RWA Narrative Analysis What are the noteworthy projects to pay attention to

Author: AYLO FLOW
Translation: Deep Tide TechFlow
We are currently in a crucial moment in the history of cryptocurrency.
In recent weeks, we have witnessed a complete 180-degree shift in the United States’ attitude towards cryptocurrency. Surprisingly, all eight Ethereum ETFs have received approval from the SEC. Additionally, the US House of Representatives not only passed the cryptocurrency FIT 21 bill but also approved legislation to prevent the creation of central bank digital currencies. However, the most noteworthy development is seeing cryptocurrency become a significant topic in the upcoming US presidential elections.
Therefore, for large financial institutions, the message is clear: cryptocurrency is here to stay, and it is crucial to familiarize yourself with it and explore its various use cases to avoid being left behind.
From this perspective, it seems obvious that tokenizing real-world assets has enormous growth potential.
But what exactly is this trend, why is it causing such a buzz, and how can it be maximized? These are the topics we will explore in this article.
Examples of Tokenization of Real-World Assets
If software is eating the world, then tokenizing real-world assets is devouring the capital markets.
In recent years, the field of Real-World Assets (RWA) has emerged as one of the most promising use cases for blockchain technology by bringing real-world assets onto the blockchain. The case for RWA is simple: bridging the stability and value propositions of real-world assets with the innovative features and potential efficiency of blockchain technology and decentralized finance (DeFi).
In fact, many consider this field as the new hotspot in the financial industry. Recently, we have even seen major names in finance such as BlackRock and Franklin Templeton show strong interest in this field and launch their tokenized funds.
In theory, any easily tradable real-world asset can be tokenized and put on the blockchain. This includes tangible and intangible assets, as well as fungible or non-fungible assets. Below is a non-exhaustive list of some of these assets.
Why Tokenization is Important?
Without clear advantages to bringing assets onto the blockchain, RWA would not receive such significant attention. The table below explains the key advantages of tokenization.
The core theory of DeFi is that blockchain can create a better standard for seamless exchange of different assets. In this sense, RWA is just about realizing the value proposition of DeFi and extending it to every tradable asset to build the next-generation market – a more transparent, secure, fair, and open market.
Understanding the Trends of RWA
We are entering the era of tokenization of markets. Gradually, all assets will be tokenized, challenging the status quo of global capital markets for the past 30 years. Especially considering that the trends of RWA are at the intersection of two trends shaping the world today: financialization and digitization.
Financialization: Today, finance has no boundaries, the economy is becoming increasingly borderless, and individuals are transferring ownership of assets globally. Everything has a market, everything has a price, everything is tradable. Therefore, establishing more efficient, transparent, fair, and open market mechanisms becomes increasingly meaningful.
Digitization: The world is becoming more and more digital. We have connected phones, watches, and soon connected brains. In this sense, it seems logical for asset ownership proof to migrate to blockchain networks.
In this sense, RWA is fully capable of capturing these two trends.
Key Challenges
Undoubtedly, bringing real-world assets onto the blockchain offers very interesting characteristics. But it also brings many challenges. The main challenges revolve around:
Regulation: Currently, there is no clear answer to where to establish a market for tokenized assets without encountering complex regulatory environments. However, as people’s understanding of cryptocurrency continues to evolve, this situation may change.
Liquidity: Providing appropriate market structures for real-world assets to achieve liquidity and market-making may be a challenge, especially for highly illiquid markets that trade 24/7.
Education: It will take a long time for everyone to understand the true value proposition of bringing real-world assets onto the blockchain, as blockchain technology and its trade-offs may be difficult to understand in the early stages.
Development of RWA
Stablecoins Pegged to the Dollar
Stablecoins pegged to fiat currencies are the first killer use case for tokenizing real-world assets. This market has grown significantly in recent years. Today, the total market value of the two largest fiat-backed stablecoins (Circle’s USDC and Tether’s USDT) exceeds $130 billion, compared to around $50 billion at the beginning of 2020.
Commodity-Backed Tokens
Tokenizing precious metals has also become another popular application of RWA. Some examples include Tether Gold (XAUT) or PAX Gold (PAXG), which are tokens backed by physical gold. While this is a relatively new market, it is growing rapidly, with the total market value of XAUT and PAXG at around $8.4 billion.
Tokenized Government Bonds
The latest major trend in RWA is the tokenization of US government bonds. According to data from 21co, we have noticed rapid growth in the market value of this sector, exceeding $13 billion. But more interestingly, traditional financial institutions are entering this market. For example, the BENJI token represented by Franklin Templeton has accumulated deposits of around $3.7 billion, while BlackRock’s BUIDL token has attracted over $3.8 billion in deposits.
The Beginning of the Next Chapter
This trend of tokenization is just beginning and is expected to continue growing rapidly. According to forecasts by the Boston Consulting Group, by 2030, the tokenization market for global financial assets is estimated to reach $160 trillion, potentially becoming the bridge we have been waiting for to connect traditional finance and DeFi, building the next-generation market.
Looking ahead, we can envision a future where not only purely financial assets but almost all easily monetizable assets, from luxury watches to art to real estate, will be tokenized on the blockchain. This is the future of finance.
Seizing the Opportunity
After reading all of this, I believe you are now asking yourself, “Alright, I understand, but how can my investment portfolio leverage this new trend?” Don’t worry, I have prepared a list of RWA observations (+ a BONUS) for you.
But before delving deeper, a reminder. Currently, the cryptocurrency market is characterized by significant speculation, so caution is essential. Therefore, the following content is not a prediction, just some thoughts. And as data availability increases and time passes, ideas may undergo significant changes.
This is not an exhaustive list, just some projects I have researched in-depth that I believe are worth paying attention to. There are many other projects in this category that I have undoubtedly overlooked.
RWA Projects
Are you ready? Now let’s explore some projects you may want to add to your watchlist:
Chainlink ($LINK)
In short: Chainlink recently updated their description of their network as a “universal platform shaping the future global markets on-chain.” By bridging real-world data and blockchain, Chainlink is key to enabling the tokenization of real-world assets.
The tweet I wrote about this is still very relevant today. Chainlink is actively partnering with Swift, The DTCC, and some of the world’s largest banks. These are not hype partnerships. Real pilots and case studies have been conducted to prove the technology’s feasibility, and full settlement of RWAs on-chain is only a matter of time.
Looking ahead, I am very bullish on Chainlink.
Ondo Finance ($ONDO)
In short: Ondo is building the next-generation financial infrastructure to enhance market efficiency, transparency, and accessibility. It allows retail and accredited investors to access the bond market on-chain through products like USDY (tokenized notes backed by US government debt) and OUSG (short-term US government debt).
Regarding ONDO, here are a few key points to note:
ONDO is one of the best performing new tokens in 2024. I find this project very interesting and it has gained a lot of momentum recently. However, it may be a bit overhyped and overvalued right now. Nevertheless, it is definitely worth adding to your RWA watchlist.
Pendle Finance ($PENDLE)
In short: Pendle is a decentralized finance protocol that allows users to tokenize and sell future yields. It is an innovative tokenization model solution that provides users with flexible and dynamic yield management options.
This is also a good protocol for earning rewards.
TrueFi ($TRU)
In short: TrueFi is a modular on-chain credit infrastructure that connects lenders, borrowers, and portfolio managers through smart contracts governed by $TRU.
Mantra Network ($OM)
In short: Mantra is a security-first, first-tier blockchain for RWA designed to comply with real-world regulatory requirements.
Learn more about this project through this tweet:
Polymesh Network ($POLYX)
In short: Similar to Mantra, Polymesh is an institution-grade permissioned blockchain built specifically for regulated assets.
If you want to learn more about why this project is important, check out this tweet:
Centrifuge ($CFG)
In short: Centrifuge provides infrastructure and an ecosystem to tokenize, manage, and invest in a complete, diversified portfolio of real-world assets. The asset pool is fully collateralized, investors have legal recourse, the protocol has no restrictions on asset categories, and the asset pool includes structured credit, real estate, US government debt, carbon credits, consumer finance, etc.
Dusk Network ($DUSK)
In short: Dusk is a permissionless, ZK-friendly first-tier blockchain protocol focused on tokenizing real-world assets.
Learn more about Dusk here:
Clearpool ($CPOOL)
In short: Clearpool is a decentralized financial ecosystem dedicated to creating the first permissionless institutional liquidity market.
Polytrade ($TRADE)
In short: This is a marketplace for real-world assets. It brings together tokenized treasury bills, credit, stocks, real estate, commodities, as well as collectibles, art, intellectual property, creator royalties, luxury goods, etc., from all chains onto one platform.
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