed to simplify the configuration, issuance, and management of digital securities by offering issuers a streamlined framework. Built to comply with key standards, including Regulations D (506-b and 506-c) and Regulation S, Asset Tokenization Studio makes tokenization more accessible without sacrificing the rigor required to meet critical legal and regulatory requirements.

At the heart of ATS is a modular, multi-layer architecture allowing issuers complete control over the token lifecycle. It extends upon the ERC-1400 standard, which is interoperable with several other standards, including ERC-20, ERC-1410, and others. Collectively, these standards provide a robust, flexible framework for managing security tokens in a compliant and efficient manner.

ATS also introduces advanced features like compatibility with wallets such as MetaMask, HashPack, and Blade Wallet, allowing asset-specific metadata to be integrated directly on Hedera - improving upon the ERC-1400, which requires critical token metadata to be stored off-chain. This includes functionalities like on-chain coupon management and regulatory approval lists—enhancing transparency and reducing off-chain risks, thereby boosting investor confidence.

The Studio’s architecture integrates several vital modules to ensure secure, compliant, and efficient token management. The Access Control module enforces role-based permissions, allowing only authorized individuals, like Minters or Controllers, to manage token issuance or transfers, while Control Lists enforces KYC and AML compliance by restricting transfers to pre-approved wallets.

Further modules include a Supply Cap to limit token issuance, promote transparency, and prevent unauthorized minting. Pause Functionality allows issuers to halt transfers during audits or security events, and Token Locking freezes specific tokens or accounts, supporting legal requirements, vesting schedules, and restricted trades. Snapshots allow timestamped captures of token balances, which is useful for audits, dividend distribution, and governance. Future upgrades will enhance compliance through advanced KYC features and protected partitions, further boosting operational efficiency.

ATS is designed for efficiency and compliance, employing factory smart contracts based on the ERC-1400 standard, audited by A&D Forensics, to automate asset tokenization at scale. To streamline the tokenization of digital securities while ensuring regulatory compliance. A Software Development Kit (SDK) provides developers with open-source tools to build dApps on the Hedera network, simplifying interactions with the tokenization framework and reducing the need for custom code development.

A Graphical Web Interface (Web UI) complements these tools by offering non-technical users an intuitive way to manage tokenized assets. This easy-to-use interface lowers barriers for market participants, encouraging broader adoption and seamless engagement with the Hedera network.

The Hedera Ecosystem: Tokenization Projects and Use Cases

The Hedera network is fueling innovation across industries. It offers secure, scalable, and easy-to-use solutions for tokenizing everything from real estate to money market funds. By leveraging Hedera’s technology, forward-thinking companies and builders are reshaping markets and expanding access to financial tools. Here’s a look at some of the exciting ways projects are using Hedera to unlock new opportunities.

DOVU: Revolutionizing Carbon Credit Management

DOVU provides a transparent platform for managing and trading carbon credits, using Hedera and the Guardian framework to ensure data integrity. By incorporating robust methodologies for Measurement, Reporting, and Verification (MRV), the platform ensures accurate tracking through advanced tools like AI, satellites, and heatmaps. DOVU acts as an MRV registry aggregator, providing historical and forecasted data on various standards, facilitating price transparency, and supporting new methodologies.

After carbon removal efforts are validated, DOVU tokenizes these credits, turning them into digital assets that can be traded. The platform is designed to be scalable, affordable, and secure, making it accessible to businesses, governments, and individuals alike. One example of its real-world impact is helping a French orchard market Avalon, a net-zero spirit, by enabling carbon offsetting. With DOVU’s technology, organizations can easily manage their carbon credits while offering buyers reliable, auditable updates on their carbon offset investments.

abrdn: Democratizing Investments with Tokenization

UK-based asset manager abrdn has tokenized - in collaboration with digital asset firm Archax - interests in and payouts for its £multi-billion money market fund using the Hedera network, cutting down on admin costs, introducing fractional ownership, and enabling near-instant settlements. This innovation opens doors for smaller investors to access traditionally exclusive opportunities by breaking down high entry barriers and removing complex fees, while also eliminating settlement delays associated with legacy infrastructure. With tokenization, abrdn fosters financial inclusion, empowering investors with greater liquidity and faster reinvestment of dividends.

RedSwan: Tokenizing Commercial Real Estate

RedSwan is shaping the commercial real estate market with Hedera, bringing fractional ownership to everyone—not just the wealthy. Through RedSwan’s platform, individuals can invest in high-value properties with as little as $1,000. This makes real estate investment more accessible while also enabling property owners to access more liquidity.

Using the Hedera Token Service (HTS), RedSwan tokenizes nearly $5 billion in real estate assets, while the Hedera Consensus Service (HCS) timestamps transactions for complete transparency and security. With Hedera’s low, predictable fees, RedSwan keeps costs down and enhances affordability, opening the door for more people to participate in fractional real estate ownership and build their financial future.

Archax: Bridging Traditional Finance and Digital Assets

As the UK’s first regulated global digital asset exchange, Archax integrates with Hedera to streamline institutional investment in digital and tokenized assets. Offering a full suite of services—from trading and custody to brokerage—Archax provides institutions with a secure and seamless way to engage with digital securities and cryptocurrencies.

Leveraging the Hedera Token Service (HTS), Archax unlocks new opportunities by tokenizing traditional financial instruments, making fractional ownership possible and boosting asset liquidity. Its custody services protect tokenized stocks, bonds, and fiat currencies, meeting rigorous regulatory standards to give institutional clients peace of mind.

Archax goes a step further with staking services, allowing institutional clients to earn rewards by contributing to Hedera’s network stability. With its scalable infrastructure, Archax serves as a reliable bridge between traditional finance and the digital asset economy, setting a bold new standard for institutional engagement with tokenized assets.

Hello, Hiero: Hedera Goes Open-source

In 2024, Hedera became a founding Premier Member of the LF Decentralized Trust, a new initiative by the Linux Foundation focused on advancing decentralized technologies. LF Decentralized Trust is dedicated to advancing decentralized technologies, and Hedera is leading the charge, having contributed its entire codebase underthe project “Hiero” to the Trust. Hedera’s contribution of its full codebase marks the first time a public blockchain has donated its entire infrastructure to an independent, open-source foundation. Hedera’s bold step underscores its unwavering commitment to decentralization, transparency, and collaborative innovation, fostering a spirit of cooperation over competition.

What Is Hiero?

Hiero is now an official open-source project within the LF Decentralized Trust, serving as the distributed ledger technology (DLT) that powers the Hedera network. At its core, Hiero leverages the cutting-edge Hashgraph consensus algorithm, known for its asynchronous Byzantine Fault Tolerant (aBFT) properties and renowned for its speed and security. It encompasses all the essential services, tools, and libraries that empower developers and enterprises to create a diverse array of decentralized applications (dApps), including wallets, exchanges, SDKs, and advanced cryptographic tools. Under the Apache 2.0 license, Hiero invites developers, enterprises, and innovators worldwide to contribute and help shape its future.

Key components of the Hiero ecosystem include:

• Consensus Nodes: Manage transactions, token issuance, and smart contracts.
• Mirror Nodes: Provide historical data, analytics, and API access for auditing.
• Multilingual SDKs: These are available in Java, JavaScript, Go, Rust, C++, and Swift, making development on the Hedera network accessible across platforms.
• Explorer Interface: A user-friendly tool for querying network data through Mirror Nodes.

With Hiero's transition to the Linux Foundation, its codebase is now fully open, inviting developers to collaborate through GitHub. Opportunities for engagement include contributing to various sub-projects like Consensus Nodes and SDKs, participating in a community-driven proposal process modeled after Hedera’s HIP repository to suggest and vote on new features, and accessing documentation hosted on a neutral platform to ensure accessibility and alignment with open-source standards.

Hedera’s contribution  is more than just a contribution—it’s a statement of intent. By opening up its infrastructure, Hedera is fostering an environment where innovation can thrive through collective effort and shared knowledge, accelerating the development of decentralized technologies. Further, it’s a reinforcement of the open source principles that have driven Hedera since day one.

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Conclusion

Tokenization is on track to reshape global markets by boosting liquidity, reducing costs, and broadening access to previously inaccessible investments. From tokenized real estate and carbon credits to commercial paper and money market funds, leading financial institutions and platforms are demonstrating how powerful this innovation can be. Hedera’s DLT infrastructure and the launch of its Asset Tokenization Studio further illustrate the growing momentum toward secure, compliant, and scalable tokenization solutions.

With an increasing number of enterprises embracing DLT, tokenization is set to bridge traditional finance and digital assets, accelerating the financial sector’s modernization. As market participants continue to adopt tokenization, this emerging paradigm will play a pivotal role in shaping the future of asset management and global investment.

As more enterprises tap into this transformative technology, tokenization is building a bridge between traditional finance and digital assets, speeding up the financial sector’s evolution. This approach won’t just change how assets are managed—it’s poised to redefine global investment, making markets more accessible, efficient, and inclusive. Tokenization isn’t just the future of finance—it’s already making its mark. And Hedera is at the forefront of that journey.

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Disclaimer: This report was commissioned by Swirl Labs. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.