Blockchain technology has emerged as a revolutionary solution for a wide range of industries and has been the driving force behind the creation of digital assets like Bitcoin and Ethereum. The blockchain market size was valued at $12.3 billion in 2023 and is projected to reach $163.83 billion by 2029 at a CAGR of 56.3%, according to a report by Fortune Business Insights.

Starting 2017, real world asset tokenization (RWA) emerged as a game-changer use case of blockchain technology. Now in 2024, the RWA market is exploding with an expected $16.1 trillion in tokenized assets by 2030.

So, public blockchain vs. private blockchain, which one is better for RWA tokenization?

While private blockchains are typically used by organizations for internal operations, public blockchains have been gaining popularity due to their decentralized nature, making them better suited for certain applications.

Let's dive into a comparison of public vs. private blockchain for tokenization down below.

Public Blockchain

Public blockchain is an open-source network that allows anyone to participate in the network and validate transactions. Transactions are transparent and can be viewed by anyone on the network. Anyone can join the network and start validating transactions by running a node. A node is a computer that stores a copy of the blockchain and validates transactions.

In a public blockchain, there is no central authority or organization that controls the network. The network is rewarded for keeping security and for the ongoing transactions being made on the network. Transactions are finite.

Examples of public blockchain include Bitcoin, Ethereum, Polygon, BASE and many more.

Private Blockchain

Private blockchain, on the other hand, is a closed network that is used by a specific group of individuals or organizations. Essentially it is a private database where transactions can be rolled back, edited or even deleted. Only authorized participants can join the network and validate transactions. The network is controlled by a central authority or organization, and transactions are hidden to participants in the transaction.

Due to their closed nature, private blockchains are mainly used by financial institutions who are entering the blockchain space and tokenizing their own assets for themselves or own network. They are still valuable but offer more of a zero to 0.1 value proposition, not a zero to one value change that public blockchains offer.

Example of private blockchain include Hyperledger, Corda, Ripple, and many more.

Public vs Private Blockchain For Asset Tokenization

Now that we have a basic understanding of public and private blockchains, let's shed light on the difference between public and private blockchain.

In short, while private blockchains offer strong authentication and a controlled environment for RWA tokens, public blockchains offer more potential to scale.

‍Decentralization

One of the key differences between public and private blockchains is decentralization.

Public blockchains are completely decentralized, meaning there is no central authority or organization that controls the network.

On the other hand, private blockchains are centralized, meaning that there is a central authority or organization that controls the network.

Transparency‍

Public blockchain are completely transparent, meaning that anyone can view all transactions on the network.

On the other hand, private blockchains are not transparent, meaning that only authorized participants can view transactions.

Security‍

Public blockchains are more secure than private blockchains. Because of its decentralized nature, often having a large number of distributed nodes governing the network, it is much more difficult to hack or attack a public blockchain network.

For instance, as of January 11, 2024, there were about 7,050 nodes on the Ethereum network - the second-largest public blockchain.

A private blockchain, on the other hand, is more vulnerable to attacks because it is centralized. Private blockchains typically have fewer nodes than public blockchains, making it easier for malicious actors to gain control of the network.

Immutability‍

Public blockchains are immutable, meaning that once a transaction is added to the blockchain, it cannot be changed or deleted. This makes public blockchains an ideal platform for creating a tamper-proof ledger.

Private blockchains can be tampered with, changed, rolled back and have its transactions even deleted.

Interoperability

Private blockchains often operate in isolation from the broader blockchain ecosystem due to security and privacy concerns. This can limit the use cases for RWA tokens issued on private chains.

Meanwhile, tokenized RWAs on public blockchains have more chances of being connected with other digital asset in the ecosystem which are issued on public chains such as BTC, ETH, altcoins, USDC, USDT, NFT, DAO, and more, potentially allowing for easier adoption and more use cases of RWA tokens in the DeFi world.

You may be interested: Licensing matrix for real world asset tokenization, created by InvestaX Legal team.

Market Data Signifies Strong Public Blockchain Adoption for Tokenization

Franklin Templeton (Publicly listed $1.5T USD financial institution) says, "private blockchains will fade next to fast-innovating public utility chains".

Meanwhile, Grayscale recently launched a report named “Public Blockchain and The Tokenization Revolution”.

While Grayscale's report acknowledges private blockchains are being explored for asset tokenization, it positions public blockchains as the more promising path for tokenization due to their open, decentralized nature and strong network effects.

• Successful tokenization applications like stablecoins, tokenized Treasuries, and tokenized credit products have primarily been launched on public blockchain infrastructure.
• Although banks have explored private blockchain infrastructure due to regulatory constraints, asset managers have preferred public chains or hybrid chains.
• Ethereum blockchain has the best chance of realizing the potential benefits of tokenization in the future.

Here come other evidence for public blockchain adoption in tokenization, as of May 2024:

• Roughly 60% of tokenized treasury products are on Ethereum (as per data from The Block).
• 87% of locked RWA token value is on Ethereum (DefiLlama).
• 6 out of 7 major RWA protocols are on Ethereum (as per data from RWA.xyz).

Therefore, there is a basis to say that the tokenization revolution will not be private.

Why We Believe Public Blockchains are Better for RWA Tokenization

We believe public blockchains are better for asset tokenization than private blockchains for several reasons.

Firstly and most importantly, every digital asset that matters is issued on a public blockchain (such as Bitcoin, Ethereum, 10,000+ alt coins, stablecoins, DAOs, NFTs and security tokens). Interoperability only works on public blockchains. The value of using blockchain is on public blockchains. You can only access and connect to the power of DeFi innovations on public blockchains.

Secondly, for those issuing real world asset tokens (asset backed tokens or security tokens, as they are commonly called), issuing your assets on public blockchains means you can start the first liquidity pools for your assets through IX Swap, the world’s first automated market maker for RWA tokens. You can see how it all works at IX Swap. This is the killer application for the security token industry bringing legal and compliant liquidity pools to any integrated digital asset.

Thirdly, public blockchains are decentralized. This makes it arguably more transparent and secure than private blockchains.

Fourthly, public blockchains are more inclusive. Anyone can participate in the network and validate transactions, regardless of their location or background. This makes it more democratic and fair than private blockchains which are only accessible to a select group of participants. 

Fifthly, public blockchains are more innovative. Because it is open-source and accessible to anyone, it is more likely to attract the best developers and entrepreneurs who can create new applications and use cases for the technology.

You can also listen to our recent recording on this topic by Julian Kwan on the Infinity and Beyond Podcast.

InvestaX and IX Swap, runs on the largest number of public blockchains in the industry, allowing for the greatest variety of choices for the digital issuance of assets. InvestaX has focused on public blockchains for years, because they are the most scalable and widely used infrastructure to issue security tokens and other digital assets. InvestaX remains agnostic to blockchains and continues to iterate and integrate with more and more exciting protocols, as the industry grows.

While private blockchains are an option and are compatible for certain businesses and products, they are inherently close-ended systems (Web 2.0) and although they improve efficiencies and transparency for an existing business, private blockchains cannot easily collaborate with other platforms and have no connection to any other digital assets including stablecoins, crypto assets, security tokens, NFTs, and DAOs (Web 3.0), therefore, limiting interoperability and scalability.

In summary, public blockchains have better technology infrastructure, which makes them more scalable, interoperable, and widely used. This is especially important for businesses that want to issue digital assets like security tokens, NFTs, and crypto assets. With public blockchains, businesses have the opportunity to participate in a larger network of users and assets, leading to greater opportunities for growth and innovation.

Tokenize Your Assets On Top Of Our Infrastructure

Our Tokenization SaaS solution enables the issuance, trading, and custody of security tokens for private market assets. We have been granted Capital Markets Services and Recognized Market Operator licenses by the Monetary Authority of Singapore to deal in and operate an organized market for securities, respectively. Our service offers a one-stop solution for all your security token needs, including seamless banking integration, thorough user verification with a know-your-customer (KYC) module, flexible OTC trading options, primary issuance services, cutting-edge blockchain technology, and smart contract deployment.

Benefits Of Using Our Tokenization SaaS Platform:

All-inclusive one-stop-shop solution: Our Tokenization SaaS platform offers everything asset owners and issuers need to get started with tokenization, including issuance, trading, and custody solutions.

Latest blockchain technologies: Our Tokenization SaaS platform uses the latest blockchain technologies to ensure the security and integrity of tokenized assets, with a choice of preferred blockchains as well.

Fast integration time: Our Tokenization SaaS platform is designed to be easy to integrate and onboard, allowing asset owners and issuers to get started immediately.

Low cost: Our Tokenization SaaS platform offers the most cost-effective solution. 

InvestaX’s user-friendly Tokenization SaaS platform makes it easy for asset owners and issuers to get started with tokenization, customize the platform and their offerings, and stay ahead of the curve in the world of private market investments. You can read more about our competitive advantage.

At InvestaX, we offer the leading Singapore Licensed Tokenization Service-as-a-Software (SaaS) platform for Real World Asset Tokens (RWA) and Security Token Offerings (STO). We provide a one stop shop for tokenized assets for global investors, including real estate, private equity, venture, ESG, startup, private credit/debt and more. We also provide IX Swap, the first legal and compliant Automated Market Maker (AMM) for RWA and STO.

If you are interested to learn more about how you can build your business on top of our infrastructure and what we can offer you as your tokenization partner, leave us a message or reach out to us at support@investax.io.