RWA: The Rise of Real World Assets
This article explores the trend and development prospects of tokenizing real-world assets (such as real estate, bonds, stocks, etc.) through blockchain technology and integrating them into the decentralized finance (#DeFi) ecosystem. It introduces the historical evolution of #RWA, major tracks, and the regulatory challenges it faces, highlighting the application potential in securities, real estate, lending, and stablecoin markets, as well as the potential investment risks.
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1. Tracing RWA

RWA - Real World Assets
RWA, short for Real World Assets, refers to the representation and trading of real-world assets in a digital, tokenized manner within 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 idea of RWA is to bring traditional financial assets into the decentralized finance (DeFi) ecosystem through blockchain technology, thus achieving more efficient, transparent, and secure asset management and transactions.

The significance of RWA lies in its ability to enhance the liquidity of relatively illiquid assets in the real world through blockchain technology, allowing them to participate in the DeFi ecosystem for lending, staking, trading, and other operations. This method of connecting real assets with the blockchain world is becoming an important development direction in the Web3 ecosystem.

RWA - A Special Asset Status
RWA is the tokenization of real-world assets, transforming them 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 via smart contracts, where all business logic and asset operations are completed on-chain; adhering to the "Code is Law" principle; while traditional assets such as bonds, stocks, and real estate operate under the legal framework of the real world, protected by government laws. The series of tokenization rules proposed by RWA requires both on-chain technological support from smart contracts and the protection of underlying assets like stocks and real estate by real-world laws.

In practice, under the RWA framework, tokenization is not merely a simple process of issuing a token on the blockchain; it involves a complex set of processes that pertain to asset relationships in the real world off-chain. The tokenization process typically includes: purchasing and custody of the underlying assets, establishing a legal framework for the relationship between the tokens and these assets, and the final token issuance. Through this tokenization process, off-chain laws and relevant product operation processes are combined, ensuring that token holders have legal claims to the underlying assets.

RWA - Historical Tracing
The development 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) gradually matured, the idea of RWA (Real World Assets) began to emerge. Some pioneering projects such as Polymath and Harbor started exploring the feasibility of tokenizing securities. Polymath focused on creating a securities token issuance platform aimed at resolving legal compliance issues, while Harbor aimed to provide a compliance framework that allowed securities assets to be liquid on the blockchain.

2018: The Beginning of Commodity Tokenization
In the realm of real estate and commodity tokenization, some pilot projects began to surface. For instance, the RealT project attempted to tokenize real estate in the United States, allowing global investors to gain partial ownership and rental income from U.S. real estate by purchasing tokens.

2019: Formation of the TAC Alliance
The TAC Alliance was established to promote the standardization and cross-platform interoperability of RWA, facilitating cooperation and development among different projects. Additionally, platforms like Securitize and OpenFinance were launched during this period, focusing on providing compliance solutions for tokenized assets to enterprises.

· Initial Development Stage (2020-2022)
2020: Multiple Projects Introduce RWA
The Centrifuge project gained significant attention for tokenizing real-world receivables and invoices, enabling small and medium-sized enterprises to obtain financing on the blockchain. Moreover, well-known DeFi projects such as Aave and Compound began experimenting with using RWA as collateral to expand their lending operations.

2021: Maker DAO Enters the RWA Market
Centrifuge introduced RWA as collateral to the MakerDAO lending platform, allowing users to earn stablecoin DAI by holding RWA.

2022: Traditional Funds Enter RWA
Large financial institutions such as JPMorgan and Goldman Sachs began conducting research and pilot projects related to RWA, exploring how to digitize traditional assets via blockchain; the RWA Alliance (Real World Asset Alliance) was established to promote the standardization and global adoption of RWA.

· Rapid Expansion Stage (2023-Present)
2023: Government Involvement in RWA Legal Construction
Large asset management companies such as BlackRock and Fidelity began experimenting with managing part of their asset portfolios through tokenization to enhance liquidity and transparency; the U.S. Securities and Exchange Commission (SEC) and the European Securities and Markets Authority (ESMA) also began to gradually intervene, attempting to establish regulatory frameworks related to RWA.RWA Track Direction

Given the diversity of traditional asset forms, the RWA track has also shone brightly in different areas. From tangible assets like real estate, commodities, precious metals, artworks, and luxury goods, to intangible assets such as bonds and securities, intellectual property, carbon credits, insurance, non-performing assets, and fiat currencies, RWA (Real World Assets) has demonstrated its application potential across various fields.
Real Estate Industry
In traditional finance, real estate is typically viewed as a relatively stable asset for long-term investments. In normal market conditions, real estate has strong capital appreciation potential. However, the low liquidity and high leverage characteristics of real estate raise the trading threshold and increase the investment risks for individual investors in this sector. In RWA projects related to real estate, the tokenization of real estate can significantly enhance asset liquidity and reduce the risks borne by individuals.

· Tangible: Focused on the tokenization of physical assets (such as real estate and precious metals), enabling these traditionally hard-to-trade assets to achieve liquidity on the blockchain.
· Landshare: By means of tokenization, Landshare allows small investors to participate in the real estate market, particularly through its blockchain-based real estate fund model.
· PropChain: Provides a global real estate investment platform based on blockchain, allowing investors to gain exposure to the global real estate market through tokens without having to purchase properties outright.
· RealT, RealtyX: Allow investors to own partial ownership of U.S. real estate and earn rental income by purchasing tokens.

Fiat to Stablecoins
In the realm of stablecoins, there are $USDT (Tether), FDUSD, USDC, and USDE, among others. These stablecoins provide a low-volatility asset in the crypto market by pegging their value to fiat currencies, with $USDT (Tether) being the most well-known. Tether is currently the largest stablecoin by market share, with its value pegged at a 1:1 ratio to the U.S. dollar. This means that the value of each $USDT corresponds to one dollar.

In traditional financial markets, fiat currency itself is a type of real-world asset (RWA) that 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, capable of directly participating in various operations within the decentralized finance (DeFi) ecosystem, such as lending, payments, and cross-border transfers. Tether directly associates the value of $USDT with real-world assets priced in dollars, significantly enhancing $USDT's stability while providing a relatively safe and stable environment for the introduction and use of RWA.

$USDT Operating Mechanism
Tether supports the value of $USDT by holding a basket of reserve assets. These reserve assets include cash, cash equivalents, short-term government bonds, commercial paper, secured loans, and a small amount of precious metals. When users deposit fiat currency (such as U.S. dollars) into Tether's account, Tether issues an equivalent amount of $USDT to the user, thereby achieving a 1:1 peg between $USDT and the dollar.

$USDT Stability and Risks
· Systemic Risk: Since the value of $USDT is directly pegged to the dollar, its users must bear systemic risks and market fluctuations associated with the dollar. For example, if the dollar experiences significant depreciation in the global market, the purchasing power of $USDT will also decrease.
· Regulatory Risk: If regulatory authorities question or take action against Tether’s operational model, it could impact the issuance and use of USDT.
· Collateral Risk: Although Tether claims that $USDT is fully backed by reserve assets, there have always been questions regarding the transparency and sufficiency of these reserves. If Tether cannot maintain sufficient reserves or if the quality of reserve assets declines, this could lead to a de-pegging of $USDT, meaning $USDT may no longer maintain its 1:1 value with the dollar.
· Liquidity Risk: Under extreme market conditions, Tether may face issues of insufficient liquidity. If a large number of users simultaneously request to exchange $USDT back to dollars, Tether may struggle to fulfill these requests in a short time, leading to market panic and price volatility.

The various dilemmas and issues faced by Tether are not unique to the stablecoin market but are challenges across the entire RWA market. The security of RWA is always closely related to the quality of its underlying assets and is easily influenced by 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 limits. In DeFi protocols such as Maker and AAVE, borrowers need to provide crypto assets as collateral that exceed the loan amount to ensure loan security. The involvement of RWA expands the range of collateral to include traditional assets like real estate and accounts receivable, allowing not just crypto assets but even assets from the real economy to participate in this system. This initiative can bring more public funding for the development of small and micro enterprises, provide larger companies with more loan channels, and allow ordinary investors to invest in enterprises and gain returns from future developments.

Bonds and Securities
In traditional financial markets, bonds and securities are some of the most widely used investment methods, often with comprehensive financial regulatory systems. Therefore, in RWA projects related to bonds and securities, aligning with real-world laws and regulations is the most crucial step.

· Maple Finance: Provides a way for businesses and lenders to create and manage loan pools on-chain, making the issuance and trading of bonds more efficient and transparent.
· Securitize: Provides issuance, management, and trading services for tokenized securities. This platform allows enterprises to issue bonds, stocks, and other securities on the blockchain, and offers a complete set of compliance tools to ensure that these tokenized securities comply with the laws and regulatory requirements of various countries.
· $Ondo Finance: Offers products including tokenized short-term government bond funds, which provide stable returns, further blurring the lines between DeFi and traditional finance.

3. RWA Market Size

The RWA market has experienced a boom since May 2023, and as of the time of writing, according to defillama, the RWA-related TVL still stands at $6.30 billion, representing a year-on-year increase of 6000%.

According to data from https://t.co/tyvXbRC5G2, there are as many as 62,487 holders of RWA-related assets, with 99 issuers, and the total value of stablecoins is $169 billion.

Several well-known Web3 companies, including Binance, are very optimistic about the future market value of RWA, estimating that by 2030, its total market value could reach $16 trillion.

As an emerging sector, RWA is changing the DeFi market with unprecedented strength, and its massive potential is worth investors' expectations. However, the development of RWA projects is highly correlated with reality, and differing laws and regulations across various countries and regions could easily become constraints on their development.

4. RWA Ecosystem Development

With the entry of traditional capital from firms like Goldman Sachs and SoftBank, as well as well-known Web3 companies such as Binance and OKX, strong projects in the RWA sector are gradually emerging; both new and established projects like Centrifuge, Maple Finance, $Ondo Finance, and MakerDAO are beginning to shine in this blue ocean, becoming genuine leaders in RWA in terms of technology and ecosystem layout.

Centrifuge: Real Asset On-chain Protocol
Concept
Centrifuge is a platform for tokenizing real-world assets on-chain, providing a decentralized asset financing protocol, collaborating with well-known DeFi lending protocols in the crypto market such as MakerDAO and Aave, and borrowers with collateral in the real world (generally startups), to complete the circulation between DeFi assets and real assets.

Financing Development
Centrifuge has received strong support from capital since its inception, securing a total of $30.80 million in funding across five rounds from 2018 to 2024, with notable VCs including ParaFi Capital and IOSG Ventures backing the project. Moreover, the Centrifuge project itself has impressive achievements, with tokenization of 1,514 assets and total financing assets reaching $636 million, with 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) calculations, and a tiered investment structure. Centrifuge Chain is an independent blockchain built on Substrate (part of the Polkadot parachain) specifically designed for managing asset tokenization and privacy protection; 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, which are then used as collateral, allowing issuers to gain liquidity from the pool while investors provide funds to the liquidity pool. Meanwhile, the on-chain NAV calculation model ensures that both investors and issuers can transparently see asset pricing and status. The tiered investment structure allows for three different lending tiers: junior (high risk, high return), mezzanine, and senior (low risk, low return).

Development Issues
Although the Centrifuge project ranks first in terms of attention to RWA projects on RootData, core metrics like TVL have declined due to the impact of the 2022 bear market and the disillusionment of project expectations in 2024, currently standing at only $497,944.

$ONDO Finance: Leader in Tokenized U.S. Treasuries
Concept
Unlike Centrifuge, which is dedicated to building a platform for the circulation of DeFi funds and real assets, $Ondo Finance is a decentralized institutional-grade financial protocol aimed at providing institutional-grade financial products and services, creating an open, permissionless, and decentralized investment bank. Currently, $Ondo Finance focuses on pioneering stable asset options beyond stablecoins, bringing risk-free or low-risk, steadily appreciating, and scalable fund products (such as U.S. Treasuries, money market funds, etc.) into blockchain, allowing holders to enjoy the returns from most underlying assets while maintaining relatively stable assets.

Financing Development
$ONDO Finance has historically conducted three rounds of financing, raising a total of $34 million, with investors including Pantera Capital, Coinbase Ventures, Tiger Global, Wintermute, and other well-known institutions. Additionally, $ONDO Finance has up to 82 partners in areas such as chain support, asset custody, liquidity support, and service facilities.

$ONDO Finance has also performed well in the market, with the current project token $ONDO priced at $0.6979. This represents an increase of 2448%, 1270%, and 784% compared to the Series A financing price of $0.0285, the ICO price of $0.055, and the opening price of $0.089 respectively, showcasing the market's enthusiastic support for the project.

Since April this year, $ONDO Finance has experienced significant growth in key metrics such as TVL, currently reaching $538.97 million, ranking third in the RWA sector.

Product Structure
$ONDO Finance's main targets currently are USDY and OUSG.

USDY (USD Yield Token) is a new type of financial instrument issued by $Ondo USDY LLC that combines the accessibility of stablecoins with the yield advantages of U.S. Treasury bonds. Unlike many other blockchain yield instruments, USDY's structural design complies with U.S. laws and regulations and is backed by short-term U.S. Treasury bonds and bank demand deposits.

USDY includes two types: USDY (accumulating) and rUSDY (rebase). The price of the USDY (accumulating) token increases with the yield of the underlying assets, making it suitable for long-term holders and cash management needs; rUSDY (rebase) maintains a token price of $1.00, achieving yield by increasing the number of tokens, making it suitable as a settlement or exchange tool.

OUSG ($Ondo Short-Term U.S. Government Bonds) is an investment tool issued by $Ondo Finance that provides liquidity exposure through tokenization, aimed at offering investors ultra-low-risk and highly liquid investment opportunities. OUSG tokens are linked to U.S. short-term Treasury bonds, and holders can gain liquidity returns through instant minting and redemption.

· Tokenization Structure: The underlying assets of OUSG are mainly held in BlackRock's U.S. Institutional Digital Liquidity Fund (BUIDL), with other portions held in BlackRock's Treasury 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 immediately obtain OUSG tokens through USDC or exchange OUSG tokens for USDC.
Token Versions: Similar to USDY, OUSG is also divided into OUSG (accumulating) and rOUSG (rebase).

Whether OUSG or USDY, both require user KYC support; thus, $Ondo collaborates with the backend DeFi protocol Flux Finance to provide stablecoin collateralized lending services for tokens like OUSG that require permissioned investment, enabling permissionless participation at the protocol's backend.

BlackRock BUIDL: The First Tokenized Fund on Ethereum
Concept
BlackRock BUIDL is an ETF (exchange-traded fund) jointly launched by the globally renowned asset management company BlackRock and Securitize, officially named "iShares U.S. Infrastructure ETF," with the ticker BUIDL. Similar to USDY, BUIDL is essentially a security; when users invest $100 in BUIDL, they receive tokens valued at $1 each while also enjoying the investment returns on the initial $100.

Regulatory Compliance
Unlike many projects in the RWA sector, BUIDL has a more robust compliance framework. The BUIDL fund is operated by a special purpose vehicle (SPV) established by BlackRock in the British Virgin Islands (BVI); the SPV is an independent legal entity used to isolate the fund's assets and liabilities. Meanwhile, the BUIDL fund has applied for Reg D exemption under U.S. securities laws and is open only to accredited investors.

Underlying Assets
BlackRock Financial manages the fund's assets. The fund invests in cash equivalents, such as short-term U.S. Treasury bonds 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 yields are generated automatically by smart contracts.

Market Response
With the strength and reputation of BlackRock, the BUIDL fund has performed very well in market recognition and TVL metrics, with a stable TVL of $502.41 million, ranking 4th in RWA TVL.

From a technical architecture perspective, BUIDL's innovation is not particularly extensive compared to other projects; however, BlackRock's longstanding reputation in the crypto market is sufficient to secure a position for the project in the RWA sector.

Within the RWA ecosystem, in addition to Centrifuge, which integrates traditional lending with DeFi, $ONDO Finance, and BlackRock BUIDL, there have also been breakthroughs in integrating real estate with DeFi, such as Propbase, which directly tokenizes real estate assets for circulation, and PARCL, which allows token investments in neighborhoods or locations.

Conclusion

· RWA essentially refers to real-world assets, and the fundamental goal of the entire sector is to achieve interoperability between real assets and on-chain assets, facilitating the influx of more real capital into the blockchain while gradually blurring the lines between DeFi and traditional finance.
· The main tracks of RWA include both tangible and intangible assets. Currently, it focuses on three major fields: securities, real estate, and credit lending, as well as stablecoins.
· Compared to other tracks, the RWA track faces stricter regulatory scrutiny and compliance requirements, which gives some well-known companies a greater advantage.

Despite the strong narrative and prospects of the RWA track, due to the uncertainty of its compliance, it is still necessary to remain cautious when investing in related projects and be prepared to respond to potential risks at any time.