Clarify the narrative central theme of the protagonist RWA in this round, and explore the development logic of RWA in the future
The birth of any phenomenal enterprise or project has a prerequisite, that is, the restrictive conditions that once bound the market have changed, and the ceiling that suppressed the market is opened. A new layer of market space has emerged, in addition to Binance, Goldman Sachs, Hamilton Lane, Siemens and other traditional financial institutions and MakerDAO, Aave and other head DeFi, agreements are competing for layout on the RWA track. RWA seems to be aiming at a trillion-level incremental market, trying to open a gap from the traditional financial market and inject massive liquidity and vast market opportunities into the DeFi market. Tokenization of real assets (Real World Assets, RWA) refers to the use or transaction of stable assets (such as real estate, automobiles, and artworks, etc.) in the real world into the chain through tokenization.
Real assets on the chain (RWA, Real-World Assets) has become a hot spot again recently. The reason is that it has been fully explored in the practice of stablecoin and other synthetic asset projects such as USDT and Synthetix, and its basic path is to provide some value support for DeFi on the chain through real life assets. In theory, whether it is the 17 years of chain reform in the East or the word Tokenization (tokenization) in the western context, they all hope to continue or migrate real assets to the chain. In this sense, OTC in a broad sense should also be included in the definition of RWA.
RWA is a bridge between the real world and the DeFi field, but the track did not attract industry attention in the beginning. Back at the end of 2020, MakerDAO Released plans and guidelines for formally incorporating RWA into strategic priorities; Aave announced the launch of the RWA market at the end of 2021, Allow the mortgage lending of real assets; Until the March of this year, Three hot events in the industry have led to the further development of RWA: Citigroup has issued a report, The article mentions that almost everything of value can be tokized; Binance announced to become the Layer1 blockchain Polymesh node operator; TradFi (Traditional finance) institutions Goldman Sachs, Hamilton Lane, Siemens and KKR all show that they are trying to link their real world assets.
According to RWA practice and research, the 10 trillion-level RWA will be integrated into the crypto economy in this market cycle. This process is complex, rigorous, pioneering and challenging, but at the same time full of value opportunities — — including how to compliance will RWAs to block chain (such as creation and fixed income and stock support, real estate support, trade financing support RWAs), also included in the process to create native encryption encryption economic assets to promote the path of RWA.
At present, the RWA market ecology is dominated by the former, but if the “RWA infrastructure” and “asset provider” are not well integrated into the crypto economy ecology and have the original market operation ability, the realization of RWA will be very difficult. For the current $1 trillion crypto market, investors mainly gain income based on on-chain activities (such as trading, lending, pledge, derivatives, etc.), and the entire market lacks a stable source of real income (Real Yield).
Since Ethereum switched to POS, liquidity pledge (LSD) based on ETH standard can be regarded as a source of native real revenue (Real Yield) in the crypto market, but the overall crypto market share is currently small. To really break through the bottleneck of the existing market, but also need a strong external force to support. Therefore, a new source of real asset income (Real Yield) is entering into reality: the real world assets (Real World Assets, RWA) existing in the chain are brought to the chain through tokenization (Tokenization), which can serve as an important source of real income for U-based assets in the crypto market.
Cyber-Verse.Inc.think:
The potential impact of RWA’s upchain entry on the crypto market is almost transformative. RWA can provide sustainable, rich types of real returns supported by traditional assets. In addition, RWA can be a bridge between the decentralized financial system and the traditional financial system for the DeFi, which means that RWA can not only import incremental capital for the crypto market, but also obtain massive liquidity, vast market opportunities and huge value capture in the traditional financial market.
Needless to say, the RWA concept is hot again, and Binance, Citigroup and other institutions see more have direct relationship, in today’s overall encryption currency market in the size of trillions of dollars, superposition of all kinds of mining, liquidity and the failure of governance tokens model, looking for updates, more attractive DeFi narrative nature need to redesign.
The results of this search are two, One is the Web3 native LSD (liquidity pledge), By more appropriately adapting Ethereum to the pledge model under the PoS model, Release liquidity equivalent to pledged amounts while borrowing Ethereum to provide the lowest level of security, A new imagination for Ethereum and even the entire crypto market; Another result is the search for a “more authentic” source of revenue and value support, On the current size of the global mainstream assets, Cryptocurrency 1T is small enough, While the traditional assets are large enough, Stablecoin (USD), US debt, real estate and corporate bonds are expected to all together constitute the underlying infrastructure of the future crypto economy.
So, how do you bring RWA into DeFi?
Smart contracts are usually used to create a Token representing the RWA, while providing an off-chain assurance that the issued Token can always redeem the underlying assets. RWA has several common applications in DeFi:
# 1 Stablecoin:
For example, USDT, USDC, BUSD belong to RWA, Tether, Circle, Paxos these issuing companies maintain the audited US dollar asset reserve, casting stable coin Token, for the use of blockchain and DeFi protocol;
# 2 Synthetic assets:
Synthetic assets also belong to RWA. For example, through the form of synthetic assets, stocks and commodities are traded in the form of linked derivatives. The best player in synthetic assets is Synthetix, which locked in more than $3 billion in its agreement at the peak of the bull market in 2021;
# 3 Lending Agreement:
RWA has been well developed in lending agreements. Borrowers use RWA as collateral, and DeFi platforms can provide mortgage lending services with unsecured assets. The use of RWA in DeFi lending agreements has played a very important positive role in the sustainable development and revenue scale of DeFi lending agreements.
The cryptocurrency industry has long been criticized for not bringing help and value to the real world. DeFi has only formed a closed loop of capital on the chain, and NFT has not helped brands in the real world to form more value growth. RWA is strongly promoted by institutions also because it sees its help to real asset liquidity. The current size of the bond market is about $127 trillion, and the total value of global real estate is about $362 trillion. If these assets can interact with the chain, the value it creates will be huge. Perhaps in the current environment, the next bull market will put more emphasis on compliance and practicality to the real world.
