Blockchain & Web3 technology have come a long way over the past few years but still have a ways to go before reaching mainstream adoption. It’s been tough for projects to attract some of the more hardcore traditional finance users given blockchain & Web3’s complexity but I think the market has found a solution that will wash some of that skepticism away.
I think one of the most promising solutions is integrating RWA (real-world assets) into the Web3 ecosystem. By tokenizing popular RWAs on the blockchain, such as real estate, precious metals (i.e. gold & silver), and other physical goods, investors & end users will have much easier access to these assets and be able to purchase them at low costs, plus get access to instant liquidity & self-custody - In this I article delves into the transformative potential of RWAs on the blockchain, examining their ability to reshape our transactions, investments, and participation in the digital economy.
Accessibility and Convenience: A Paradigm Shift in Asset Ownership
Just imagine you want to buy physical gold or silver - you would need to go online or to a precious metals shop and deal with high premiums, all while worrying about storage in your home or paying a third party to hold your metals for a fee. With RWAs on the blockchain, you have much more flexibility to purchase these assets without having to leave your home, with fewer fees, and storage on your Web3 Wallet or hardware device.
Another key advantage of tokenizing RWA is fractional ownership - as opposed to needing to purchase an entire asset (i.e. 1 gold bar or an entire house), you can instead buy a portion of it. Many of these assets (especially real estate) have been available & limited to those who have significant capital, leaving out smaller investors from being able to capitalize on investment opportunities or diversifying it. With fractionalization combined with the accessibility of the blockchain, the door to invest in RWAs becomes wide open to the globe.
To be honest, this is only scratching the surface of what RWAs are all about. I’m completely for RWA on the blockchain and I think it will go mainstream quickly - furthermore, I think RWAs will have a massive impact to push Web3 adoption to an entirely new level opening new markets and opportunities for retail.
Unlocking Liquidity and Yield Generation through DeFi
As I was browsing the web, I came across a Forbes article with an interesting angle for RWAs’ use cases in DeFi. The TLDR is another added use case for RWAs on the blockchain where users can earn yield via DeFi in protocols, adding another feather to the cap, for the potential of this industry to thrive (and differentiating it from the actual assets themselves in the physical sense).
To add to that, you should also check out this informative Twitter thread from Charles (@c_storry on Twitter) highlighting the use cases for RWA in DeFi - just another interesting angle for perspective.
So you might ask which projects I’m keeping an eye out for that are driving the RWA narrative home in Web3?
Here’s my current list:
- Centrifuge: This platform has been around for several years, and I think it’s a sleeping giant for the RWA industry. It’s designed to give small business access to liquidity through RWA and DeFi, allowing users to finance RWA in a completely decentralized way and lend to earn yield (backed by RWA such as real estate, invoices, financing, etc.)
- Maple Finance: I think this platform has a ton of potential as well, and it’s still only in its early days. Users can lend capital into pools that are managed by reputable credit experts, which is then lent out to profitable, real-world businesses. It also offers undercollateralized borrowing.
- Paxos: Considered one of the gold standard platforms for stablecoins, Paxos is also dipping its feet in the RWA industry. For example, speaking of precious metals as I touched on previously, users can purchase $PAXG, Paxos’ version of tokenized gold. This means users can own a digital version of the asset, all backed by real gold - no need to worry about storage fees, premiums, or the like.
The integration of real-world assets into the Web3 ecosystem represents a significant leap forward in the adoption of blockchain technology. By tokenizing RWAs, we can unlock unprecedented accessibility, convenience, and liquidity while bridging the gap between traditional finance and the digital economy. As the potential of RWAs continues to be realized, it is crucial to keep an eye on emerging projects that contribute to this evolving landscape. The rise of RWAs holds the promise of a new bull market narrative, driven by the growing utility and tangible benefits they offer. Brace yourselves for a future where Web3 adoption reaches new heights, fueled by the power of real-world assets on the blockchain.