Real World Assets (RWA) are tangible assets that exist in the physical world and are brought on-chain. The DeFi industry, which is worth $57 billion as of writing, has been facing a decline in yields, making it less attractive than traditional finance (TradFi). However, the tokenization of RWA, such as real estate and loans, has become a new source of yield in DeFi, providing opportunities for higher yields and portfolio diversification. The tokenization of RWA also increases the liquidity available and offers a novel asset class for DeFi participants to leverage for investment yield.
Some of the most prominent RWA protocols include Maple Finance, TrueFi, Centrifuge and Goldfinch. These protocols allow businesses to tap into the DeFi ecosystem for capital, lowering the barrier to entry for businesses, especially in emerging markets, to receive loans.
It does seems that Real World Assets in the crypto vertical make sense due to the potential market size in traditional finance. The credit market and tokenization of assets such as real estate and art have been gaining interest and adoption from the market. While there are risks involved, such as the possibility of default, there have been successful protocols like Goldfinch that have addressed this issue. It will be interesting to see how this space continues to develop and gain more adoption.
Real world assets can offer opportunities and risks for crypto investors. Investing in real world assets through crypto protocols can provide greater diversification and potentially higher yields compared to traditional investments. It can also offer fractional ownership, allowing for smaller investments and increased liquidity.
Protocols that have adopted RWA into their Crypto Space.
Aave: Aave is a decentralized lending platform that has introduced support for RWA. The platform allows users to collateralize real-world assets such as real estate, invoices, and fine art to access liquidity.
MakerDAO: MakerDAO is a decentralized lending platform that supports RWA as collateral. The platform allows users to collateralize assets such as real estate, stocks, and precious metals to generate Dai stablecoins.
Centrifuge: Centrifuge is a platform that enables businesses to tokenize and finance their real-world assets. The platform allows users to collateralize assets such as invoices, real estate, and royalties to access liquidity.
Nexus Mutual: Nexus Mutual is a decentralized insurance platform that provides coverage for smart contract failures. The platform has recently introduced cover for RWA, such as real estate and fine art.
These protocols are just a few examples of the progress being made in adopting real-world assets into crypto space. As technology continues to evolve, we can expect to see more innovation and adoption in this area.