1. Tracing the source RWA
RWA – Real World Assets
RWA, the full name of which is Real World Assets, literally means "real-world assets", which refers to the digital and tokenized representation and trading of real-world assets in the blockchain or Web3 ecosystem. These assets include but are not limited to real estate, commodities, bonds, stocks, artworks, precious metals, intellectual property, etc. The core concept of RWA is to bring traditional financial assets into the decentralized finance (DeFi) ecosystem through blockchain technology, thereby achieving more efficient, transparent and secure asset management and transactions.
The significance of RWA is that it makes assets that are relatively difficult to flow in the real world liquid through blockchain technology, and on this basis can participate in the DeFi ecosystem to conduct operations such as lending, staking, and trading. This way of connecting real assets with the blockchain world is becoming an important development direction in the Web3 ecosystem.
RWA – Special Asset Status
RWA tokenizes real-world assets into digital assets that can generate utility in the blockchain. Its essence is a bridge between crypto-native assets and traditional assets. Crypto-native assets are generally implemented through smart contracts, and all business logic and asset operations are completed on the chain; following the "Code is Law" principle; while traditional assets such as bonds, stocks, and real estate operate under the legal framework of the real society and are protected by government laws. The series of tokenization rules proposed by RWA require both on-chain technical support for smart contracts and the protection of underlying assets such as stocks and real estate by real-world laws.
In fact, under the framework of RWA, tokenization is not just a simple process of issuing a token on the blockchain. It includes a whole set of complex processes that involve asset relationships in the real world off-chain. The tokenization process usually includes: the purchase and custody of the underlying assets, the establishment of a legal framework between the tokens and these assets, and the final issuance of tokens. Through this tokenization process, the laws and regulations off-chain and the relevant product operation procedures are combined, so that token holders have legal claims on the underlying assets.
RWA - Historical Origins
The development history of RWA can be divided into three stages: early exploration, initial development and rapid expansion.
Early Exploration Stage (2017-2019)
2017: RWA exploration begins As the concept of decentralized finance (DeFi) matures, the concept of RWA (Real World Assets) begins to sprout. Some pioneering projects such as Polymath and Harbor begin to explore the feasibility of tokenizing securities. Polymath focuses on creating a security token issuance platform and is committed to solving legal compliance issues, while Harbor is committed to providing a compliance framework that enables securities assets to flow on the blockchain.
2018: The beginning of commodity tokenization In the field of real estate and commodity tokenization, some pilot projects began to emerge. For example, the RealT project attempted to tokenize real estate in the United States, allowing global investors to obtain partial ownership and rental income of US real estate by purchasing tokens.
2019: TAC Alliance was established. The TAC Alliance was established to promote RWA standardization and cross-platform interoperability, and promote cooperation and development between different projects. In addition, platforms such as Securitize and OpenFinance were also launched during this period, focusing on providing enterprises with compliance solutions for tokenized assets.
Initial development stage (2020-2022)
2020: Multiple projects gained significant attention with the introduction of the RWACentrifuge project, which enables small and medium-sized enterprises to obtain financing on the blockchain by tokenizing real-world accounts receivable and invoices. In addition, well-known DeFi projects such as Aave and Compound have also begun to try to introduce RWA as collateral to expand the scope of their lending business.
2021: Maker DAO joins the RWA market Centrifuge introduces RWA as collateral into MakerDAO's lending platform, allowing users to obtain stablecoin DAI by holding RWA.
2022: Traditional funds deploy RWA. Large financial institutions such as JPMorgan Chase and Goldman Sachs begin RWA-related research and pilot projects to explore how to digitize traditional assets through blockchain; the RWA Alliance (Real World Asset Alliance) is established to promote the standardized development and global promotion of RWA.
Rapid expansion phase (2023-present)
2023: Government intervention in RWA legal construction. Large asset management companies such as BlackRock and Fidelity began to try to manage part of their asset portfolios through tokenization to improve liquidity and transparency; the U.S. Securities and Exchange Commission (SEC) and the European Securities Markets Authority (ESMA) also began to gradually intervene and try to formulate RWA-related regulatory frameworks.
2. RWA track direction
Given the diversity of traditional asset forms, the RWA track has also shined in different fields. From tangible assets such as real estate, commodities and precious metals, artworks and luxury goods, to intangible assets such as bonds and securities, intellectual property, carbon credits, insurance, non-performing assets, legal tender, etc., RWA (real world assets) has demonstrated its application potential in various fields.
Real estate industry
In traditional finance, real estate is usually regarded as a relatively stable asset in long-term investment. In a normal market environment, real estate has strong capital appreciation potential. However, the low liquidity and high leverage characteristics of real estate have raised the transaction threshold of real estate and increased the investment risk of individual investors in the real estate sector. In real estate-related RWA projects, the tokenization of real estate will greatly improve asset liquidity and reduce the risks borne by individuals.
Tangible: Focuses on the tokenization of physical assets (such as real estate and precious metals), making these traditionally difficult-to-trade assets liquid on the blockchain.
Landshare: Through tokenization, Landshare enables small investors to participate in the real estate market, especially through its blockchain-based real estate fund model.
PropChain: Provides a blockchain-based global real estate investment platform that enables investors to gain exposure to the global real estate market through tokens without actually purchasing the property.
RealT, RealtyX: Allow investors to own part of U.S. real estate and earn rental income by purchasing tokens.
Fiat to Stablecoin
In the field of stablecoins, there are USDT (Tether), FDUSD, USDC and USDE. These stablecoins provide a low-volatility asset in the crypto market by pegging the value of fiat currencies, and the most famous of them is USDT (Tether). Tether is the stablecoin with the largest market share, and its value is pegged to the US dollar at a ratio of 1:1. This means that the value of each USDT corresponds to one US dollar.
In the traditional financial market, fiat currency itself is a real-world asset (RWA), which maintains its value through reserves and regulatory mechanisms. When fiat currency enters the blockchain in the form of stablecoins, it is repackaged as a programmable digital asset that can directly participate in various operations in the decentralized finance (DeFi) ecosystem, such as lending, payments, cross-border transfers, etc. Tether directly links the value of USDT to real-world assets denominated in US dollars, which greatly improves the stability of USDT and provides a relatively safe and stable environment for the introduction and use of RWA.
USDT’s operating mechanism
Tether supports the value of USDT by holding a basket of reserve assets. These reserve assets include cash, cash equivalents, short-term Treasury bonds, commercial paper, secured loans, and a small amount of precious metals. When a user deposits fiat currency (such as US dollars) into a Tether account, Tether will issue an equivalent amount of USDT to the user, thereby achieving a 1:1 peg between USDT and the US dollar.
USDT’s Stability and Risks
Systemic risk: Since the value of USDT is directly linked to the US dollar, its users need to bear the systemic risks and market fluctuations associated with the US dollar. For example, if the US dollar depreciates significantly in the global market, the purchasing power of USDT will also decline.
Regulatory risk: If regulators question or take action on Tether’s operating model, it may affect the issuance and use of USDT.
Collateral risk: Although Tether claims that USDT is fully backed by reserve assets, there have been doubts about the transparency and adequacy of these reserve assets. If Tether fails to maintain sufficient reserves or the quality of reserve assets declines, it may cause the price of USDT to decouple, that is, USDT will no longer be able to maintain a 1:1 value to the US dollar.
Liquidity risk: Under extreme market conditions, Tether may face liquidity problems. If a large number of users request to redeem USDT back to US dollars at the same time, Tether may find it difficult to honor these requests in a short period of time, leading to market panic and price fluctuations.
The various difficulties and problems faced by Tether are not unique to the stablecoin market, but problems of the entire RWA market. The security of RWA is always closely related to the quality of its underlying assets, and is extremely susceptible to the laws and regulations of different countries and regions.
Lending Market
The combination of RWA and the credit loan market can bring more collateral options and higher loan amounts. In DeFi protocols such as Maker and AAVE, borrowers need to provide crypto assets that exceed the loan amount as collateral to ensure the safety of the loan. The intervention of RWA has included traditional assets such as real estate and accounts receivable into the category of collateral, expanding the scope of pledgeable assets, so that not only crypto assets, but even assets in the real economy can participate in this system. This move can bring more public funds for the development of small and micro enterprises, and provide more loan channels for large enterprises. At the same time, ordinary investors can also invest in enterprises and obtain future development benefits.
Bonds and Securities
In the traditional financial market, bonds and securities are the most widely used investment methods and often have a complete financial regulatory system. Therefore, in RWA projects related to bonds and securities, aligning with actual laws and regulations is the most important step.
Maple Finance: Provides a way for businesses and lenders to create and manage loan pools on-chain, making bond issuance and trading more efficient and transparent.
Securitize: Provides issuance, management and trading services for tokenized securities. The platform allows companies to issue bonds, stocks and other securities on the blockchain and provides a full set of compliance tools to ensure that these tokenized securities comply with the laws and regulatory requirements of various countries.
Ondo Finance: Products offered include tokenized short-term treasury bond funds that provide stable returns, further blurring the line between DeFi and traditional finance.
3. RWA Market Size
RWA has experienced a major explosion since May 2023. As of the time of writing, according to defillama, the RWA-related TVL is still as high as US$6.3 billion, a year-on-year increase of 6,000%.
According to data from the official website of RWA.xyz, there are 62,487 RWA-related asset holders, 99 asset issuers, and the total value of stablecoins is US$169 billion.
Binance and many other well-known Web3 companies are also very optimistic about the future market value of RWA, and even estimate that its total market value could reach 16 trillion US dollars in 2030.
As an emerging track, RWA is changing the DeFi market with unprecedented strength, and its huge potential is worthy of investors' expectations. However, the development of the RWA project is highly related to reality, and different laws and regulations in various countries and regions can easily become a constraint on its development.
4. RWA Ecosystem Development
With the entry of traditional capital such as Goldman Sachs and SoftBank and well-known Web3 companies such as Binance and OKX, strong projects in the RWA track have gradually emerged; new and old projects such as Centrifuge, Maple Finance, Ondo Finance, MakerDAO, etc. have begun to show their edge in this blue ocean and have become the veritable leaders in RWA in terms of technology and ecological layout.
Centrifuge: A protocol for putting real-world assets on the blockchain
concept
Centrifuge is an on-chain platform for tokenizing real-world assets. It provides decentralized asset financing protocols and combines well-known DeFi lending protocols in the crypto market such as MakerDAO and Aave with borrowers (generally start-ups) with collateral in the real world to complete the circulation between DeFi assets and real assets.
Financing Development
Centrifuge has been highly sought after by capital since its inception. It has received a total of US$30.8 million in funding support in five rounds of financing from 2018 to 2024. Well-known VCs including ParaFi Capital and IOSG Ventures have all supported it. The performance of the Centrifuge project itself is also very impressive. Currently, 1,514 assets have been tokenized, with total financing assets reaching US$636M, a year-on-year TVL increase of 23%.
Technical Architecture
The core architecture of Centrifuge consists of Centrifuge Chain, Tinlake, on-chain net asset value (NAV) calculation, and hierarchical investment structure. Centrifuge Chain is an independent blockchain built on Substrate (part of the Polkadot parallel chain), which is dedicated to managing the tokenization and privacy protection of assets; Tinlake is a decentralized asset financing protocol that allows issuers to generate NFTs from assets and use these NFTs as collateral to obtain liquidity.
In a complete lending operation process, real-world assets are tokenized into NFTs through the Tinlake protocol, these NFTs are used as collateral, issuers obtain liquidity from the pool, and investors provide funds to the fund pool. At the same time, through the on-chain NAV calculation model, investors and issuers can transparently see the pricing and status of assets. The tiered investment structure allows three different lending tiers: secondary part (high risk and high return), intermediate part, and senior part (low risk and low return).
Development issues
Although the Centrifuge project ranks first in RootData's RWA project attention, core data such as TVL has been declining due to the impact of the 2022 bear market and the failure of project expectations in 2024, and is currently only US$497,944.
ONDO Finance: The leader in U.S. debt tokenization
concept
Unlike Centrifuge, which is committed to building a circulation platform for DeFi funds and real assets, Ondo Finance is a decentralized institutional-grade financial protocol (Institutional-Grade Finance) that aims to provide institutional-grade financial products and services and create an open, permissionless, decentralized investment bank. At present, Ondo Finance focuses on creating stable asset options other than stablecoins, introducing risk-free or low-risk, stable value-added and scalable fund products (such as US Treasury bonds, money market funds, etc.) into the blockchain, allowing holders to enjoy the benefits of most underlying assets while having relatively stable assets.
Financing Development
ONDO Finance has completed three rounds of financing in history, with a total of 34 million US dollars in financing. Investors include PanteraCapital, CoinbaseVentures, TigerGlobal, Wintermute and other well-known institutions. In addition, ONDO Finance has as many as 82 partners in the four areas of chain support, asset custody, liquidity support and service facilities.
ONDO Finance's market performance is also good. The current price of the project token ONDO is US$0.6979, which is up 2448%, 1270% and 784% respectively compared with the A round financing price of US$0.0285, ICO financing of US$0.055 and opening price of US$0.089, demonstrating the market's fanatical pursuit of the project.
In terms of key data such as TVL, ONDO Finance has experienced significant growth since April this year and is currently as high as US$538.97m, ranking third in the RWA track.
Product Architecture
ONDO Finance's current main targets are USDY and OUSG.
USDY (Dollar Yield Token) is a new financial instrument issued by Ondo USDY LLC that combines the availability of stablecoins with the yield benefits of U.S. Treasuries. Unlike many other blockchain yield instruments, USDY is structured to comply with U.S. laws and regulations and is backed by short-term U.S. Treasuries and bank demand deposits.
USDY includes two types: USDY (accumulation type) and rUSDY (rebase type). The token price of USDY (accumulation type) will increase with the income of the underlying assets, which is suitable for long-term holders and cash management needs; rUSDY (rebase type) maintains a token price of US$1.00, and the income is realized by increasing the number of tokens, which is suitable as a settlement or exchange tool.
OUSG (Ondo Short-Term US Government Bonds) is an investment instrument issued by Ondo Finance that provides liquidity exposure through tokenization, aiming to provide investors with ultra-low risk and highly liquid investment opportunities. OUSG tokens are pegged to US short-term treasury bonds, and holders can obtain liquidity benefits through instant minting and redemption.
Tokenized structure: OUSG underlying assets are mainly deposited in BlackRock USD Institutional Digital Liquidity Fund (BUIDL), and the rest are deposited in BlackRock's Federal Fund (TFDXX), bank deposits and USDC to ensure liquidity. Through blockchain technology, OUSG shares have been tokenized and can be transferred and traded 24/7
Minting and redemption mechanism: Investors can obtain OUSG tokens immediately through USDC, or redeem OUSG tokens for USDC.
Token Version: Similar to USDY, OUSG is also divided into OUSG (accumulation type) and rOUSG (rebased type).
Both OUSG and USDY require user KYC support, so Ondo cooperates with the back-end DeFi protocol Flux Finance to provide stablecoin mortgage lending services for tokens such as OUSG that require licensed investment, so as to achieve permissionless participation in the back-end of the protocol.
BlackRock BUIDL: Ethereum’s First Tokenized Fund
concept
BlackRock BUIDL is an ETF (Exchange Traded Fund) jointly launched by BlackRock, a world-renowned asset management company, and Securitize. Its full name is "iShares U.S. Infrastructure ETF" and its ticker is BUIDL. BUIDL is similar to USDY and is essentially a security. When a user invests $100 in BUIDL, he or she will receive a token with a stable value of $1. At the same time, he or she can enjoy the financial benefits of the $100.
Regulatory Compliance
Unlike many RWA track projects, BUIDL is more complete in terms of compliance. The BUIDL fund is operated by a special purpose vehicle (SPV) established by BlackRock in the British Virgin Islands (BVI), and the SPV is an independent legal entity used to isolate the assets and liabilities of the fund. At the same time, the BUIDL fund has applied for Reg D exemption in accordance with US securities laws and is only open to qualified investors.
Underlying assets
BlackRock Financial is responsible for the fund's asset management. The fund invests in cash equivalents such as short-term U.S. Treasury bills and overnight repurchase agreements to ensure that each BUIDL token maintains a stable value of $1. Securitize LLC is responsible for the tokenization process of the BUIDL fund, including converting the fund's shares into on-chain tokens. On-chain income is automatically generated by smart contracts.
Market response
Backed by BlackRock's own strength and reputation, the BUIDL fund has performed very well in terms of market recognition, TVL and other data. Its TVL has stabilized at USD 502.41 million, and it ranks 4th in the RWA TVL Ranking.
In terms of technical architecture, BUIDL is not as innovative as other projects, but BlackRock's long-standing reputation in the crypto market is enough to allow the project to occupy a place in the RWA track.
In the RWA ecosystem, in addition to Centrifuge, which integrates traditional lending and DeFi, ONDO Finance and BlackRock BUIDL, which integrate securities and DeFi, there have also been breakthroughs in the integration of real estate and DeFi. For example, Propbase directly tokenizes real estate assets for circulation, and PARCL allows the use of mutual tokens to invest in communities or locations.
5. Conclusion
RWA is essentially a real-world asset. The fundamental purpose of the entire track is to achieve interoperability between real assets and on-chain assets, allowing more real funds to flow into the blockchain while gradually blurring the boundaries between DeFi and traditional finance.
RWA's main track includes both tangible assets and intangible assets. Currently, it focuses on three major areas: securities, real estate, credit lending, and stablecoins.
Compared with other tracks, the RWA track is subject to stricter supervision and has more stringent compliance requirements, which also gives some well-known companies greater advantages.
Although the RWA track has a strong narrative and prospects, due to the uncertainty of its compliance, it is still necessary to remain cautious when investing in related projects and be prepared for possible risks at any time.
