According to Dune Analytics, RWA has emerged as the sole crypto narrative, excluding meme coins, to experience growth over the past three months. This performance is particularly noteworthy given the broader market’s stagnation. The buzz around RWA has been building since June of last year, and it was ignited further by BlackRock’s launch of the BUIDL on-chain fund.

While many have recognized this opportunity, few have successfully capitalized on it. Numerous teams have pivoted to RWA in the past six months, but only a handful have shown significant results. To succeed in this competitive landscape, identifying the right opportunities is crucial. One project that has caught our attention is Jiritsu.

The Fragmented Liquidity Problem in RWA

The primary advantage of tokenizing real-world assets is the ability to facilitate faster and more efficient trading and settlement. However, the technical implementation of this concept presents numerous challenges, one of the most significant being fragmented liquidity.

The decentralized nature of the market exacerbates the complexity of on-chain trading for RWAs. A Digital Asset Research report from last July highlighted that over 60% of current RWA institutions trade on their own tokenized asset markets. This means that once an asset is tokenized, it is often confined to a small, captive audience.

According to The Block, total funding for RWA projects has rebounded to $300 million this year. This resurgence has attracted many new entrants, leading to a proliferation of RWA projects. However, most funded projects are focused on narrow verticals such as natural resources, specific commodities, and art. Real estate RWA projects are particularly prominent in this trend.

To what extent can these verticals be subdivided? For example, platforms like Balcony and Mnzl offer tokenization processes for regional real estate resources. The on-chain assets and the users trading through on-chain tools are often local institutions or government departments, forming what can be seen as a semi-closed asset market.

The vertical and regional focus of RWA projects is understandable, given that many real-world assets are highly localized and often require specialized handling. However, due to varying regulations in different regions, each RWA project has to build its on-chain processes and trading platforms from scratch. This, combined with diverse choices in underlying blockchains and smart contract development tools, poses significant challenges for interoperability between different RWAs.

Many entrepreneurs have noticed this liquidity fragmentation. Consequently, platforms like Midas and Plume, which aggregate RWA assets or act as RWA launch platforms, have emerged. Yet, they face a dilemma: to establish a unified market, there must be some compatibility in token and contract standards, which hinders the large-scale, multi-type aggregation of RWA assets. Conversely, if they first aggregate different RWA protocols, they are limited to the role of a “launch platform” due to differences in the technical stacks of these protocols. While they bring some liquidity to small projects, the tokenized assets still face market fragmentation.

Even the tokenized US Treasury market, which has the best liquidity, faces this issue. Although the push from institutions like BlackRock and Franklin Templeton has solved the single-category scaling problem, you’ll still find that to offer more choices to future potential investors and partner projects, these assets are dispersed across different blockchains such as Ethereum, Stellar, and Avalanche.

This fragmentation issue creates a narrative window for cross-chain interoperability protocols that have long focused on RWAs, such as Axelar. Last year, Axelar partnered with Centrifuge and Ondo to launch Centrifuge Everywhere and Ondo Bridge, optimizing protocols and improving interoperability and liquidity for tokenized RWA products. In the current market environment, where fragmentation is evident, cross-chain interoperability may be a viable solution.

Jiritsu ZK-MPC: Trustless, Automated Off-Chain Asset Verification

It’s clear that the bottleneck for scaling RWA lies in the lack of automated processes or technologies like AMM in the DeFi sector. For RWA products, tokenization is often just the beginning. Ensuring continuous asset updates and transparency after the product is on-chain is crucial for efficiency and cost-effectiveness, typically involving the following aspects:

1. Financial Reporting: Asset managers need to regularly publish financial and performance reports of the assets. For example, real estate managers need to provide details on rent payments, arrears, and vacancies to give investors a clear understanding of the property’s cash flow dynamics.

2. Debt Management: For products like RWA credits, regular updates on loan collateral, repayments, interest rate adjustments, and refinancing activities are essential to inform investors about the product’s health, maintaining their trust.

3. Ownership Changes: Announcements are also needed if the underlying asset or the legal entity owning the asset undergoes any fundamental ownership changes.

4. Market Regulation: When the regulatory environment of the underlying asset’s market changes, managers must report and make necessary adjustments to ensure compliance.

Besides these, there are other intricate details such as asset insurance and risk management strategies, asset valuation and inspection, and the issuing legal entity. From tokenization to information updates and maintenance, managing a real-world asset requires significant effort and attention throughout its investment lifecycle. In the current “infrastructure redundancy” market environment, getting assets on-chain is no longer the hardest part of RWA development; continuous off-chain verification and legal regulation slow down the growth in asset categories and scale, diminishing the value of on-chain assets. This discussion unfolds on the premise that centralized off-chain audits are not considered risky.

The scale and growth rate of RWA assets depend entirely on the strength of off-chain issuers and management institutions. This is precisely why US Treasury RWA products quickly grew after BlackRock entered the space. In contrast, other assets like real estate and commodities struggle to achieve scale effects due to a lack of process automation. Nevertheless, the value erosion of on-chain assets also represents a significant business opportunity. Currently, this potential revenue flows mainly into the hands of asset issuers and managers like Securitize.

Is it possible to build an automated “asset oracle” system in the RWA field, similar to what ChainLink does for DeFi? We’ve found some answers in the Jiritsu project.

Jiritsu is an Avalanche subnet specifically designed for off-chain asset verification, aiming to automate and trustlessly register and verify off-chain assets. This enhances the economic efficiency and transparency of RWA tokenization while reducing on-chain wear and costs. By integrating ZK proofs and MPC multi-party computation, Jiritsu can ensure secure and private automated verification of asset details, embedding regulatory compliance and asset integrity into tokenized products. Interestingly, “Jiritsu” comes from the Japanese word “じりつ,” meaning independence. In the RWA field, which heavily relies on centralized labor for key aspects, this is precisely what is needed to enhance the crypto-native attributes and achieve scale effects.

The Jiritsu ZK-MPC oracle aggregates data from multiple sources and verifies related computations, employing multi-functional data retrieval mechanisms to enhance the integration depth of different asset types. The oracle includes both “Push” and “Pull” mechanisms. The former allows data providers (e.g., asset managers) to send information directly to the oracle, while the latter enables the oracle to fetch data via API directly from integrated information providers’ systems, such as supply chain software and banking information.

In terms of consensus mechanisms, Jiritsu introduces the Proof of Workflow (PoWF) concept. Nodes in the network run an operating system driven by a computation engine and workflow manager, utilizing generated ZK proofs to ensure verifiable computation and smart contract execution consensus mechanisms, directly integrating the consensus mechanism into its MPC framework. Unlike existing oracles like ChainLink or Pyth, Jiritsu does not require cross-chain bridges for information transmission when aggregating data and adds analysis and verification functions to the simple data feedback.

When users or asset managers register assets they wish to tokenize and their detailed information on Jiritsu, the ZK-MPC verifiers will analyze this information and confirm the asset’s value and compliance status. The analysis process involves two types of verifiers: one for reviewing business policies and regulatory compliance, and another for handling financial data, performing spot price retrieval and market valuation tasks. After the information is analyzed and verified, the ZK-MPC will generate a ZK proof and store it on-chain. Users can then claim these proofs and embed them into their smart contracts, completing the entire asset tokenization process.

Jiritsu officially illustrated the full process using Paxos’s tokenized gold product, PAXG:

First, Paxos buys gold through a reliable exchange and deposits it with a custodian. Jiritsu users can then use the Jiritsu dApp on supported public chains to create verifiers on the ZK-MPC nodes of the Jiritsu network. After the ZK-MPC nodes retrieve information about Paxos’s gold custody, the verifiers generate the relevant ZK proofs.

During the verification process, ZK-MPC nodes are responsible for off-chain verification computations, and the generated ZK proofs have different levels of access and confidentiality permissions. For example, auditors can have full access to all information, while asset managers can only see information relevant to their role. This verification process can update information at preset times or on demand, far more efficiently and reliably than Paxos’s current method of manually verifying inventory quarterly.

After uploading the ZK proof to the Jiritsu network, Paxos can proceed with tokenizing its custodied gold. At this stage, Jiritsu also implements the “chain abstraction” concept, allowing asset issuers like Paxos to mint corresponding tokens on ideal target chains such as Solana, Avalanche, or BNB Chain.

Once tokens are generated, Paxos pays fees to nodes and verifiers through the Jiritsu dApp, with a portion allocated to the Jiritsu network. Investors buying PAXG tokens will receive an underlying gold proof and can use this proof to access the gold custody status information on the Jiritsu network, while Paxos can pass on the fee costs to investors at this stage.

The dApps on the Jiritsu network are designed to facilitate the writing of specific data, allowing users to create verifiers for any business logic, data reader, and smart contract integration. This adaptability ensures Jiritsu can provide customized solutions for a wide range of business needs. Additionally, under its ZK-MPC cloud services, Jiritsu Proof significantly expands the asset categories for information verification. Besides traditional financial verifications like banking information and corporate credit, it can also verify the status information of various real-world assets, such as equipment, inventory, and transaction and revenue information of company premises. Recently, Jiritsu provided inventory proof for an Amazon supply chain company with over 100,000 SKUs and a total value of approximately $20 million.

Building on this, Jiritsu also measures its impact on real-world asset tokenization through two data metrics: “Total Asset Verified” and “Total Asset Secured.” These metrics provide more compatible and interoperable underlying asset Legos for DeFi protocols. According to data on the official Dune dashboard, Jiritsu has verified over $18 billion in assets to date, with over $60 million in assets ready for use by various protocols.

Recently, Jiritsu integrated with BlackRock’s RWA ecosystem to provide automated on-chain proofs for the valuation, verification, compliance, and KYC platform information of its Bitcoin spot ETF and BUIDL fund reserve assets. This facilitates other protocols to use these already on-chain assets more conveniently and quickly. On the other hand, although iBIT and BUIDL bring substantial incremental funds to the crypto market and RWA, their asset verification still relies on self-reporting and only offers annual audits. Jiritsu provides these products with more transparent and cost-effective solutions.

Jiritsu has also integrated with the Republic platform, which has deep expertise in the RWA field, allowing any asset manager to directly implement and use similar solutions. While offering various tokenized products, it improves compliance and operational efficiency. Asset managers can use the mature infrastructure provided by Republic for tokenization, compliance, marketing, and customer service. By automating and trustlessly verifying and auditing, Jiritsu moves the work previously done by institutions like Moody’s and KPMG on-chain. The revenue from this part of the traditional market exceeds $150 billion; even a 10% calculation presents a highly imaginative business ceiling.

Team Background

Jiritsu Network’s co-founders Jacob Guedalia and David Guedalia are highly respected in the academic field. Jacob holds a Bachelor’s degree in Physics and Philosophy from New York University and a graduate degree in Applied Physics from the Weizmann Institute of Science in Israel. David has a Master’s degree in Computational Geography from Bar-Ilan University and a Ph.D. in Neural Computation from the Hebrew University of Jerusalem. Additionally, Jacob is a successful serial entrepreneur, having founded and exited four companies, and together with David, they hold over 100 U.S. patents.

Jiritsu has raised a total of $10.2 million in its last two funding rounds, led by gumi Cryptos Capital. Other investors include Susquehanna Private Equity Investments, LLLP, and Republic Capital. Former BlackRock asset manager Michael Lustig has also joined the Jiritsu team. The company plans to use the new funds to “accelerate the development and adoption of the UVC platform and Tomei RWA.” Founded in 2020, Jiritsu has developed technologies such as Unlimited Verifiable Computation (UVC), which aim to provide an easy-to-program approach applicable to any workflow, generating proofs of workflow.

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