This report explores the increasing interconnection between real-world assets (RWAs) and blockchain technology.
This report explores the increasing interconnection between real-world assets (RWAs) and blockchain technology. As part of the analysis, a comparative approach is taken with various blockchains including Bitcoin, Ethereum, and Tron. Relevant data and statistics are incorporated to provide a comprehensive overview of this emerging space.
Blockchain technology has grown significantly over the past few years, from a fringe technology mainly associated with cryptocurrencies like Bitcoin to a mainstream tool with applications in many different industries. The decentralized, secure, and transparent nature of blockchain technology makes it especially suitable for representing and transacting real-world assets (RWAs).
2. Real-World Assets and Blockchain: An Overview
Real-world assets refer to physical or tangible assets such as real estate, commodities, and other forms of owned property. With the rise of blockchain technology, the concept of tokenizing these assets has gained significant attention.
In 2022, around 10% of the global GDP, amounting to $8.6 trillion, was projected to be stored on blockchain by 2027 (World Economic Forum, 2022). This figure suggests a significant potential for the integration of RWAs into blockchain platforms.
2.1 Current State of the Real-World Asset Segment
The Real-World Asset (RWA) sector is diverse, housing many projects, predominantly in the Decentralized Finance (DeFi) space. For a clearer perspective, these projects can be categorized into three distinct groups: (1) Fixed-income projects rooted in off-chain assets such as U.S. bonds, stocks, real estate, and artwork; (2) Public credit projects built on assets offered and traded in the public market; and (3) Trading marketplaces centered around intangible assets like carbon credits. There is also the emergence of infrastructure projects like sector-specific Layer 1 (L1) blockchains.
In the realm of fixed income, projects are founded upon the U.S. bonds and equity markets, offering loans to both individual and institutional entities. What separates these initiatives from other DeFi lending platforms is their collateral base, which can include tangible, real-world assets.
In contrast, public credit projects aim at carving out investment funds within the crypto sphere for crypto users, mimicking the pathways of U.S. bonds and other similar instruments.
As per data from RWA.xyz, seven prominent RWA lending protocols — namely Centrifuge, Maple, GoldFinch, Credix, Clearpool, TrueFi, and Homecoin — collectively granted loans amounting to approximately $4.38 billion. With borrowers predominantly hailing from developing nations, these loans carried an average Annual Percentage Rate (APR) of 10.52%. These credit lending protocols typically offer higher returns than most DeFi lending platforms. However, it is important to note the potential risk, as evidenced by Maple Finance, which defaulted on $69.3 million worth of debt amidst institutional turbulence in 2022.
3. The Rise of Tokenized Assets: A Case of Tokenized Gold
Tokenization is the process of putting ownership of tangible assets, such as precious metals, on the blockchain. It offers the convenience of buying and selling these assets round the clock, bypassing the need for traditional brokers.
Bank of America highlighted this growth in a 2023 report, noting that the tokenized gold market surpassed $1 billion in value, underlining the increasing momentum of RWA tokenization (Coindesk, April 2023).
Prior to the advent of tokenized gold, investors seeking exposure to the gold market could buy exchange-traded funds (ETFs) and futures, or they could purchase physical gold through dealers. However, these traditional investment vehicles come with drawbacks related to cost and/or liquidity.
Tokenized gold offers exposure to physical gold, real-time 24/7 settlement, no management fees, and no storage or insurance costs. The low minimum investment increases accessibility, and fractionalization enables the transfer of physical gold ownership and value that was previously impossible (Coindesk, April 2023).
4. Comparative Analysis of Different Blockchains
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Bitcoin's blockchain was the first to establish the concept of a decentralized digital ledger. Although it is primarily used for the transfer of its native cryptocurrency, it has also been used for "colored coins" that can represent RWAs.
However, Bitcoin's limited scripting language and lack of native smart contract support have constrained its utility for complex RWA representation. As of 2023, only a few projects have explored using Bitcoin for RWA tokenization.
Ethereum, with its smart contract functionality, has been the leading platform for RWA tokenization. As of the first quarter of 2023, there were approximately 250 active projects dealing with RWA tokenization on Ethereum (Etherscan, 2023).
Ethereum's smart contracts allow for the creation of ERC-721 (Non-Fungible Tokens, NFTs) and ERC-20 tokens representing unique and fungible assets, respectively. These assets ranged from real estate properties to works of art and intellectual property rights.
Tron is a newer, more scalable blockchain platform that has also seen a surge in RWA tokenization projects. By Q1 2023, there were 120 active projects dealing with RWA tokenization on Tron (Tronscan, 2023).
Tron's smart contracts, similar to Ethereum's, enable the creation of TRC721 and TRC20 tokens for unique and fungible assets, respectively. Tron's advantage lies in its higher transaction speed and lower fees compared to Ethereum, which might drive more projects to adopt this platform in the future.
5. The Impact of Blockchain on Real-World Assets
Blockchain technology brings several benefits to real-world asset management, such as increased liquidity, improved transparency, reduced transaction costs, and more. As per a report by Deloitte (2023), 74% of organizations indicated blockchain as a "compelling solution" for managing and transacting RWAs.
However, there are also potential challenges and risks, such as regulatory uncertainty, lack of standardization, and the need for reliable asset valuation and auditing mechanisms.
6. Top Real-World Asset Protocols on Ethereum and Tron
Given the pivotal role played by Ethereum and Tron in the tokenization of real-world assets (RWAs), several protocols have been developed on these platforms to facilitate this process. Here's a look at some of the top RWA protocols on Ethereum and Tron.
MakerDAO is one of the most well-known decentralized finance (DeFi) protocols on Ethereum. Its DAI stablecoin is over-collateralized by a variety of assets, including RWAs. It operates with the aim of creating a more open and inclusive financial system.
Centrifuge allows for the tokenization and financing of real-world assets on the Ethereum blockchain. It enables businesses to convert their real-world assets into NFTs (Non-Fungible Tokens), which can then be used as collateral to access liquidity.
stUSDT, in a bid to bridge the gap between traditional markets and blockchain ecosystems. Mirroring Alipay's Yu'e Bao, stUSDT operates via the decentralized platform JustLend, offering a secure and equitable investment channel into real-world assets. This initiative, backed by a vast global user base and a $50 billion stablecoin market cap, aims to become a cornerstone for TRON's RWA ventures and build a financial gateway that seeks to empower people worldwide. Emphasizing the transparency, security, and immutability of blockchain technology, stUSDT is poised to drive the next stage of growth in the blockchain industry by attracting new blockchain enthusiasts and expanding the TRON DAO community.
The integration of blockchain technology and real-world assets has significant implications for financial transactions and asset management, representing a major paradigm shift in the way we perceive and handle asset ownership. This innovative blend is paving the way for secure, transparent, and efficient transactions, in addition to opening new opportunities in the financial sector.
Real-world assets (RWA) on blockchain platforms offer significant opportunities, including tokenization of various types of assets like real estate, gold, and even intangible assets such as carbon credits. This tokenization could potentially increase the liquidity of these traditionally illiquid assets, thereby allowing a broader range of investors to access these markets. Furthermore, the inherent transparency and immutability of blockchain transactions can enhance the auditing and traceability of these assets, increasing investor confidence and potentially leading to increased market participation.
In the race of blockchain platforms, Bitcoin, Ethereum, and Tron are leading in showcasing the capabilities of blockchain for RWA management. While Ethereum currently leads in terms of active projects, newer and more scalable platforms like Tron are rapidly gaining ground.
TRON, in particular, has announced plans to further advance its technology and provide more robust support for its ecosystem in the RWA space. Nevertheless, despite the substantial potential and ongoing efforts, there are still challenges and risks that need to be addressed, such as regulatory uncertainty, the need for standardization, and the need for reliable asset valuation and auditing mechanisms. Thus, further research and policy-making efforts are required in order to fully realize the potential of this innovative approach.
Overall, the convergence of blockchain and real-world assets represents a transformative change in the financial landscape, one that could redefine how we think about and interact with the financial world.
1. World Economic Forum (2022). Blockchain future trends and implications.
2. Etherscan (2023). Ethereum real-world asset projects.
3. Tronscan (2023). Tron real-world asset projects.
4. Deloitte (2023). Blockchain and real-world assets: Opportunities and challenges.