RWA Track Dominates Screen Again, Everything You Need to Know about New Opportunities

2024-06-13, 01:25

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![](https://gimg2.gateimg.com/image/article/1718241707sdfx.jpeg)
##  [TL；DR]
With the US spot <a href="/pt-br/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> ETF and <a href="/pt-br/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> ETF attracting a large number of traditional funds and the US Congress actively discussing related issues, the RWA sector has shown relatively strong performance.

Currently, the on-chain trading of assets such as stablecoins and treasury bills has proven the feasibility of asset tokenization, and more projects are actively exploring the inclusion of more types of assets in the blockchain field.

Although tokenizing assets on unlicensed public blockchains can leverage on-chain liquidity, due to its trustless nature, it may face strict regulatory scrutiny, which is currently the most pressing challenge for crypto technology to move towards practical applications.

## Introduction
When exploring the relatively persistent crypto topic amidst the recent market downturn and volatility, we have to mention a track that is no less competitive than AI, MEME, and DePIN—the tokenization of Real World Assets (RWA).

With the passage of US spot Bitcoin ETFs and Ethereum ETFs, a large amount of real asset funds have flooded into the crypto market, and the strong rising RWA projects represented by Ondo Finance (ONDO) have further focused on market heat. This article will further interpret the RWA sector’s development status and investment opportunities.
 
## New Opportunities for RWA Under the Narrative of Spot ETFs
If we talk about the most noteworthy narrative of this bull market, we cannot do without the spot ETFs of Bitcoin and Ethereum, which have brought more and more funds and attention to the crypto market. However, ETF products mainly focus on Bitcoin and Ethereum, and there are no signs of spillover to other Altcoin sectors. Therefore, in recent times, there have been discussions in the market about the strong imbalance between the mainstream and Altcoin sectors of this bull market.

However, the emergence of RWA products has bridged this cognitive imbalance, as traditional market buying is pouring into the crypto market through spot ETFs. As a virgin land that promotes the integration of traditional financial markets and crypto technology, RWA is becoming the most beneficial sector in the context of continuously expanding crypto adoption rates.

Especially in the context of the recent active discussion on tokenization of real world assets by the U.S. House of Representatives Financial Services Digital Assets Subcommittee, and the rise in the yield of 10-year treasury bond bonds, RWA has emerged from a relatively independent strong performance.
![](https://gimg2.gateimg.com/image/article/17182417921.jpeg)
Source: Gate.io
 
From a broader perspective, with multiple delays in regulatory tightening and expectations of loose monetary policy, large market investors are seeking more robust, risk-free investment opportunities. At the same time, macroeconomic changes and the rise in US bond yields have made the tokenization of real-world assets a shining star in the crypto market, becoming an important channel for investors to capture value.

In fact, from a broader development perspective, the market has been seeking ways to bring real-world assets onto the chain since the advent of blockchain technology. Nowadays, well-known traditional financial institutions such as Goldman Sachs, Hamilton Alley, Siemens, and KKR are actively attempting to chain their real-world assets. Meanwhile, some leading decentralized finance (DeFi) protocols in the field of crypto, such as MakerDAO and <a href="/pt-br/price/aave-aave" target="_blank" class="blog_inner_link">Aave</a>, are constantly adjusting their strategies to adapt to and embrace the trend of RWA.

Real world asset tokenization (RWA) converts the equity value of tangible or intangible assets (such as ownership, income rights, and usage rights) into digital tokens, enabling direct storage and transfer of assets on the blockchain without traditional central intermediaries. This process not only endows these assets with the unique attributes of cryptocurrency, such as decentralization, security, and anonymity, but also brings them unprecedented transaction efficiency and transparency.

We have found that in the current market context of weak volatility, the RWA sector is one of the few sectors that has sustained heat and value innovation potential compared to the AI, MEME, DePIN, and other sectors that have been frequently discussed in the past. According to data from CoinMarketCap, as of the writing date, there are 142 projects in the RWA sector, including Ondo (ONDO), MakerDAO (MKR), Polymesh (POLYX), etc., with a total market value of over $40B, accounting for only 0.16% of the total market cap of the crypto market. There is great potential for upward development.

In terms of business data, according to DeFiLlama's data, the RWA market has now entered the 11th largest category in the DeFi field, with 14 RWA protocols included, and a total value locked exceeding $4.1B.

As can be seen from the figure below, after the turbulent April and May, the RWA market dominated by token-based US treasury bond bonds regained its upward trend. This may be related to the recovery of the overall crypto market and investors shifting to higher yields in DeFi lending and liquidity re-staking field.
![](https://gimg2.gateimg.com/image/article/17182418202.jpeg)
Source: DeFiLlama
 
## What are the Innovative Highlights of the RWA Track?
RWA is not a simple tokenized on-chain business of US treasury bond bonds. According to our observation, there have been many innovative highlights in the development of this sector.
### 1.Asset digitization: achieving seamless integration of asset value
The tokenization of RWA enables the digital representation of asset value, enabling traditional assets to seamlessly integrate into the digital world. This innovation makes assets that were originally difficult to circulate and trade, such as real estate, art, etc., easier to trade and circulate.

Taking the Sol on-chain real estate RWA platform Parcl as an example, homeowners can convert rental income from multiple real estate projects under their umbrella into digital assets and conduct transactions in the DeFi ecosystem through this platform. This provides investors with more diverse investment choices and new financing channels for real estate developers, achieving maximum asset value.
### 2.Decentralized trading: reducing transaction costs and improving transaction efficiency
RWA trades in the DeFi ecosystem without the involvement of traditional financial intermediaries, thereby reducing transaction costs and risks. The automatic execution of transaction conditions through smart contracts reduces the risk of human intervention and erroneous operations.

Meanwhile, RWA tokens or digital assets have professional custody and trading platforms, especially DePIN. This platform provides a more on-chain and native solution for issuing and anchoring RWA assets, ensuring the security and efficiency of transactions.
### 3.Rich investment options: expanding the scope of asset allocation
It is obvious that compared to the narrative limited to Initial Coin Offering / Security Token Offering (ICO/STO) in 2018, today's RWA has broader innovative conditions, coverage, and development potential.

The token-based RWA enables investors to access more diversified asset categories, such as real estate, art, gold, treasury bond, etc. The tokenization of these assets not only enriches investors' investment choices but also improves the efficiency of asset allocation.

In particular, the US treasury bond token assets, which currently occupy the highest share of the RWA market, have not only stable returns and low risks, but also have high liquidity and tradability. Investors can buy and sell these treasury bond tokens anytime and anywhere, realizing the convenient allocation of global assets.

For example, Galaxy Digital Holdings LP is expanding its loan business to new customer groups. The latest transaction is a multimillion dollar loan secured against a violin that once belonged to Russian Empress Catherine II. The violin will be held by a custodian in Hong Kong, and taking it away requires both the mortgagor, Yat Siu, and Galaxy, to sign an agreement.
![](https://gimg2.gateimg.com/image/article/17182418703.jpeg)
Source: public information
### 4.Smart contracts: ensuring the automation and intelligence of transactions
The blockchain-based smart contract technology makes RWA transactions more automated and intelligent. Smart contracts can automatically execute transaction conditions, reducing the risk of human intervention and erroneous operations. Meanwhile, smart contracts can automatically adjust trading strategies based on market conditions, achieving intelligent asset management and optimization.

For example, Ondo Finance has not only made traditional ETFs accessible on the blockchain through a series of innovative tokenization strategies but also promoted the trading activity of tokenized stocks. Their move significantly narrows the gap between traditional securities and blockchain technology, further highlighting the integration and integration between DeFi (decentralized finance) and traditional finance.

## Risk and Opportunity Coexist, RWA Opens up Trillions of Dollars in Market Cap Space
As an important component of blockchain technology and DeFi, the RWA track is gradually showing its unique value and application potential.

Global currency and market data show that real-world assets such as silver, gold, stocks, global bonds, real estate, and derivatives constitute a huge market size, far exceeding digital currencies themselves. Through innovative methods such as asset digitization, decentralized trading, diverse investment choices, and smart contracts, the RWA market is entering a golden period of rapid development.

According to the Boston Consulting Group, the global tokenization market for financial assets is expected to reach a staggering $16 trillion by 2030. This trend not only indicates that the bridge between traditional finance (TradFi) and decentralized finance (DeFi) is gradually taking shape, but also lays a solid foundation for the creation of the next-generation market.
![](https://gimg2.gateimg.com/image/article/17182418924.jpeg)
Source: Boston Consulting Group
 
Currently, the on-chain trading of assets such as stablecoins and treasury bills has proven the feasibility of asset tokenization, and more projects are actively exploring the inclusion of more types of assets in the blockchain field.

However, the tokenization of RWA also faces a series of challenges. Although tokenizing assets on unlicensed public blockchains can leverage on-chain liquidity, due to its trustless nature, it may face strict regulatory scrutiny, which is currently the most pressing challenge for crypto technology to move towards practical applications.

Although tokenized assets on private networks and ecosystems can meet regulatory requirements, they may be more limited in attracting users and investors.

In addition, an urgent problem remains: how to increase the demand for tokenized assets, improve their liquidity and practicality, and balance operational experience, transaction costs, and technical risks.

With the continuous advancement of technology and the improvement of the regulatory environment, the RWA market is expected to inject new vitality into the innovation and development of the global financial industry. It is foreseeable that blockchain transactions of more realistic tradable assets will become more traceable, transparent, efficient, and secure, heralding a new era of asset management and trading. We have reason to believe that RWA will be the next noteworthy frontier in the field of crypto.

<div class="blog-details-info">
<div>Author:**Carl Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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