Benefits of RWAs in Crypto

Benefits of RWAs in Crypto

• Increased Liquidity: Tokenized assets can be traded 24/7 on blockchain platforms, unlike traditional assets that may take weeks to sell. This is particularly valuable for illiquid assets like real estate.

• Fractional Ownership: By dividing assets into tokens, RWAs allow investors to own a portion of high-value assets, lowering entry barriers. For example, a $1 million property can be tokenized into 1 million tokens at $1 each, accessible to small investors.

• Transparency and Security: Blockchain’s immutable ledger ensures that ownership and transaction records are verifiable, reducing fraud.

• DeFi Integration: RWAs can be used as collateral in DeFi protocols, generating yield. For instance, MakerDAO tokenized over $1 billion in U.S. Treasury products by July 2024, and platforms like Creditcoin, Maple Finance, and Goldfinch facilitate lending and borrowing.

Prominent Examples and Market Impact

Several projects exemplify RWAs in action:

• stUSDT: A stablecoin with over $1.4 billion in total value locked (TVL) and a 4.18% APY, managed by RWA DAO.

• Ondo Finance: Offers tokenized securities with $221.42 million TVL and APYs ranging from 4.5% to 7.76%, launching USDY on the Cosmos blockchain via Noble in July 2024.

• Backed Finance: Provides tokenized securities like bC3M, bIBTA, bNIU, and bCOIN, accessible via DEXs for non-KYC investors, enhancing accessibility.

The market impact is significant, with RWAs contributing to DeFi’s growth. For example, the DeFi industry reached a peak TVL of $181.22 billion in December 2021, and while it dropped in 2022-2023 due to events like Luna and FTX, RWAs are seen as a new yield source.

Challenges and Considerations

Despite their potential, RWAs face several challenges:

• Regulatory Issues: Tokenizing assets, especially securities, involves navigating complex legal frameworks. Utilizing regulatory technologies, like licensed security token issuers and KYC/AML standards, is crucial.

• Security Risks: Hacking and fraud are concerns, mitigated by secure custody solutions , but require vigilance.

• Market Adoption: RWAs need widespread acceptance to reach their full potential, with liquidity and investor education being key hurdles.

• Default Risks: Protocols dealing with undercollateralized loans face default risks.

Role of Exchanges and Wallets

Major crypto exchanges facilitate RWA trading, ensuring compliance and liquidity:
Wallets like [Gate Wallet] offer self-custody options, while providing custody solutions for secure RWA storage, ensuring investor protection.

Future Potential and Conclusion

Research suggests RWAs are transforming finance by bridging TradFi and DeFi, with a potential market size encompassing nearly all human economic activity. The evidence leans toward benefits like increased liquidity and accessibility, but challenges like regulation and security must be addressed. For beginners, RWAs offer new investment opportunities, but require careful research and risk management.
In conclusion, RWAs in crypto are real-world assets tokenized on the blockchain, enhancing liquidity, accessibility, and fractional ownership. They represent a significant innovation, with challenges to overcome, but their potential to revolutionize finance is clear.