RWA: The Rise of Real World Assets

1. Overview of RWA

RWA stands for Real World Assets, which refers to representing and trading real-world assets in a digital and tokenized manner within the blockchain or Web3 ecosystem. These assets include real estate, commodities, bonds, stocks, artworks, precious metals, intellectual property, etc. The core concept of RWA is to bring traditional financial assets into the decentralized finance ( DeFi ) ecosystem through blockchain technology, achieving more efficient, transparent, and secure asset management and trading.

The significance of RWA lies in realizing the liquidity of assets that are difficult to circulate in the real world through blockchain technology, allowing them to participate in DeFi ecosystems for lending, staking, trading, and other operations. This way of connecting real assets with the blockchain world is becoming an important development direction for the Web3 ecosystem.

RWA is essentially a bridge between crypto-native assets and traditional assets. Crypto-native assets operate on-chain through smart contracts, adhering to the principle of "Code is Law"; whereas traditional assets such as bonds, stocks, and real estate operate under the legal framework of the real world, protected by government laws. The tokenization rules proposed by RWA require support from on-chain technology of smart contracts as well as protection of underlying assets by real-world laws.

2. The Development History of RWA

The development of RWA can be divided into three stages:

Early exploration stage ( 2017-2019 ):

• 2017: The RWA concept began to take shape, with projects like Polymath and Harbor starting to explore security tokenization.
• 2018: Projects like RealT attempted real estate tokenization
• 2019: TAC Alliance established, promoting RWA standardization

Initial development stage ( 2020-2022 ):

• 2020: Projects like Centrifuge gained attention, Aave and Compound introduced RWA as collateral.
• 2021: Maker DAO joins the RWA market
• 2022: Traditional financial institutions begin to lay out RWA

Rapid Expansion Phase ( from 2023 to present ):

• 2023: Large asset management companies begin to experiment with tokenized asset management, and regulators gradually intervene.

3. Main Application Areas of RWA

real estate industry

Real estate tokenization can enhance asset liquidity and reduce individual investment risk. Related projects include:

• Tangible: Focus on tokenizing real estate and precious metals
• Landshare: Enabling small investors to participate in the real estate market through tokenization.
• PropChain: A blockchain-based global real estate investment platform
• RealT, RealtyX: Allow partial ownership of US real estate through tokens.

fiat stablecoin

Introduce fiat currency into the blockchain in the form of stablecoins, such as USDT, FDUSD, USDC, etc. Taking USDT as an example:

• Operating mechanism: Tether holds reserve assets to support the value of USDT
• Stability and Risk:
  • Systemic risk: market fluctuations related to the US dollar
  • Regulatory Risk: Regulatory bodies questioning the operational model
  • Collateral Risk: Issues of transparency and adequacy of reserve assets
  • Liquidity Risk: Exchange pressure under extreme market conditions

Lending Market

RWA has expanded the range of collateralizable assets in DeFi lending protocols, such as real estate and accounts receivable. This provides enterprises with more financing channels and allows ordinary investors to invest in companies to earn returns.

bonds and securities

Bond and securities-related RWA projects need to align with real-world regulations:

• Maple Finance: On-chain creation and management of loan pools
• Securitize: Provides issuance, management, and trading services for tokenized securities.
• Ondo Finance: offers products such as tokenized short-term government bond funds

4. RWA Market Size

RWA has seen explosive growth since May 2023, with a current TVL of 6.3 billion USD, a year-on-year increase of 6000%. There are over 60,000 RWA asset holders, nearly a hundred asset issuers, and a total value of stablecoins at 169 billion USD. Several well-known institutions predict that the total market value of RWA could reach 16 trillion USD by 2030.

5. RWA Ecological Development

Centrifuge

Centrifuge is a platform for tokenizing real-world assets on the blockchain, providing decentralized asset financing protocols. Its core architecture includes:

• Centrifuge Chain: Managing asset tokenization and privacy protection
• Tinlake: Asset financing agreement that allows assets to generate NFTs as collateral.
• On-chain asset net value ( NAV ) calculation
• Layered investment structure

ONDO Finance

ONDO Finance is committed to providing institutional-grade financial products and services, with main products including:

• USDY: Dollar Yield Token, backed by U.S. Treasury bonds and bank deposits.
• OUSG: Short-term U.S. government bond token, providing liquidity exposure

BlackRock BUIDL

The ETF launched by BlackRock in partnership with Securitize invests in cash equivalents such as short-term U.S. Treasury bonds, with each token maintaining a stable value of 1 dollar.

6. Summary

• RWA aims to achieve interoperability between real-world assets and on-chain assets, blurring the boundaries between DeFi and traditional finance.
• The main sectors include securities, real estate, credit lending, stablecoins, etc.
• Facing stricter regulatory requirements, compliance is a key challenge.
• Carefully assess risks when investing in related projects.