What is RWA? What are the currencies worthy of attention in the RWA track? Introduction to RWA tokenization

Table of Contents
What are Real World Assets (RWA)?
What is RWA tokenization?
Major Use Cases for RWA Tokenization

1. Real Estate Tokenization
2. Digital ADR
3. Tokenized Stocks
4. Digital Bonds
5. Tokenized Debt
   RWA Tokenization in DeFi
6. Lending
7. Trading & Investment
8. Staking and Mining
   What are the currencies worth paying attention to in the RWA track?
9. RSR (ReserveRights)
10. OM (MANTRA)
11. POLYX (Polymesh)
12. ONDO (OndoFinance)
13. MPL (MapleFinance)
    What are the benefits of tokenized RWA?
    RWA Tokenization Risks
    RWA Future Outlook
    Summary
    RWA is the abbreviation of Real World Asset, which is called real world assets in Chinese. It covers a wide range of tangible and intangible assets, from physical property and infrastructure to intellectual property rights and financial contracts. . RWA tokenization refers to the conversion of rights to a portion of these real-world assets into digital tokens on the blockchain.

In March 2024, BlackRock, the world's largest asset management company, announced the launch of BUIDL, the first tokenized fund issued on the Ethereum blockchain, causing the RWA track to become popular again. BlackRock’s actions are indicative of a broader trend that could fundamentally redefine investment strategies: the rise of tokenization of real-world assets (RWA).

So, what exactly is RWA? What currencies are worthy of attention on the RWA track? What is the significance of RWA tokenization, why are they important in DeFi, and what is its future prospects? In this article, we will analyze and introduce it in detail.

What is Real World Asset RWA? Real World Assets (RWA) cover a wide range of tangible and intangible assets, including financial assets (such as stocks, bonds and equities), real estate, art, commodities and intellectual property. Real-world assets make up a large portion of global financial value, as evidenced by the global real estate market valuation of US$326.5 trillion in 2020, plus the market value of gold and other assets as high as US$12.39 trillion. Despite the importance of these assets in traditional finance, their utilization remains largely underexplored in the decentralized finance (DeFi) space. The potential to bring real-world assets into the DeFi space has sparked discussions about expanding its scope. Through this integration, DeFi participants will have access to more liquidity as well as new asset classes to earn returns on their investments. Notably, incorporating real-world assets into investment strategies may mitigate the impact of cryptocurrencies’ inherent volatility, providing a more stable and secure investment path. Data from DefiLlama paints a progressive trajectory, showing total value locked (TVL) exceeding $6 billion as of close on October 26, 2023, signaling the rise of tokenization of real-world assets (RWA) in the cryptocurrency space. So, understanding what real world assets are and as DeFi reaches its potential, next, we will understand what is RWA tokenization? What is RWA tokenization? The tokenization of real world assets (RWA) is called the "next generation market" and it is one of the largest market opportunities in the blockchain industry. In theory, anything of value can be tokenized and brought on-chain. RWA tokenization refers to the conversion of rights in various assets, from bonds and equity to real estate and cultural assets, into blockchain-based digital tokens. This tokenization marks a major shift in how these assets are accessed, exchanged and managed, unlocking a platform for blockchain-driven financial services as well as a variety of non-financial use cases based on cryptography and decentralized consensus. Series of new opportunities. By some estimates, the tokenization of real-world assets is expected to be a $16 trillion industry by 2030 (approximately 10% of global GDP). It has the potential to change the way assets are held, traded and issued, with broad implications for companies, markets and investors. Overall, RWA tokenization makes the financial and investment fields more inclusive and convenient, thereby transforming and democratizing the financial and investment fields. The technology also increases the liquidity of previously illiquid assets and changes how they are accessed, traded, transferred and managed. Key Use Cases for RWA Tokenization Tokenization of real-world assets has become increasingly popular among investors in recent months as it allows them to access markets that were previously difficult or impossible to access. Next, we will present several major use cases of current RWA tokenization: 1. Real estate tokenization Real estate tokenization is a key focus area, involving various strategies, including: Partial tokenization of residential areas: involving real estate Divided into tranches and sold to developers, institutions and real estate investors. Legal tokenization of commercial property: Includes tokenization of commercial property within the legal framework. Trophy Tokenization: Refers to the tokenization of real estate assets within iconic and lucrative buildings in prime locations. 2. Digital ADR Digital American Depository Receipts (ADRs) represent the ownership of foreign company stocks and are traded through blockchain technology, simplifying the trading process of foreign stocks. This innovation significantly reduces associated costs and time while providing investors with greater transparency, security and 24/7 accessibility. 3. Tokenized shares Tokenized shares represent ownership in a public or private company, including profit-sharing rights and voting rights. Despite being digital assets, they can be traded seamlessly 24/7 on digital asset exchanges without the need for a traditional stockbroker. 4. Digital Bonds Digital bonds are similar to traditional bonds and involve providing a loan to the issuer and paying interest over time. With blockchain technology, digital bonds can be traded efficiently and quickly, with many offering additional features such as automated coupons and smart contracts. 5. Tokenized Debt Tokenized debt is a digital representation of a loan issued to the issuer, with scheduled repayments and interest. Tokenized debt transactions are conducted on a blockchain platform, allowing greater transparency and efficiency than traditional bond transactions. RWA Tokenization in DeFi RWA tokenization in DeFi promotes innovative ways for individuals to utilize their physical assets, promoting community participation, personalization and even gamification. Depending on the nature of the asset and the platform used, the RWA concept in DeFi can be utilized through various strategic methods to generate income: 1. Lending RWA acts as a viable collateral or debt instrument on the lending platform, allowing users to Lending and borrowing activities using cryptocurrencies or fiat currencies with variable or fixed interest rates. Participants can borrow stablecoins using tokenized real estate or gold as collateral, or lend stablecoins to borrowers backed by tokenized loans secured by assets such as businesses or cars. 2. Trading and Investing RWA tokens facilitate seamless trading and investing activities on the trading platform, enabling users to buy or sell cryptocurrencies or fiat currencies at prevailing market rates. Participants can invest in tokenized stocks or bonds through a decentralized exchange (DEX), or choose to invest in tokenized funds or indices that perform consistently with various RWAs.3. Staking and Mining Through the staking or mining mechanism on the reward platform, RWA is able to earn additional tokens or fees by locking assets within a predetermined period or providing liquidity to the capital pool. Next, let’s now take a look at some DeFi projects that are already working on RWA tokenization. What currencies are worthy of attention on the RWA track? Several prominent DeFi platforms have emerged, promoting the tokenization and utilization of real-world assets (RWA) in the decentralized finance space. Here are five projects worthy of attention on the RWA track. 1.RSR (ReserveRights) ReserveRights is a blockchain-based stablecoin currency system designed to protect the assets of high-inflation countries and provide a more efficient way to conduct global transactions. ReserveRights uses a dual-token architecture, which includes a stablecoin called Reserve (RSV), backed by a portfolio of multiple assets managed through smart contracts. RSV is pegged to the U.S. dollar at a ratio of 1:1, that is, 1 RSV = 1 U.S. dollar. RSV aims to provide developing countries with a reliable, robust ecosystem and help reduce the cost of remittances. The other token is ReserveRights (RSR), which is the utility token of the protocol. Through an opportunistic arbitrage system, it serves to maintain RSV at a target price of $1. RSR tokens will change, and the main purpose is to maintain the stability of RSV, which is different from RSV. RSR can also be used to vote on governance proposals, giving holders the right to decide the future development direction of the ReserveRights ecosystem. In the later stages of the plan, ReserveRights intends to support the Reserve stablecoin with a more diversified asset portfolio and gradually remove the peg to the U.S. dollar, replacing it with an alternative RSR asset that uses RSV tokens to reflect partial ownership of the collateral pool. . 2.OM (MANTRA) MANTRA is a security-first RWA layer 1 blockchain capable of adhering to and enforcing real-world regulatory requirements. The vision for the project is to create a forward-looking protocol that engages a wider range of users in the future of cryptocurrency and blockchain technology through its regulatory-friendly design. OM is the native cryptocurrency of MantraOMniverse and has two main uses. Users can stake it to participate in various DeFi activities on the Mantra platform, such as lending and earning rewards. In addition, OM token holders have voting rights on proposals affecting the future development of Mantra. 3. POLYX (Polymesh) Polymesh is the first permissioned public layer 1 blockchain built specifically for regulated assets such as security tokens and real-world asset markets. This project aims to solve various problems faced in the field of securities and security tokens. By solving governance, identity, compliance, security and payments challenges, Polymesh simplifies outdated processes and opens the door to new financial instruments. On Polymesh, any user can freely access and view network activities. However, users participating in Polymesh must complete an identity verification process. This verification process applies to all participants on the chain, from issuers and investors to stakers and node operators. POLYX is a cryptocurrency using Polymesh and can be considered the fuel of Polymesh. As the RWA theme attracted attention, the price of POLYX currency rose sharply and became the RWA currency with the largest increase this month. 4.ONDO (OndoFinance) OndoFinance is a decentralized finance (DeFi) platform focused on organizing real-world assets (RWA). It tokenizes real-world assets such as U.S. Treasury bonds, bonds, and stocks on the blockchain, allowing Investors around the world invest indirectly in these financial products through blockchain infrastructure. In other words, Ondo leverages the power of blockchain technology to establish an investment infrastructure system that is transparent, efficient, and available to institutional clients. It lowers the threshold for ordinary investors to enter financial products. Ondo is a leader in the RWA space, and its team claims to have nearly 40% of the global market share of tokenized securities. Currently, the project has successfully raised a total of US$46 million through multiple rounds of financing. 5.MPL (MapleFinance) MapleFinance provides a powerful platform for cryptocurrency and RWA loan pools. By allowing crypto funds, market makers, and fintech companies to tap into lending pools, Maple tokenizes RWA as collateral for borrowing stablecoins. Each loan pool is overseen by a designated pool representative who is responsible for loan underwriting, servicing and monitoring. The governance and reward mechanisms within Maple are facilitated by its native token MPL. What are the benefits of tokenizing RWA? Now that we know this much, let’s summarize the potential benefits of using blockchain technology to tokenize real-world assets (RWA). Tokenized RWAs have fractional ownership of their assets, which can increase liquidity by enabling smaller investors to purchase and trade shares of assets that may have previously been inaccessible or too large to invest in. Tokenized assets can be traded on global markets 24/7, providing greater accessibility and democratized investment opportunities. Transactions are recorded on a decentralized ledger, making them secure, transparent and auditable. This increases trust and confidence in the asset and reduces the likelihood of fraudulent activity. Tokenization allows for the fragmentation of an asset, meaning it can be divided into smaller parts that can be independently owned and traded. This may provide greater flexibility in the ownership and management of assets and facilitate the creation of new investment products. Investors can diversify their portfolios and gain exposure to a wider range of asset classes by tokenizing traditional financial instruments.Tokenized assets are also easier to trade on cryptocurrency exchanges than non-tokenized assets, making them an attractive option for traders looking for greater liquidity. Therefore, the potential benefits of RWA tokenization make it an exciting development in the financial world, with many institutional players jumping on board. Tokenization is revolutionizing the financial world, bridging the gap between traditional and cryptocurrency markets. By representing real-world assets on the blockchain, tokenization makes it possible to trade these assets more easily on cryptocurrency exchanges and unlocks a range of possibilities for investors. From portfolio diversification and increased liquidity to lower transaction costs and faster settlement times, tokenized assets are transforming global financial markets. Risks of tokenizing RWA Finally, it is important to know that there are also some risks with tokenized RWA, mainly in terms of custody of physical assets (which must be done reliably) and connections to the outside world. In addition, smart contracts also have flaws and loopholes. Finally, it is not enough to simply issue an asset, there must also be good market liquidity or demand for it to thrive. RWA Future Outlook Traditional financial firms are excited about the idea of ​​tokenizing the assets they already trade, such as gold, stocks and commodities. Investment fund giant Franklin Templeton launched the Franklin OnChain U.S. Government Currency Fund on Stellar in 2021, expanding to Polygon in 2023. The fund is the first registered mutual fund in the United States to use a public blockchain to process transactions and record equity stakes. In addition, BlackRock, the world's largest asset management company, announced the launch of BUIDL, the first tokenized fund issued on the Ethereum blockchain, in March 2024, once again drawing attention to RWA. Bank of America calls RWA tokenization “a key driver of digital asset adoption.” According to their report, the tokenized gold market has attracted over $1 billion in investments. Demand for tokenized U.S. Treasuries is also growing, with the total market capitalization of tokenized money market funds approaching $500 million, according to data compiled by CoinDesk. Currently, the future of tokenization is bright, with global business consulting firm Boston Consulting Group predicting that the market for tokenized assets could surge to $16 trillion by 2030. Summary RWA tokenization is a transformative technology driving innovation in the investment and financial sectors. It revolutionizes the way we buy, own and trade assets. RWA tokenization is currently booming as a way to democratize the once exclusive investment universe, increase asset liquidity, and diversify markets. Although the technology is still emerging and there are unique challenges that need to be overcome, tokenization has the potential to revolutionize asset ownership. Therefore, investors and market participants need to adapt to circumstances and keep a close eye on the latest trends in the industry.

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