RWA: The Rise of Real Assets

1. Definition and Characteristics of RWA

RWA stands for Real World Assets, which refers to the representation and trading of real-world assets in a digital and tokenized manner within the blockchain or Web3 ecosystem. This includes real estate, commodities, bonds, stocks, artwork, precious metals, intellectual property, and more. RWA aims to bring traditional financial assets into the DeFi ecosystem through blockchain technology, achieving more efficient, transparent, and secure asset management and trading.

The significance of RWA lies in enabling the liquidity of assets that are difficult to liquidate in the real world through blockchain technology, allowing participation in lending, staking, trading, and other operations within the DeFi ecosystem. This method of connecting real assets with the blockchain world is becoming an important development direction in the Web3 ecosystem.

As a bridge between crypto-native assets and traditional assets, RWA requires not only on-chain technical support from smart contracts but also legal protection for the underlying assets in the real world. The tokenization process involves the purchase and custody of the underlying assets, establishing a legal framework of association, and ultimately the issuance of tokens. This grants token holders a legal right to claim the underlying assets.

2. The Development History of RWA

The development of RWA can be divided into three stages:

Early exploration phase ( 2017-2019 ):

• The RWA concept began to take shape in 2017, with projects like Polymath starting to explore security tokenization.
• The pilot project for real estate tokenization appeared in 2018.
• The TAC Alliance was established in 2019 to promote RWA standardization.

Initial development stage ( 2020-2022 ):

• In 2020, projects like Centrifuge gained attention, and Aave introduced RWA as collateral.
• In 2021, MakerDAO introduced RWA as collateral.
• In 2022, traditional financial institutions began to lay out RWA.

Rapid Expansion Phase (2023 to Present ):

• Large asset management firms attempt to tokenize part of their asset portfolios.
• Regulators have begun to intervene and establish relevant frameworks.

3. Main Application Areas of RWA

RWA shows application potential in various fields, including:

Real estate industry:

• Improve asset liquidity and reduce personal investment risk.
• Representative projects: Tangible, Landshare, PropChain, etc.

Fiat to stablecoin:

• Stablecoins like USDT bring fiat value into the blockchain.
• Facing challenges such as systemic risk, regulatory risk, and collateral risk.

Lending Market:

• Expand the range of stakable assets to provide enterprises with more financing channels.
• Ordinary investors can invest in enterprises to obtain returns.

Bonds and Securities:

• Must align with real laws and regulations
• Representative projects: Maple Finance, Securitize, Ondo Finance, etc.

4. RWA Market Scale and Prospects

The RWA market has seen a surge since May 2023, and as of now:

• TVL reached $6.3 billion, a year-on-year growth of 6000%
• Over 60,000 asset holders, nearly 100 asset issuers.
• The total value of stablecoins is 169 billion USD

Many institutions are optimistic about the prospects of RWA, expecting the total market value to reach 16 trillion USD by 2030. However, the development of RWA is highly related to reality, and regulations in various regions may become a constraint.

5. Representative Projects in the RWA Ecosystem

Centrifuge

• On-chain tokenization platform for real assets, providing decentralized asset financing agreements
• Total financing amount of 30.8 million USD, TVL reached 636 million USD
• Built on Substrate, the core architecture includes Centrifuge Chain, Tinlake, etc.
• Recently, the TVL has declined, currently only 497,944 dollars.

ONDO Finance

• Institutional-grade financial agreements focused on stable asset tokenization
• Raised $34 million, with a TVL of $538.97 million, ranking third.
• The main products USDY and OUSG correspond to dollar yield and US Treasury bonds respectively.
• KYC is required, collaborating with Flux Finance for permissionless participation

BlackRock BUIDL

• The ETF launched by BlackRock in partnership with Securitize
• Compliance improvement, operated by special purpose vehicles.
• Invest in cash equivalents to maintain a stable value of 1 US dollar
• TVL stabilized at 502.41 million USD, ranking fourth.

6. Summary

RWA aims to achieve interoperability between real-world assets and on-chain assets, mainly focusing on fields such as securities, real estate, credit lending, and stablecoins. Compared to other tracks, RWA is subject to stricter regulations and has higher compliance requirements. Although the prospects are broad, caution is still needed when investing, with close attention to regulatory trends and potential risks.