The Rise of Real World Assets (RWA) in the Encryption Field

The original intention of cryptocurrency was to create a more transparent, accessible, and efficient global economy, rather than just short-term speculation. However, most of the current cryptocurrency narrative is still limited to on-chain activities, with few practical applications benefiting ordinary consumers. There are huge opportunities in the traditional market, waiting for blockchain technology to disrupt and improve it.

The emergence of decentralized finance ( DeFi ) has unleashed the potential of blockchain. DeFi applications offer advantages such as atomic settlement, low costs, transparency, composability, and user control. However, DeFi is still mainly a closed-loop economy with limited connection to the existing global economy.

In order to achieve broader applications, DeFi is exploring the integration with real-world assets ( RWA ). RWA refers to tangible assets that exist in the physical world, such as real estate, commodities, and artworks. The total value of global RWA, such as real estate and gold, exceeds $300 trillion, presenting a significant opportunity for DeFi.

Multiple financial institutions have begun to make inroads in the RWA field. Goldman Sachs launched a blockchain bond platform, Siemens issued digital bonds on a public blockchain, and MakerDAO's stablecoin DAI has also introduced RWA as collateral.

The applications of RWA in DeFi include:

1. Stablecoin: using RWA as reserve assets
2. Synthetic Tokens: Creating derivatives linked to RWA
3. Loan Agreement: Use RWA as collateral

Currently, RWA on-chain protocols are mainly divided into two categories:

1. Stock and physical asset markets, such as Backed Finance
2. Fixed income markets, such as Centrifuge, Goldfinch, etc.

Some major RWA protocols include:

• Backed Finance: Tokenized S&P 500 ETF Stocks
• Ondo Finance: Tokenized U.S. Treasuries and corporate bonds
• Maple Finance: A blockchain-based credit market
• Centrifuge: Focused on debt securitization and tokenization
• Goldfinch: Decentralized Credit Protocol

The yields provided by these RWA protocols are generally higher than those of traditional DeFi protocols.

In the future, there may be Layer 1 public chains specifically designed for RWA to meet the unique permission and privacy needs of RWA.

With the exhaustion of the DeFi narrative and the enormous scale of the real asset market, RWA brings new opportunities for DeFi. The composability, transparency, and efficiency of DeFi can address the pain points of traditional asset markets, providing more possibilities for global assets. The recent banking crisis has also driven the demand for tokenization of RWAs such as gold. A new narrative of DeFi empowering offline assets may be on the horizon.