Moving Assets On-Chain: Use Cases for RWAs

Use cases for RWAs

Real-world asset (RWA) tokenization brings tangible assets to the blockchain, with revolutionary implications for both traditional finance (TradFi) and decentralized finance (DeFi). Xend Finance, a DeFi initiative inspired by traditional credit unions, has extended its offerings into the RWA tokenization space. We’re building a one-of-a-kind RWA-native chain to facilitate the seamless movement of assets on-chain, empowering compliance, liquidity, and utility.

According to CoinGecko’s RWA Report 2024, while fiat-backed stablecoins are the origin of RWA tokens, the 2022 bear market led to a more diverse set of tokenized RWAs. Initially focused on debt/credit, other RWAs like real estate, art, and collectibles are now capturing investors’ interest.

Notable use cases for RWA tokenization:

• USD-Pegged Assets: The USD has always been in high demand due to its credibility, strength, and global usage. Investors worldwide seek the security offered by USD-pegged assets. CoinGecko noted that approximately 99% of all stablecoins currently are USD-pegged.
• Commodity-Backed Tokens: Commodity-backed RWA tokens are also popular. CoinGecko reported that commodity-backed tokens reached $1.1 billion in market capitalization over the past year, with gold being the most popular commodity. Tokenized precious metals like Tether Gold (XAUT) and PAX Gold (PAXG) hold 83% of this market cap, both pegged to one troy ounce of physical gold.

Source — Commodity-backed tokens by market capitalization

• Tokenized US Treasuries: These are another much-coveted investment, with Franklin Templeton being one of the biggest issuers of tokenized US securities.
• Agricultural Product Derivatives: The global agricultural product derivatives market is expected to reach a nominal value of $30.99 trillion in 2024. The RWA tokenization space has clear opportunities in this sector, making it a prominent use case.
• Other Assets: Art, collectibles, real estate, cash, gemstones, intellectual property, energy assets, and more present exciting possibilities. For example, in property ownership, RWA tokens can enable fractionalization, improving liquidity and accessibility.

Where does Xend Finance come in?

Recognizing the real-world applications of RWA tokenization, Xend Finance aims to bridge blockchain-based decentralized finance and the physical world by enabling assets to move on-chain with ease. Between 2022 and 2023, Xend Finance saw widespread adoption of its banking platform and now looks to expand into the real-world asset tokenization space. Our native token, previously called $XEND, will now be known as the RWA token, symbolizing our commitment to merging crypto with other blockchain-based assets.

The new principles of Xend Finance

Xend Finance’s goals are simple: to build a comprehensive and fully compliant environment to put real-world assets on-chain and manage ownership and transactions. The Onchain Assets Environment (OAE) framework is designed to facilitate the compliant onboarding of assets on-chain.

The Xend Finance OAE framework

Xend Finance’s OAE relies on several strategic pillars, which include:

Xend Finance OAE pillars

• 7-in-1 integration: OAE brings together seven platforms to manage the entire lifecycle of assets:

1. AssetChain: To tokenize real-world assets, offering an integrated layer for legal and factual event recording.
2. Origin Studio: To manage and issue tokens, allowing the tokenization of assets and associated rights.
3. Social Hub: To connect token and asset owners with service providers the likes of market makers, investors, authenticators, insurance, and compliance validators.
4. Xend Connect: To link the aforementioned AssetChain with other components of the OAE as well as external systems through data exchange oracles.
5. Global Ownership Register (GOR): To create asset profiles on the RWA blockchain, and track relevant transactions and events.
6. Xend Solutions: A suite of Xend Finance’s offerings, including banking, centralized and decentralized exchanges, fundraising platforms, wallets, and bridges for on/off-ramping as well as cross-chain transactions.
7. IAC (Insurance, Authentication, and Compliance Validation): Ensures the integrity and compliance of assets.

• Global Ownership Register (GOR): Xend Finance is looking to create a unified social platform for asset profiles, including an integrated transaction explorer.
• Event mirroring in OAE: The Xend Finance OAE and the AssetChain reflect legal and factual events related to the assets onboarded directly on the AssetChain.
• Smart contracts: Every asset on the Xend Finance AssetChain is represented by a smart contract rather than a token.
• Tokens: On-chain representation of specific rights associated with an onboarded asset is achieved through token standards.
• Universal Asset Environment: The Xend Finance OAE onboards all legally transactable assets, whether tangible or intangible.
• IAC cooperation triangle: This involves three key partner types — Insurance Providers, Asset Authenticators, and Compliance Validators — that enable event mirroring and credibility checks.
• Legal binding: The OAE framework ensures true asset ownership through verifiable legal binding involving smart contract administrators.

With the RWA token, Xend Finance is well on its way to becoming the comprehensive RWA onboarding and management platform on the blockchain, supporting all emerging RWA token use cases.

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