Is There Traditional Financial Asset Backing? Understanding the Current Development Status of RWA Assets and Representative Projects in One Article

Recently, discussions about RWA in the market have continued to gain momentum. Many well-known large institutions have also entered this field, signaling that RWA may become the next hot trend in the market.

In fact, the data supports the popularity of RWA. This year, RWA has become the fastest-growing track in the cryptocurrency field, with a staggering total locked value (TVL) growth rate of 653%. As of October, RWA has become the sixth-largest category in DeFi, with a total TVL of $57 billion. Additionally, the number of RWA token holders has been steadily increasing. Currently, RWA has over 45,000 token holders, which is nearly double compared to the previous year.

RWA Data Growth Situation

So, what exactly are RWA assets? What is their current development status? What are the most representative projects in this field? The following text will introduce them one by one for you.

1、RWA assets are backed by corresponding real assets and are fully recorded on the blockchain.

Real World Assets (RWA) refer to tangible and intangible assets in the physical world, such as real estate, bonds, commodities, etc. The tokenization of RWAs brings these off-chain assets onto the blockchain, opening up new possibilities and potential use cases. Tokenized RWAs can be stored and traced on the blockchain, thus improving efficiency and transparency while reducing the possibility of human errors.

With the rapid rise of the RWA field, various projects have emerged like mushrooms after rain. Currently, over 20 projects have successfully launched and are operating, with countless more projects in the pipeline.

However, RWA projects differ from traditional cryptocurrency projects. Firstly, RWA projects are backed by real underlying assets. To ensure the authenticity and legitimacy of the assets, every tokenization of RWA assets must meet two core elements: representation and ownership, and both of these elements must be recorded on the blockchain.

Representation means that the assets must physically exist and cannot be purely imaginary. Furthermore, details about the assets, such as whether they have a physical form, whether they expire, and who the actual holders are, all need to be explicitly defined and recorded.

Ownership pertains to the legal ownership of the assets. This means that ownership of the assets must be legally documented on the blockchain, ensuring consensus among asset holders and providing a dispute resolution mechanism for potential conflicts.

2、The constraints facing RWA asset development: Incompatibility with traditional financial regulations.

While the field of Real World Assets (RWA) is rapidly developing, it is still in an exploratory stage, and industry standards have not yet fully formed.

Looking back to the 1990s, the United States credit market began the securitization process, packaging various assets using a standard called CUSIPs. This standard could reflect the potential risks of assets but could not fully represent ownership of the assets. Now, decentralized ledger technology provides a possible solution and becomes a core support for RWA crypto projects.

However, the current challenge is that RWA projects still cannot perfectly reflect the risk of assets and cannot effectively resolve disputes caused by asset risks. Today, when disputes arise in the crypto world, most issues still need to be resolved through legal means.

In this context, the current exploration directions for RWA primarily involve two aspects: gradually recognizing asset tokens for RWAs as legitimate underlying assets in various countries and protecting them through existing legal systems. For example, recent measures in Hong Kong seem to be moving in this direction. Project teams are directly embedding assets and protection measures into smart contracts, providing stronger protection within existing legal frameworks. This appears to be the development direction in North America in the absence of clear regulations.

In conclusion, even though the current RWA market is relatively small compared to traditional finance, its advantages in on-chain settlement and regulation have not fully materialized. However, as the market grows and traditional financial institutions gradually understand new technology, the advantages of this new technology will gradually become evident.

3、The Tokenized Asset Coalition (TAC) has emerged, specifically designed to promote Real World Assets (RWA).

On September 7th, Coinbase, Circle, and Aave, among others, jointly launched the Tokenized Assets Consortium (TAC). Other members of this consortium include Base, Centrifuge, Credix, Goldfinch, and RWA.xyz. The consortium believes that the tokenization of Real-World Assets (RWA) is the future of the cryptocurrency industry, and it is committed to advancing the adoption of RWA tokenization on a global scale.

RWA Data Dashboard

Based on the tokenized asset dashboard provided by TAC, it is clear that within the current DeFi tokenized asset landscape, the total value locked (TVL) in private lending-type assets has reached $4.4 billion USD, with an annual percentage rate (APR) as high as 9.87%.

The TVL (Total Value Locked) in U.S. Treasury Bonds reaches 600 million dollars with an APY (Annual Percentage Yield) of 5.25%.

The alliance is also considering the formulation of relevant compliance principles to promote the adoption of blockchain technology, in addition to creating educational content and building the necessary infrastructure to bring different types of assets onto the blockchain.

Centrifuge founder Lucas Vogelsang stated, “Through TAC, what we are trying to build is a marketplace or an entire ecosystem. The more we can standardize and collaborate, the faster the entire industry will reach escape velocity and truly compete.”

Regarding the standardization of real-world assets, Lucas said, “I believe KYC will become one of the standardizations that will emerge sooner or later. Today’s KYC credentials are not truly portable, and real-world assets in DeFi must undergo KYC, so we need to figure out how we can collaborate in this regard.”

Next, we will delve deeper into some of the currently popular RWA projects.

4、Here are some representative projects related to RWA：MakerDao、Pendle、Ondo Finance、Frax、TrueFi

MakerDAO is currently a leader in the RWA (Real World Asset) space and is also the second-ranked DeFi project in terms of TVL (Total Value Locked). Its TVL in the RWA business has reached $3.2 billion, with a growth rate of 400% this year. In March of this year, the founder, RuneKek, proposed the “Endgame” plan, aimed at increasing platform revenue by investing in real-world assets and money market funds. Currently, 46% of $DAI is backed by RWA as reserve assets, and 66.9% of Maker DAO’s protocol revenue comes from RWA.

MakerDAO Protocol Revenue Share Chart

Pendle, a LSDFi protocol that garnered significant attention in the first half of this year, received investment from Binance Labs in August. Following this, Pendle announced its integration of two Real World Asset (RWA) protocols into its core product, Pendle Earn. These protocols are sDAI from MakerDAO and fUSDC from Flux Finance. TN Lee, the co-founder and CEO of Pendle, stated that RWAs have entered the DeFi space, and Pendle can offer users various traditional financial tools such as interest rate derivatives, swaps, and fixed income to help them manage their yields.

Ondo Finance is the top-ranked tokenized securities DeFi protocol. It boasts an annualized return of 4.7% from its investments in the US Money Market Fund (OMMF), while the yield from US Treasury Bonds (OUSG) can reach 5.5%.

Official Website Screenshot

On October 12th, Frax released FraxV3, allowing users to earn real-world bond yields on-chain through sFrax and FBX. sFrax, powered by AMO, converts underlying collateral into various RWAs, generating income. Users can earn weekly $FRAX rewards by staking Frax, with an initial annual yield of up to 10%. FXB, on the other hand, is an on-chain zero-coupon bond that users can purchase at a discount and redeem for FRAX at face value after a specified period, thus generating returns. Within just one day of its launch, FraxV3 attracted over 150 users who collectively deposited more than $35 million into the sFRAX collateral pool, resulting in a total staked sFRAX supply exceeding 11 million tokens.

Maple Finance is a B2C on-chain lending platform, currently ranked first in TVL among uncollateralized loan protocols. Users can lend funds to Web3 institutions like market makers or asset management platforms and earn returns ranging from 4% to 14%.

TrueFi primarily operates as a B2B uncollateralized credit platform, employing innovative mechanisms that connect borrowers, lenders, and professional credit assessors through smart contracts. Currently, only institutions can borrow on the platform, and loan approvals are determined by $TRU token holders following credit assessments conducted by an internal committee. TrueFi recently introduced a US Treasury Fund, with a minimum purchase requirement of $100,000, making it a relatively high-entry threshold investment option.

5、Conclusion: RWA is embarking on a pivotal experiment to integrate crypto with the real world.

In the realm of Real World Assets (RWA), which serves as the convergence point between financial technology and traditional assets, it is currently at a crucial stage of development. While its market share remains relatively limited compared to the traditional financial system, its true potential and advantages have yet to be fully realized. However, it is becoming increasingly evident that this situation is changing as technology advances and the market matures.

Traditional financial institutions are gradually recognizing the value of blockchain and decentralized technologies, creating favorable conditions for the further growth of RWAs. We have reason to believe that over time, RWAs will integrate more effectively with traditional finance and blockchain technology, offering unprecedented opportunities and value to investors and market participants. Let us look forward to RWAs bringing about more transformation and breakthroughs in the entire financial sector in the future.

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