RWA and DeFi
Since last year, we have observed that some traditional financial giants are actively laying out plans for RWA (Real World Assets). For example, Goldman Sachs launched GS Dap (a platform developed based on the Digital Asset's Daml smart contract language and the privacy blockchain Canton) to tokenize traditional assets; Siemens issued a $60 million bond using RWA; and BlackRock launched the tokenized investment fund BUIDL (which mainly focuses on investing in liquidity assets such as U.S. Treasury bills, repurchase agreements, and cash), among others.
Previously, Citigroup also released a research report titled "Money, Tokens, and Games," predicting that by 2030, there will be $4 trillion to $5 trillion in tokenized digital securities, and the trade finance transaction volume based on distributed ledger technology will reach $1 trillion.
In the past two years, RWA has experienced rapid development, and so far, its TVL has grown from $100 million to $6.4 billion, as shown in the figure below.
This does not even include the dollar asset reserves of various Stablecoins. If these are included, the TVL of RWA has already exceeded $11 billion, as shown in the figure below.
Although the TVL data above suggests that the RWA market (mainly concentrated in tokenized real estate, stocks, foreign exchange, etc.) has exciting growth potential, the largest RWA currently is actually tokenized US Treasuries, which account for over $2 billion of the TVL. As shown in the figure below.
From the figure above, we can also see that the current yield on US Treasuries is around 5%, while some on-chain lending protocols can offer higher yields. As shown in the figure below.
Therefore, logically, DeFi yields should always be higher than bond yields because the risks involved in DeFi lending protocols are greater than the risks of funding the U.S. government (U.S. Treasuries). This implies that in an efficient market, the yield on tokenized government bonds should be lower than the yield on DeFi.
However, for institutions, the yield of DeFi is easily affected by token volatility, technical security, etc., so large funds are reluctant to enter. Institutions often seek lower-risk high-yield products, such as U.S. Treasuries, making RWA based on U.S. Treasuries a new possible choice.
Currently, one of the main motivations for introducing RWA into the DeFi space is that RWA can provide a stable, risk-free return for the crypto market. DeFi protocols can capture the income-generating value of underlying assets through RWA projects (essentially establishing a dollar-based asset class).
1. RWA and DeFi
RWA and DeFi can create mutual benefits and meet different needs, such as in asset risk management:
Currently, DeFi yields mainly come from activities like staking, trading, and lending. If the market is relatively active, the associated yields will also be relatively high. However, once the crypto market enters a downturn and on-chain activities become less active, DeFi yields will decline.
For a long time, U.S. Treasuries have maintained relatively high yields, as shown in the figure below. In this context, some traditional DeFi protocols have seen opportunities and begun to gradually introduce U.S. Treasuries. This not only helps secure the assets of the protocol's treasury but also allows for stable returns based on U.S. Treasuries (risk-free returns).
Taking MakerDAO, which we are familiar with, as an example, the protocol has focused on the RWA space since last year and has accumulated assets in U.S. Treasuries, with RWA now accounting for over 40% of its asset categories, as shown in the figure below.
Additionally, MakerDAO recently announced plans for a comprehensive reform of its collateral ecosystem. Besides unwinding WBTC positions (due to concerns over security following Sun Yuchen's involvement with WBTC), MakerDAO has started accepting applications for RWA tokenization and innovative products based on short-term Treasury bills, planning to tokenize up to $1 billion in assets (this plan will depend on community proposals, and the application process will continue until September 20, but Maker retains final decision-making authority).
Different individuals may have varying understandings of risk management. For example, some retail investors may think that entering the crypto space means aiming for tenfold or hundredfold returns. However, for many large funds, lower-risk high-yield products (compared to real-world yields) are the preferred choice, such as RWA and BTC ETFs.
2. Classification of RWA
- From the perspective of asset categories:
Currently, RWA mainly includes US Treasuries, Private Credit, Tokenized Commodities, Tokenized Stocks, etc. Among them:
In terms of US Treasuries, the current Total Value is $1.94 billion, with an Avg. Yield to Maturity of 4.95%. Representative protocols in this subfield include Securitize, Ondo, Hashnote, etc.
In terms of Private Credit, the current Active Loans Value is $8.85 billion, Total Loans Value is $14.09 billion, and Current Avg. APR is 9.02%. Representative protocols in this subfield include Figure, Centrifuge, Maple, etc., as shown in the figure below.
- From the perspective of project categories:
Currently, RWA-related projects include Tokenization Platforms, Real Estate, Infrastructure, Collectibles, etc.
For specific project classifications, I found that HouseofChimera has done a comprehensive整理, so I will directly share it here. As shown in the figure below.
As for the introduction of some specific RWA projects, there has already been considerable整理 and introduction in previous discussions, so we will not elaborate further here. Interested readers can refer back to historical articles. As shown in the figure below.
In summary, from a short-term perspective, the current participation and audience of RWA seem to be mainly concentrated among institutional users, while retail investors find it difficult to find entry points (except for speculating on RWA-related concept tokens). From a long-term perspective, RWA, as a financial innovation, can integrate well with DeFi. Although it will face various issues (such as regulatory challenges) on its development path, there is indeed a lot of imaginative space, and we are still in the early stages of this field.
At the end of the article, let's briefly look at some noteworthy information from the past two days:
On August 23, at 10 PM Beijing time, Powell will give a speech, which seems to be a topic of much attention today. The market currently predicts a 25 basis point rate cut in September. If Powell's speech today contradicts this market prediction, it may have new adverse effects on the market (especially risk markets), as market sentiment seems to be undergoing some changes.
On August 23, Sony's Sony Block Solution Labs announced the launch of the Ethereum Layer 2 network Soneium. Soneium is built on Optimism Rollup technology, using the OP Stack of the Optimism blockchain ecosystem, and is expected to launch its testnet in the coming days. As shown in the figure below.
On August 22, Babylon launched the first phase of its mainnet Bitcoin staking, reaching the staking cap of 1,000 BTC in just over 3 hours, with approximately 12,700 users participating in the staking. However, the first phase of staking will not provide direct rewards; Babylon has designed a points system to incentivize players to stake. During the staking of 1,000 Bitcoins, every Bitcoin block will generate 3,125 points, which will be distributed proportionally to all staking addresses during the staking period.
On August 22, the NFT market Magic Eden officially announced its token ME. More information about the ME token, including token economics and utility details, will be announced later. It remains to be seen how many users might receive airdrops from Magic Eden this time. As shown in the figure below.
That's all for this issue. More articles can be viewed on the Huahua Huawai homepage.
Disclaimer: The above content is merely personal opinions and analyses, intended for learning records and communication purposes only, and does not constitute any investment advice. The crypto space is a highly risky market, and many projects carry the risk of going to zero at any time. Please view it rationally and take responsibility for yourself.
