Real-World Assets: Bringing Real-World Value to DeFi

Real World Assets is a promising application for blockchain technology that is gaining traction. We explore notable projects like Centrifuge, Ondo, Tangible, and Toucan.

Aug 02, 2023 Real-World Assets: Bringing Real World Value to DeFi

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Key Takeaways

  • Real World Assets (RWA) is a promising application for blockchain technology that is gaining traction. According to a report by Boston Consulting Group, the on-chain RWA market is projected to reach $4 trillion to $16 trillion by 2030.
  • Real World Assets typically refer to the utilisation of distributed ledger technology like blockchain to track physical and intangible assets, with performance and valuation derived from sources outside the blockchain. An example of RWA is the issuance of tokens that represent ownership in real estate investments, or participation in funding initiatives for entrepreneurs in developing nations. Although these tokens exist on a blockchain, the underlying assets and transactions take place in the physical world.
  • RWA tokens are essentially representations of assets that are not inherently native to the blockchain, and they differ from volatile assets commonly associated with cryptocurrencies. Meanwhile, RWA tokens, similar to other cryptographic tokens, possess programmable capabilities, enabling the inclusion of features such as lockup periods and requirements for accredited investors. RWA Tokenisation General Workflow
  • This process enables any valuable asset to be tokenised and utilised for on-chain transactions, leading to the prediction that almost everything could be tokenised within five to 10 years. There is a wide variety of real world assets with different characteristics, which are listed in the table below. RWA Characteristics RWA Protocols Landscape
  • There are various challenges in the process of implementing RWAs, which include legal and regulatory compliance, valuation and auditing, custody and security, governance and trust, as well as interoperability and scalability concerns. Overcoming these obstacles would require significant collaboration among all stakeholders, including asset originators, token issuers, service providers, regulatory bodies, and investors.
  • Overall, the outlook for RWAs is promising. According to a Citi report, the tokenisation of financial and real world assets has the potential to become the game-changing use case that drives blockchain breakthroughs. Citi suggests that tokenisation could grow by a factor of 80 times in private markets and potentially reach a value of nearly $4 trillion by the year 2030.
  • In conclusion, as blockchain technology continues to mature and regulations evolve, it is likely that there will be increased adoption and integration of RWAs into the crypto space. While challenges persist, the potential benefits make RWAs an exciting frontier in the crypto landscape.

Read the full report: Real-World Assets: Bringing Real-World Value to DeFi

Authors Research and Insights team

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