Real-world assets (RWAs) on the blockchain are digital tokens representing physical and financial assets like currencies, commodities, equities, and bonds. RWA tokenization presents a massive market opportunity in the blockchain industry, potentially reaching hundreds of trillions of dollars. This article will guide you to understand RWA and the top projects with RWA narratives.
What is Real World Asset?
Tokenized real-world assets (RWAs) are digital tokens representing physical and financial assets like cash, commodities, equities, bonds, artwork, intellectual property, credit and more.
This innovation revolutionizes asset accessibility, exchange, and management, opening up new opportunities for crypto-based financial services and non-financial applications.
Asset tokenization is a key crypto use case and has vast market potential, covering nearly all economic activities. The future of finance is decentralized, with numerous blockchains supporting trillions of dollars in tokenized RWAs connected by interoperability standards.
Read Also: How Blockchain Will Revolutionize Gaming
Tokenized RWAs
Tokenized assets offer improved liquidity, accessibility, transparent onchain management, and reduced transactional friction compared to traditional assets. For financial assets, RWAs tokenization consolidates distribution, trading, clearing, settlement, and safekeeping into a single layer. This streamlines the onchain financial system, reducing counterparty risk and enabling more efficient capital mobilization.
Tokenized RWAs have the potential to revolutionize decentralized finance (DeFi), extending its benefits to assets outside the blockchain ecosystem. This expansion could propel the digital asset industry to new heights by leveraging blockchain technology. By integrating assets currently beyond the digital asset ecosystem onto blockchain rails, liquidity conditions can improve, transparency can increase, and systemic risks can decrease. This shift creates a fairer financial environment, less susceptible to exploitation by a select few.
-
Real-world assets are already gaining traction in DeFi, with approximately $5 billion in RWA total value locked as of December 2023, according to DefiLlama.
-
Additionally, these assets enable innovative financial products. MakerDAO, a prominent DeFi protocol, uses a mix of real-world asset collateral to back its stablecoin DAI, showcasing the potential for combining traditional and blockchain-based assets and technology.
Read Also: A Comprehensive Guide to PYTH Tokenomics
Benefit of Real World Assets in Crypto
Tokenized real-world assets provide several benefits:
-
Liquidity: Tokenized RWAs offer enhanced market liquidity by leveraging blockchain technology, supported by Chainlink CCIP for cross-chain activity. This enables globally accessible liquidity conditions, particularly for traditionally illiquid assets.
-
Transparency: As tokenized assets are represented onchain, transparency and auditable asset management are ensured. This reduces systemic risks by providing accurate insight into leverage and overall risk within the system.
-
Accessibility: Tokenized RWAs expand the potential user base for various asset types by facilitating easier access through blockchain-based applications. Fractional ownership options allow a broader set of users to utilize assets that would otherwise be inaccessible to them.
Real World Assets Risk
Tokenized RWAs come with inherent risks that need careful consideration:
-
Custody: Ensuring reliable custody of physical assets is crucial, as it directly impacts tokenized asset security.
-
Connectivity: Maintaining robust connections to the outside world is essential for accurate asset representation on blockchain.
-
Smart Contract Risks: Potential bugs and vulnerabilities in smart contracts pose a risk to the integrity and security of tokenized assets.
-
Market Liquidity: Successful tokenized assets require sufficient market liquidity and demand to thrive.
These risks highlight the importance of comprehensive risk management strategies in RWA tokenization endeavors.
5 Top Real World Assets Tokens and Projects
According to DefiLlama, RWA is in the top 10 of the biggest sectors in DeFi and records $4.352 billion of TVL as of the time of writing. Currently, there are 42 projects in the RWA category. We will list the top projects in this category based on its TVL.
MakerDAO ($DAI & $MKR)
MakerDAO has a stablecoin called $DAI that is pegged to the US dollar by relying on an over-collateralisation model. Maker allows DAI holders to receive a share of the revenue earned by MakerDAO through the Dai Savings Rate (DSR) module.
DAI is utilizing RWAs to diversify collateral to mitigate risk This strategy involves issuing DAI loans to financial institutions for real-world projects, managing default risk by ensuring it's lower than prevailing interest rates.
-
In 2023, Maker revenue mostly comes from its RWAs holding, such as US Treasury bonds.
-
Currently, Maker RWA's TVL is at around $2.2B
stUSDT ($stUSDT)
TRON is a leading platform for real-world asset tokenization, hosting the second-largest RWA protocol globally, stUSDT. With annual yields exceeding 4.51%, $stUSDT allows users to stake USDT in designated smart contracts, which then invest in real-world assets (RWA) like government bonds. With over $1.3 billion in assets under management, stUSDT ranks behind MakerDAO.
Ondo Finance ($USDY)
Ondo Finance is a tokenized RWA platform. Ondo has a product called USD Yield ($USDY).USDY represents a tokenized note backed by US Treasuries and bank deposits. Offering similar accessibility and utility as stablecoins, USDY sets itself apart by providing token holders with yields and robust investor protections.
Ondo TVL is still small compared to Maker's and stUSDT. Ondo records around $182M in TVL at the time of writing.
Mountain Protocol ($USDM)
Mountain Protocol launched USDM in 2023, it is the first nationally-regulated, yield-bearing stablecoin. This ERC-20 token grants non-US users access to US Treasury yields and is compatible with various DeFi protocols. Fully backed by short-term US Treasuries, USDM offers daily rewards through rebasing, currently at a rate of 5% APY. Currently, Mountain Protocol records around $150 million TVL.
RealT
RealT simplifies real estate investments and offers fractional ownership of US properties through tokenized assets utilizing blockchain technology on the Ethereum blockchain or Gnosis Chain. Traditional paper deeds are replaced with digital tokens, providing unique advantages in asset ownership. Currently, RealT records around $100 million TVL.
Conclusion
Real World Assets (RWA) in crypto refer to digital tokens representing physical and financial assets on the blockchain, offering enhanced liquidity, transparency, and accessibility. However, they come with risks like custody and smart contract vulnerabilities. Despite this, RWA presents a significant market opportunity and top projects include MakerDAO, stUSDT, Ondo Finance, Mountain Protocol, and RealT, with MakerDAO leading in total value locked (TVL) followed by stUSDT. Each project offers unique features like yield-bearing stablecoins, tokenized real estate, and access to US Treasury yields.
Read Also:
Bitrue Official Website:
Website: https://www.bitrue.com/
Sign Up: https://www.bitrue.com/user/register
Website: https://www.bitrue.com/
Sign Up: https://www.bitrue.com/user/register
Disclaimer: The views expressed belong exclusively to the author and do not reflect the views of this platform. This platform and its affiliates disclaim any responsibility for the accuracy or suitability of the information provided. It is for informational purposes only and not intended as financial or investment advice.