Real World Assets (RWA) is one of the emerging use cases of blockchain technology that the community has been watching for quite a time.
It is because RWA is the process of tokenizing liquid assets that exist in this physical world—real estate, luxuries, commodities, and even government treasuries.
In fact, a report from Boston Consulting Group estimated that the RWA market by 2030 could reach $16 trillion.
Even BTC ETF-issuer Blackrock CEO Larry Fink expressed his belief that tokenization of assets, especially securities, is the next evolution of the financial market.
At BitPinas we have reported about two RWA projects IX Swap and Investa X.
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Advantages of RWA
Stablecoins are among the prime example of RWA. For instance, for every 1 $USDC available on the market, $1 is reserved on financial institutions. Stablecoins are helpful for individuals who want to send and receive fiat-valued currencies without going to banks.
And because physical assets have been tokenized on-chain, the true value of an asset can be viewed, highlighting transparency to the public.
The tokenization of real-world assets also offers efficiency, as when assets are tokenized, fractionalization of the asset will be possible, allowing people to have partial ownership using just their crypto wallets.
Lastly, tokenized assets can also serve as collateral in (decentralized finance (DeFi) protocols. This enables more web3 users to lend and borrow and provides liquidity.
How Does RWA Work?
DeFi protocols are the ones responsible for tokenizing physical assets. But before the process takes place, the asset should first have value, ownership, and good legal standing in the physical world.
The next step includes turning the asset’s information into a digital token. In this part, the data of the asset, including the value and ownership, will be embedded within the token’s metadata.
After the token is fully available, it will be fully launched to DeFi protocols. Like cryptocurrencies, a RWA’s fiat value is also influenced by the supply-and-demand mechanism.
Aside from this, the market price, performance history, and physical condition of the asset are also among the factors that influence the value. For big time assets, such as real estate, they must have undisputed legal ownership, documented by deeds or invoices.
DeFi Protocols Launching RWA: A Game Changer?
Most physical assets are sold through traditional financial institutions. It is almost unbelievable to sell a property online and transactions will be purely digital.
DeFi Protocols proved it is not true. With the tokenization of physical assets, more and more are exposed to financial freedom, giving them the opportunity to own and earn from RWA.
With this, BitPinas has curated a list of DeFi protocols engaged in utilizing RWA with potential airdrops or rewards systems to those who will engage with these platforms.
Frax Finance (https://frax.finance/) is a decentralized protocol has three sub protocols, with each sub protocol containing a stablecoin. The three stablecoins are $FRAX, a dollar-pegged asset; Frax Price Index ($FPI), a stablecoin pegged to a basket of consumer goods; and FraxEther ($frxETH), pegged to $ETH for use as a replacement for WETH in smart contracts.
It recently launched its third subprotocol, FRAX v3, which claims to utilize a RWA strategy that yield “very close” to the Interest Rate on Reserve Balances (IORB) rate with as little duration risk as possible.
The RWA it offers include:
- short-dated United States treasury bills
- Federal Reserve Overnight Repurchase Agreements
- USD deposited at Federal Reserve Bank master accounts
- select shares of money market mutual funds
Lingo (https://www.lingocoin.io/) is a blockchain startup that claims to use real estate to reward its community with vacations and onboard more web3 natives.
As of this writing, Lingo has an active rewards system for those who stake its native token. The points earned are redeemable for real-world rewards, such as free coffee or staycation.
According to its website, the rewards program is fueled by assets owned by Lingo Holding Company and each transaction on the platform helps the firm’s real-estate portfolio to grow.
Credix (https://credix.finance/) is a credit ecosystem that allows the tokenization and securitization of real-world assets.
In its whitepaper, it claims to work “directly with local borrowers such as FinTechs lenders to provide them capital at an attractive interest rate, so they can use these funds for lending purposes.”
Users can also invest on different pools of local lenders while accredited investors, such as hedge funds and private equity, are allowed to directly invest in credit deals within the platform.
Maple (https://www.maple.finance/) is an Ethereum-based capital marketplace. It claims to be a platform for credit experts to start and scale lending businesses.
Basically, it offers a list of lending pools where users can choose the Pool Delegate that suits their liquidity, risk, and return requirement.
Recently, it introduced a treasury management solution designed specifically for DAO treasuries. The latest pool launched by Maple also intends to ensure that deposited funds are sent to a special-purpose vehicle (SPV), which is only permitted to buy US Treasuries.
Clearpool (https://clearpool.finance/) is a Polygon-based decentralized credit marketplace for unsecured institutional liquidity.
According to its whitepaper, Clearpool’s permissionless single-borrower pools enable institutions to raise short-term capital while providing DeFi lenders access to risk-adjusted returns based on interest rates derived by market consensus.
The platform offers users to earn compounding interest on every block by lending to vetted institutions, stake $CPOOL to help secure Clearpool’s interest rate mechanism, and transfer CPOOL between Ethereum and Polygon chains.
Centrifuge Protocol (https://centrifuge.io/) is a known protocol for facilitating the decentralized financing of real-world assets natively on-chain.
Within the Centrifuge platform, asset pools are fully collateralized, liquidity providers have legal recourse, and the protocol is asset-class agnostic with pools for assets spanning mortgages, invoices, microlending and consumer finance.
The protocol allows users to choose between the pools of different asset classes, including US Treasuries, Structured Credits, Invoice Financing and Accounts Receivables, Real Estate Bridge Loans, Whole Loans, and Debt Facilities.
This article is published on BitPinas: Real World Assets Tokenization – RWA Crypto Tokens With Potential Airdrops
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