Read the current status of RWA asset development and representative projects in one article

Source: Chain Catcher

Written by Mrs Watanabe

Recently, the discussion of RWA in the market has continued to rise. Many large, well-known institutions have also ventured into this space, indicating that RWA may be the next market outlet. In fact, the data also proves the popularity of RWA. This year, RWA became the fastest-growing track in the cryptocurrency space, with a staggering 653% Total Locked Value (TVL) growth. By October, RWA had become the sixth largest category in Defi, with a total TVL of $57 billion. In addition, the number of holders of RWA is steadily rising. Currently, RWA has more than 45,000 token holders, a number that has almost doubled compared to last year.

! [Read the current status of RWA asset development and representative projects in one article] (https://cdn-img.panewslab.com//panews/2022/10/22/images/1109f3e959166bb21b003b450ba1337d.)

RWA data growth

So, what exactly are RWA assets? How is it currently developing? What are the most iconic projects of this track? Each of them will be introduced below.

First, RWA assets are supported by corresponding real assets and are fully recorded on the chain

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

With the rapid rise of the RWA space, projects have sprung up. Currently, more than 20 projects have been successfully up and running, and countless more are coming soon.

But RWA projects are different from traditional encryption projects. First of all, RWA projects are backed by real underlying assets. To ensure the authenticity and legitimacy of assets, every RWA asset tokenization must meet two core elements: representation and ownership, and both of these elements must be on-chain.

Representation means that assets must be real and cannot be imagined. In addition, other details of the asset, such as whether it has a physical object, whether it will expire, who the actual owner is, etc., need to be clarified and recorded.

Ownership is about the legal attribution of assets. This means that ownership of assets must be written on-chain through legal means, ensuring consensus on the owners of the assets and providing a resolution mechanism for disputes that may arise.

Second, the constraints faced by RWA's asset development: incompatible with traditional financial regulations

Although the RWA space is growing rapidly, it is still in the exploratory phase and industry standards are not yet fully formed.

Back in the '90s, the credit market in the U.S. began the process of securitization, packaging various assets through a standard called CUSIPs. This standard can reflect the potential risk of an asset, but it does not fully reflect ownership of the asset. Now, decentralized ledger technology offers us a possible solution that is at the core of RWA's crypto project.

However, the current problem is that RWA projects still do not perfectly reflect the risk of assets and do not well resolve disputes arising from asset risk. When disputes arise in the crypto world today, most issues still need to be resolved through legal means.

In this context, there are two main directions for RWA to explore: countries gradually recognize RWA's asset tokens as legitimate underlying assets and protect them through the existing legal system. For example, Hong Kong's recent series of measures seem to be in this direction; Project parties write assets and protections directly into smart contracts, providing stronger protection within the existing legal framework. This seems to be the way forward for North America in the absence of regulatory clarity.

Overall, despite the relatively small size of the current RWA market, its advantages in on-chain clearing and regulation over traditional finance have not yet fully emerged. However, with the expansion of market scale and the gradual understanding of new technologies by traditional financial institutions, the advantages of new technologies will gradually emerge.

Third, the Tokenized Asset Alliance (TAC) was born to promote RWA assets

On September 7, Coinbase, Circle, and Aave jointly launched the Tokenized Asset Alliance (TAC), whose other members include Base, Centrifuge, Credix, Goldfinch, and RWA.xyz. The consortium believes that RWA tokenization is the future of the crypto industry and will work to advance RWA's adoption worldwide.

! [Read the current status of RWA asset development and representative projects in one article] (https://cdn-img.panewslab.com//panews/2022/10/22/images/91362ed4fa6ea3e62df1a27c8583e9ac.)

RWA data dashboard

According to the tokenized asset dashboard provided by TAC, it can be clearly seen that among the current defi tokenized asset types, the private credit TVL reached $4.4 billion, and the APR was as high as 9.87%;

! [Read the current status of RWA asset development and representative projects in one article] (https://cdn-img.panewslab.com//panews/2022/10/22/images/d10b652672c61c9ec4ce56a96d7d307c.)

US Treasury TVL reached $600 million, APY reached 5.25%

In addition to creating educational content and building the necessary infrastructure to bring different types of assets on-chain, the consortium is also considering developing relevant, compliant principles to drive the adoption of blockchain technology.

Lucas Vogelsang, founder of Centrifuge, said: "With TAC, we are trying to build a market or an entire ecosystem. The more we standardize and collaborate, the faster the industry will reach escape speed and truly compete."

On how real-world assets can be standardized, Lucas said, "I think KYC is going to be one of the normalizations that will come sooner or later. Today's KYC credentials are not really portable, real-world assets DeFi have to be KYC, and we have to figure out how we can actually work together on that."

Next, we'll dive into some of the current hot RWA projects.

List of RWA representative projects: MakerDao, Pendle, Ondo Finance, Frax, TrueFi

MakerDao is currently a leader in RWA and TVL's second-largest Defi project. TVL for its RWA business has reached $3.2 billion, with a growth rate of up to 400% this year. In March, founder RuneKek proposed the "Endgame" initiative, which aims to increase platform revenue by investing in real-world assets and money market funds. Currently, 46% of $DAI are backed by RWA as a reserve asset, and 66.9% of Maker DAO's agreement revenue comes from RWA.

! [Read the current status of RWA asset development and representative projects in one article] (https://cdn-img.panewslab.com//panews/2022/10/22/images/bdfb54f4cbc7aa49e9abb36956a245d4.)

MakerDao protocol revenue percentage chart

Pendle, the much-watched LSDFi protocol in the first half of this year, received investment from BinanceLabs in August this year, and then Pendle announced that it will integrate two RWA protocols in its core product, Pendle Earn, namely Maker DAO's sDAI and Flux Finance's fUSDC. TN Lee, co-founder and CEO of Pendle, said RWA has entered the DeFi space, and Pendle can provide users with a variety of traditional financial instruments such as interest rate derivatives, swaps and fixed income to help them manage their earnings.

Ondo Finance is the number one tokenized security Defi protocol by market cap. Its OMMF returns 4.7% annualized on its investments in the US money market, while the US Treasury OUSG yields 5.5%.

! [Read the current status of RWA asset development and representative projects in one article] (https://cdn-img.panewslab.com//panews/2022/10/22/images/aaa785e481b62a6927633d5e69902db8.)

Screenshot of the official website

Frax released Frax V3 on October 12, allowing users to earn real-world bond yields on-chain through sFrax and FBX. sFrax generates revenue by converting underlying collateral into multiple RWA through AMO. Users can earn weekly $FRAX earnings by staking Frax with an initial annualized payoff of up to 10%. FXB, on the other hand, is an on-chain zero-coupon bond that users can buy at a discount and exchange it for FRAX at face value after a certain period of time, thus earning a profit. One day after FraxV3 went live, more than 150 users have invested more than $35 million in the sFRAX pledge pool, and the total amount of sFRAX stakes has exceeded 11 million.

Maple Finance is a B2C on-chain lending platform that ranks first in TVL among unsecured loan agreements. Users can lend funds to Web3 institutions, such as market makers or asset management platforms, and earn between 4% and 14% from them.

TrueFi is a B2B-focused unsecured credit platform. It uses an innovative mechanism to connect borrowers, creditors, and professional credit ratings through smart contracts. Currently, only institutions can borrow money on the platform, and after a credit assessment by the protocol's internal committee, it is up to the $TRU token holders to decide whether to approve it. Recently, it launched a U.S. Treasury fund, but the minimum purchase amount is $100,000, so the threshold is relatively high.

V. Conclusion: RWA is embarking on a critical experiment in the integration of crypto and reality

The RWA space, as the intersection of fintech and traditional assets, is at a critical stage of development. While its share of the market is still limited, its true potential and advantages over the traditional financial system have yet to be fully realized. But we can clearly see that this situation is changing as technology advances and markets mature.

Traditional financial institutions are gradually recognizing the value of blockchain and decentralized technology, which has created favorable conditions for the further development of RWA. We have reason to believe that over time, RWA will better integrate traditional finance and blockchain technology, bringing unprecedented opportunities and value to investors and market participants. Let's look forward to RWA bringing more changes and breakthroughs to the entire financial sector in the future.