Zhao Changpeng: RWA has huge market potential, but asset verification difficulties and insufficient volatility are two major issues
ChainCatcher news, Binance founder Zhao Changpeng spoke during an AMA regarding RWA-related issues, stating: "STO was all the rage in 2017 and 2018, but it turned out that it didn't really take off. Now we have a term------RWA, and the previous unsuccessful attempts do not mean that it will never succeed in the future. RWA has enormous market potential, with total asset sizes potentially reaching trillions of dollars.
However, this development also faces some difficulties. First, in most countries, doing RWA must comply with securities regulations.
Secondly, the lack of development is due to concerns about the authenticity of the assets and the validity of the backing. If you say this token is backed by gold, how do users know if that gold actually exists? If the project team shows users a video of gold, it can be easily faked. If the project team shows users a certificate, users will again doubt the credibility of that certificate. Therefore, the verification of RWA is actually a significant issue. This is also one of the reasons why many gold-backed tokens have never really taken off.
If the authorities can provide support, these issues would be easier to handle. Currently, I believe the global adoption rate of cryptocurrencies is around 3% to 5%. When the adoption rate reaches 10%, crypto will attract more mainstream users, that is, ordinary people, non-technical individuals. They may be more willing to trust the authorities, and if the authorities promote these RWA projects, there could be a larger market. But there is another important issue, which is the price of RWA.
The price of RWA is relatively stable, which is not a good characteristic for trading. If you tokenize a house, the price of the house will not fluctuate like the price of Bitcoin, which can rise or fall by 5% to 10% in a single day. Volatility is actually an attractive factor for traders because they want to trade when prices fluctuate. If prices remain constant, people will not trade, which is also why people do not trade stablecoins.
When the price of RWA does not fluctuate much, trading volume decreases. The lower the trading volume, the thinner the order book becomes. So, if you want to buy a million dollars' worth of assets, the price will go up; if you sell a million dollars' worth of assets, the price will go down, because there are not many buyers and sellers on either side.
This situation leads to two problems: first, insufficient liquidity, which may increase trading costs. Second, low price volatility may not attract investors who want to trade. Therefore, for the tokenization of RWA, we need to find ways to address the issues of liquidity and price volatility to better meet the needs of traders.
I hope things can develop in this direction, but the trading of RWA faces some difficulties that need to be overcome. However, if everyone is eager to tokenize everything, then the market size will become enormous, and liquidity will be good because many people will be involved, so I hope that will happen."
