You've probably already heard the buzz around real-world assets (RWA) in the crypto space. It's the latest narrative, and it's got everyone talking – from crypto influencers to major businesses like Amazon and JPMorgan.
But what is it all about?
In this article, we'll delve in and take a look at the RWA narrative's potential impact on the market, exploring how RWAs work, their value, and why they're considered the next big thing in crypto.
So, buckle up and let's start navigating the exciting world of RWAs.
Quick Overview of Real-World Assets
First off, let's define exactly what we mean when we talk about RWAs.
RWAs are off-chain assets that have been brought onto blockchain allowing them to be traded in the crypto space — most commonly through a process known as tokenization.
If you want to dig further into real-world asset tokenization, we covered it in more detail in this article.
Imagine having the freedom to trade a massive range of assets digitally with anyone across the globe — not only tangible things like real estate, commodities, or collectible art, but even intangibles like bonds and copyrights.
Traditional assets that were once confined to specific markets and posed challenges in terms of liquidity, transparency, or efficiency are now being transformed.
What is the Current RWA Narrative Today?
Unless you've been living under a rock, you'll have noticed the crypto winter that's been casting a shadow the past couple of years.
In fact, Galaxy Research produced a report focused on non-stablecoin real-world assets (RWAs) by not including stablecoins in charts and total value locked (TVL) calculations.
Stablecoins, with a significant market value of $125 billion, are excluded to clearly showcase the growth and market dynamics of smaller RWAs.
Based on the report for 2023:
- Non-stablecoin RWAs saw an increase in on-chain value of $1.05 billion. A major portion of this growth, 82% or $855.7 million, originated from sectors like Treasuries, real estate, and private credit, which are all assets that generate yield.
- The surge in on-chain RWAs is largely driven by the demand for off-chain yields. The proportion of yield-generating RWAs in the market rose from 31% to 53% between January 1 and September 30.
- The value of active on-chain private credit loans grew by $210.5 million, an 84% increase, though it remains 70% below its peak value.
- On-chain real estate experienced the smallest growth in dollar value among the yield-bearing RWA categories. It saw a 102% increase, adding $90 million in value.
- Treasuries and other bond types, including U.S. Treasuries and on-chain corporate bonds, increased by $557 million in the same timeframe.
As the crypto winter sank its claws in, unsustainable yields in decentralized finance (DeFi) caused the collapse of many major crypto projects and left investors looking elsewhere for real, sustainable yields.
RWAs were, and are, the perfect candidate. Assets that were previously bound by illiquid and exclusionary markets have now become available, offering the possibility of fractional ownership and opening up access to everyday investors, like you.
Historically, it's been the gold and precious metals dominating the RWA market, but the current narrative sees private credit and treasury bonds making real inroads, with a host of other applications hot on their heels. So while the crypto market has been stagnating, in the world of RWAs, investment opportunities are opening up left, right and center.
This isn't just a crypto narrative, either. RWAs promise to create a completely new paradigm for investment in general and it's an opportunity too good to miss.
Top 4 Crypto Projects Pushing the RWA Narrative
Within the burgeoning world of Real-World Assets (RWA), several trailblazing projects are helping shape the space.
These projects are unlocking substantial value for traditional businesses and crypto enthusiasts, keen on exploring diverse and sustainable investment opportunities and helping to actively push the RWA narrative.
This is not to be confused with top RWA platforms that we covered previously.
Creditcoin is a pioneering blockchain platform that integrates real-world assets with the crypto economy.
Creditcoin connects borrowers, lenders, and investors globally, recording over 4.27 million credit transactions worth $79.7 million USD to date. Its ledger provides transparency in credit history and loan performance, merging traditional finance with cryptocurrency.
With tools like the Creditcoin Block Explorer and the Credal API, it offers detailed on-chain metrics and supports a multi-blockchain lending ecosystem. This approach democratizes credit access and combines digital asset flexibility with traditional financial stability.
Goldfinch is a decentralized credit protocol enabling users to lend USDC to real businesses globally, offering more stability compared to typical DeFi lending. Investments are collateralized off-chain, providing a secure avenue for lending in high-return markets.
The protocol features a Senior Pool for diversified investments and offers community-driven incentives for participation. Goldfinch's mission is to democratize capital access, creating a unified global credit marketplace for a wide range of borrowers and investors.
#3: Maple Finance
Maple Finance is an on-chain marketplace specializing in lending to real businesses, catering to institutional and accredited individual investors. It offers a managed marketplace with transparent lending opportunities, underwritten by professionals.
Maple emphasizes transparency in every loan and partners with regulated institutions for services like custody, KYC, and AML checks, bridging traditional finance and crypto assets.
Centrifuge is a pioneering platform that integrates real-world assets with blockchain technology, aiming to create a more efficient financial system. It offers full transparency in securitizing and managing debt facilities on-chain, reducing traditional finance costs, and providing equal access through decentralized governance.
The platform allows users to finance real-world assets via DeFi, bypassing banks and intermediaries. It adheres to strict regulatory and compliance standards, ensuring security and legal recourse.
Centrifuge diversifies yields with real-world assets, offering stability and robust yields for investors, while fostering active community participation in protocol governance.
Why Real-World Asset Tokenization Will Remain one of the Hottest Crypto Narratives in 2024
As we've seen, even in the face of stagnated crypto market, RWAs have bucked the trend by showing tremendous growth. And that growth doesn't look like stopping any time soon.
Popular DeFi analyst, Viktor DeFi talked about the extreme growth of RWA protocols in 2023.
The TVL of RWA protocols morphed from $100M to $1.2B in 2023.— Viktor DeFi 🛡🦇🔊 (@ViktorDefi) September 5, 2023
With the many developments underway, it's showing no signs of slowing down.
Here's how Creditcoin intends to front-run the next wave of RWA with its upcoming mainnet + airdrop 🧵👇 pic.twitter.com/R4xCuBt96N
Whether or not that holds true, the sentiment remains the same: RWAs are here, and they are here to stay.
As the RWA narrative continues into 2024, institutional involvement looks set to take center stage.
𝐌𝐚𝐧𝐲 𝐓𝐡𝐫𝐞𝐚𝐝𝐬 𝐚𝐛𝐨𝐮𝐭 𝐑𝐖𝐀𝐬.— Sir🔶️Khaycee (🎮) (@kceeonyekachi1) December 4, 2023
𝐌𝐚𝐧𝐲 𝐖𝐫𝐢𝐭𝐞-𝐔𝐩𝐬 𝐚𝐛𝐨𝐮𝐭 𝐢𝐭𝐬 𝐩𝐨𝐭𝐞𝐧𝐭𝐢𝐚𝐥.
𝐇𝐞𝐫𝐞 𝐚𝐫𝐞 𝐬𝐨𝐦𝐞 𝐬𝐡𝐨𝐜𝐤𝐢𝐧𝐠 𝐑𝐞𝐯𝐞𝐥𝐚𝐭𝐢𝐨𝐧𝐬 𝐚𝐛𝐨𝐮𝐭 𝐑𝐖𝐀𝐬 𝐭𝐡𝐚𝐭 𝐲𝐨𝐮 𝐝𝐨𝐧'𝐭 𝐤𝐧𝐨𝐰!
𝐑𝐞𝐚𝐝. 𝐑𝐞𝐭𝐰𝐞𝐞𝐭.… pic.twitter.com/Ve7DE40Moy
As per a joint survey by research and advisory firm Celent and American banking behemoth BNY Mellon, more and more institutional investors are interested in putting their money into tokenized assets, and the majority agrees that tokenization stands to revolutionize the realm of asset management.
Read BNY Mellon stance on Tokenization: https://www.bnymellon.com/us/en/insights/all-insights/tokenization-opening-illiquid-assets-to-investors.html
Read Celent stance: https://www.celent.com/insights/651136303
Already some banking goliaths are paving the way, with the recent launch of JPMorgan's tokenized asset platform Tokenized Collateral Network (TCN), which counts BlackRock among its key clients, and UBS' announcement of the live pilot of a tokenized variable capital company (VCC) fund known as Project Guardian, with heavy involvement from Singapore’s central bank.
Will the RWA Narrative Fuel the Crypto Bull Market?
RWA tokenization is transforming the crypto industry. Where once unsustainable DeFi yields propped up the market, the prospect of more stable returns promises to drive growth built on more solid ground. The signs are very promising, and they're pointing toward the RWA narrative fueling the next crypto bull market.
In fact, such is the belief in the transformative power of RWAs, the Boston Consulting Group estimates the market for tokenized assets could hit a staggering $16 trillion by 2030.
If you want to ride this wave, now is the time to start writing your own story in the crypto narrative.