Real World Assets (RWA) have become a hot topic in the cryptocurrency industry recently. By tokenizing real-world assets, RWA has created a new foundation for decentralized finance (DeFi) and is seen as a highly promising project.
(Previous summary:
Jupiter announces unified market plan: tokenizing real-world assets (RWA), stocks, and foreign exchange on the Solana blockchain, establishing the GUM Alliance)
(Background:
RWA | Franklin’s Tokenized US Treasury Fund (FOBXX) enables P2P transfers on Polygon and Stellar)
Table of Contents:
What is RWA?
Why do we need RWA?
Examples of assets that can be tokenized
1. Real estate
2. Public investment products
3. Intellectual property rights
4. Loans and collateral
Advantages of RWA
How does RWA work?
Off-chain standardization
Alignment of asset information
Designing DeFi protocols exclusively for RWA
Promising projects in the RWA space
Ondo Finance
Goldfinch
Creditcoin
Polytrade
Realio
Challenges faced by RWA
Investment and financing in the RWA market
Future development of RWA
RWA, or Real World Assets, combines real-world assets with blockchain technology to tokenize physical or tangible assets, including loans, insurance contracts, commodities, and real estate. Each token represents a share, stake, or ownership of the underlying asset. The goal is to make traditional assets more convenient for online trading, investment, and ownership, leveraging the immutable nature, transparency, and transactional advantages of blockchain technology. Even global asset management giant BlackRock has launched its first tokenized fund, “BlackRock USD Institutional Digital Liquidity Fund,” on Ethereum, investing 100% of its assets in cash, US Treasury bonds, and repurchase agreements, allowing investors to earn returns while holding tokens on the blockchain.
In this article, we will delve into what RWA is, how it works, its potential, and the challenges it faces. RWA aims to enhance the efficiency and transparency of traditional finance through blockchain, creating a more efficient market. According to a research report by Binance, a complete RWA system requires off-chain standardization, alignment of asset information, and the design of DeFi protocols specifically for RWA.
Before integrating real-world assets into digital ledgers, their asset value, ownership, and legal status must be determined in the physical world. When estimating the value of RWA, factors such as market prices, performance history, and the physical condition of the assets must be considered. Additionally, the asset must have undisputed legal ownership and be supported by documents such as contracts or invoices.
During this stage, the assets undergo tokenization, where asset information is transformed into digital tokens. The value and ownership information of the assets are embedded in the metadata of the tokens. Due to the transparency of the blockchain, anyone can verify the authenticity of the tokens through the metadata.
DeFi protocols specifically designed for RWA facilitate user transactions and provide easy access to information related to off-chain assets, attracting more investors. Ondo Finance aims to bridge the gap between traditional finance and DeFi by developing structured financial products that offer high returns and stable opportunities. It also offers a range of investment options to meet different risk preferences. Goldfinch focuses on real-world lending and provides a decentralized credit protocol. The project offers investment returns to capital providers while providing cryptocurrency loans to creditworthy applicants without the need for locking up crypto assets as collateral. Creditcoin is a foundational L1 blockchain that aims to enhance credit history and trust in the lending market. Polytrade is a blockchain-based decentralized trade finance protocol that connects buyers, sellers, insurance companies, and investors, providing a seamless trading experience. Realio is a digital issuance, investment, and peer-to-peer trading platform that integrates blockchain technology with real estate investment, enhancing transparency and liquidity.
To thrive in the cryptocurrency field, clear regulations are crucial for RWA. Additionally, due to the immaturity of related technologies and users’ limited understanding of blockchain, there may be occurrences of hacking, technical vulnerabilities, or malicious actors fraudulently using the RWA name.
In the future, apart from ensuring the security of the link between tokens and physical assets, RWA platforms will face the challenge of effectively managing a large volume of transactions and data.
Overall, RWA is not a completely unique invention, but it has the potential to enhance the transaction efficiency and transparency of traditional finance through blockchain, creating a more efficient market. The Bank for International Settlements (BIS) explicitly states that “all assets will be tokenized in the future, and Finternet based on blockchain will be the future of the financial system.”
2024/05/13
RWA Weekly Report: Arbitrum launches bidding, 10 financial giants collaborate on tokenizing deposits, CBDC…
In essence, RWA aims to bring all real-world assets onto the blockchain to achieve efficient asset circulation and create new asset categories by leveraging blockchain’s composability. The Bank for International Settlements (BIS) has made it clear that “all assets will be tokenized in the future, and Finternet based on blockchain will be the future of the financial system.”
2024/05/02
BlackRock aims to dominate the RWA market: Leads $47 million funding round for Securitize, BUIDL becomes the largest tokenized US Treasury fund
Securitize, a US asset tokenization company, announced the completion of a $47 million funding round led by asset management giant BlackRock, with support from Hamilton Lane, one of the world’s largest private markets investment firms, and leading fixed-income trading platform Tradeweb Markets.
2024/03/28
Raising $250 million in a week! BlackRock’s tokenized fund BUIDL provides monthly dividends, seizing the RWA market
BlackRock announced the launch of the “BlackRock US Dollar Institutional Digital Liquidity Fund” (BUIDL), the first asset-tokenized fund on Ethereum. It invests 100% of its assets in cash, US Treasury bonds, and repurchase agreements, allowing investors to earn returns while holding tokens on the blockchain. Within just one week, BUIDL has reached a market value of $2.448 billion, becoming the second-largest tokenized US Treasury fund in terms of size.
2024/01/23
Insight: After targeting RWA US Treasury bonds, what else does Ondo Finance need to do?
Ondo’s early entry into RWA US Treasury bonds can be seen as a unique vision. US Treasury bonds are low-risk, stable-yielding, and scalable assets, making them the biggest beneficiaries in the RWA space with unlimited potential.
2024/01/03
7 Outlooks for RWA in 2024: Disrupting traditional financial models
Essentially, the core of tokenizing real-world assets is to establish an investment tool on the blockchain that is associated with tangible assets such as real estate or cars or anything else that may exist in physical form. Once ownership is recorded on the blockchain, assets can be traded, divided, or securely held.
2023/10/26
RWA market cap could reach $16 trillion in 2030: VanEck believes tokenized real-world assets and stablecoins have the potential to disrupt traditional finance
Tokenizing real-world assets (RWA) has been a hot topic in the cryptocurrency industry recently. VanEck, the digital asset strategy head, expressed on X (formerly Twitter) that stablecoins and tokenized RWAs have enormous market potential.
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