With the continuous development of blockchain technology, Real World Assets (RWAs) are gradually becoming a significant investment domain. Particularly since 2023, discussions about RWAs have remained fervent, major institutions have entered the field, expressing long-term optimism.
What are Real World Assets (RWA)?
RWA (Risk-Weighted Assets) refers to the results obtained by tokenizing assets from the offline real world. In other words, RWA tokenizes traditional assets through blockchain technology, enabling various real-world assets to interact with the crypto financial system. The goal of RWA is to introduce more liquidity to real-world assets, leveraging the advantages of decentralized financial systems to provide greater benefits and possibilities for real assets. The underlying assets covered by RWA are diverse, including but not limited to stocks, bonds, real estate, cash, artworks, precious metals, accounts receivable, insurance, and investment funds, both tangible and intangible. Currently, the third-ranked stablecoin USDT can be considered one of the most successful projects in the RWA field, as it maps the US dollar to blockchain and tokenizes it.
Market Status of Real World Assets
The RWA market is in its early development stages but shows signs of growth, with Total Value Locked (TVL) increasing. According to DeFiLlama-tracked protocols, as of mid-August 2023, RWAs rank ninth in DeFi protocols, with a total TVL of $1.255 billion. An important contributor is stUSDT, launched in July, allowing USDT holders to earn yields based on RWAs.
Currently, there are over 413,000 RWA token holders on the Ethereum blockchain. The number of RWA token holders has significantly increased compared to the previous year, more than doubling from 179,000 to the current 413,000.
Key Drivers of Rapid Growth in Real World Assets
As the overall cryptocurrency market remains bearish and previous high-yield DeFi returns underperform, investors are seeking low-risk yields. Bonds, as low-risk haven assets and fixed-income investment vehicles, are gaining popularity. U.S. Treasury bonds, in particular, are recognized as risk-free rates in the market. The active lending volume of government bond-type RWAs has been increasing.
MakerDAO is a notable example, successfully boosting its revenue by introducing government bonds into the protocol. At the time of writing, MakerDAO's RWA investment portfolio has exceeded $2.3 billion DAI, primarily used to purchase U.S. Treasury bonds. According to Dune Analytics, over half of MakerDAO's revenue comes from interest-bearing RWA assets.
With substantial revenue growth, MakerDAO has also raised DAI savings rates multiple times this year, from 1% to 3.49%, and recently to 8%, surpassing the risk-free rate of 5% on its underlying asset, the U.S. dollar, with the aim of expanding DAI and DSR usage.
It's worth noting that investing in tokenized U.S. bonds is not without risks. Investors with U.S. Bond holdings are subject to term risk associated with such investments, as interest rate changes can lead to price fluctuations (though term risks for short-term notes are lower). Other key considerations include tokenization structure, fees, and KYC processes.
Market Outlook for Real World Assets
According to a report by Boston Consulting Group, the market size of tokenized assets is expected to reach $160 trillion by 2030. This would account for 10% of global GDP at the end of 2030, a significant increase from $3.1 trillion in 2022. This estimate encompasses tokenization of on-chain assets (more relevant to the blockchain industry) and fractionalization of traditional assets (such as Exchange-Traded Funds (ETFs) and Real Estate Investment Trusts). Considering the potential market size, capturing even a small portion of this market could have a huge impact on the blockchain industry.
Even at $160 trillion, tokenized assets would still be a small fraction of the current global total asset value, estimated at $900 trillion (less than 1.8% and not accounting for future growth in global total asset value). One could even argue that the true potential market is the entire global asset market, as anything that can be tokenized can be represented on-chain as RWAs.
Notable Real World Assets Ecosystem Projects
MapleFinance
MapleFinance is an institutional capital network that provides infrastructure for on-chain lending businesses for credit experts, connecting institutional borrowers and lenders. MapleFinance has three main stakeholders: borrowers, lenders, and pool representatives.
Institutional borrowers can access financing options on MapleFinance.
Lenders can earn returns by lending assets to borrowers.
Pool representatives are credit professionals who assess, manage, and underwrite loans.
While MapleProtocol previously focused on uncollateralized cryptocurrency loans, it has increasingly ventured into RWA-based loans. Earlier, uncollateralized cryptocurrency loans left Maple with over $50 million in bad debts. These losses stemmed from the collapse of centralized exchanges last year, which spread to Maple's cryptocurrency-native borrowers.
Currently, MapleFinance is one of the market leaders in the private credit sector, with over $332 million in outstanding loans.
MakerDAO
As the protocol behind the DAI stablecoin and the third-largest DeFi protocol, MakerDAO is undoubtedly a name familiar to many in crypto. Borrowers deposit collateral into MakerDAO's vaults and can withdraw debt denominated in DAI.
MakerDAO's attempts to integrate RWAs date back to as early as 2020, when MakerDAO voted to allow borrowers to collateralize RWA-based assets in its vaults. Since then, the RWA vaults of MakerDAO have increased to $2.3 billion. It's worth noting that its RWA growth mainly occurred in the past year, accompanied by the rise in real-world yields.
OndoFinance
OndoFinance provides institutional-level investment products and services on blockchain. The company is led by former Goldman Sachs employee Nathan Allman and has received support from prominent investors like Peter Thiel's Founders Fund, Coinbase Ventures, and Tiger Global.
Ondo offers four RWA products, providing investors with access to a range of cash management products and bond funds. During the process, investors can deposit USDC, convert it to USD, and purchase assets like ETFs or funds. In return, new liquidity providers receive a custody certificate that can be used in other protocols.
In Conclusion
For blockchain technology, tokenizing real-world assets presents a powerful application scenario that could attract more users to the cryptocurrency realm. Tokenization has become an attractive alternative solution, improving the inefficiencies of existing mechanisms by providing greater transparency and efficiency.
Traditional financial institutions have begun exploring tokenization technology, a trend that could address the inefficiencies of current solutions. The diffusion of tokenized real-world assets is a positive development for cryptocurrency investors, as they can now access opportunities beyond the crypto ecosystem. Additionally, introducing tokenized real-world assets brings more stable assets to decentralized finance (DeFi) and diversifies collateral.
Looking ahead, we anticipate continuous innovation and development in the tokenization of real-world assets, bringing more use cases and driving widespread adoption of cryptocurrencies.
For more analysis, please follow Aibit's media account for real-time updates! This article is for reference only, does not represent any position, and is not intended as investment advice. Investment is risky, caution should be exercised.
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