The Rise of RWA: A Bridge Connecting Reality and Blockchain

RWA stands for Real World Assets, which refers to representing and trading real-world assets in a digital and tokenized manner on the Blockchain. These assets include real estate, commodities, bonds, stocks, artworks, precious metals, intellectual property, etc. The core idea of RWA is to bring traditional financial assets into a decentralized financial ecosystem through blockchain technology, achieving more efficient, transparent, and secure asset management and trading.

The significance of RWA lies in enabling illiquid real-world assets to achieve liquidity through blockchain technology, allowing participation in the DeFi ecosystem for operations such as lending, staking, and trading. This approach of connecting the real world with the blockchain world is becoming an important development direction in the Web3 ecosystem.

RWA is essentially a bridge between crypto-native assets and traditional assets. It requires both on-chain technology support from smart contracts and legal protection of the underlying assets in the real world. The tokenization process includes the purchase and custody of the underlying assets, establishing a legal framework for the relationship between the tokens and the assets, and ultimately the issuance of the tokens.

The development of RWA can be divided into three stages: early exploration, preliminary development, and rapid expansion.

• The years 2017-2019 marked the early exploratory stage, during which some pioneering projects in security tokenization and commodity tokenization emerged.
• The period from 2020 to 2022 was the initial development stage, during which multiple DeFi projects began to introduce RWA, and traditional financial institutions also started to make their moves.
• Since 2023, we have entered a phase of rapid expansion, with large asset management companies beginning to attempt asset management through tokenization, and regulators also starting to intervene in the formulation of relevant frameworks.

RWA has shown application potential in multiple fields, mainly including:

1. Real Estate Industry: Improve the liquidity of real estate and reduce individual investment risks.

2. Fiat to Stablecoin: Repackaging fiat currency into programmable digital assets to directly participate in the DeFi ecosystem.

3. Lending Market: Expand the range of collateralizable assets to provide more financing channels for businesses and individuals.

4. Bonds and securities: Improve issuance and trading efficiency while ensuring compliance.

The RWA market size is rapidly growing. According to data, the TVL related to RWA has reached 6.3 billion USD, a year-on-year increase of 6000%. Several well-known companies predict that the total market value of RWA could reach 16 trillion USD by 2030.

In the RWA ecosystem, some projects have gradually become leaders:

1. Centrifuge: A platform for tokenizing real-world assets on-chain, integrating DeFi lending protocols with real-world borrowers.

2. ONDO Finance: An institutional-grade financial protocol focusing on the tokenization of stable assets, such as U.S. Treasury bonds.

3. BlackRock BUIDL: An ETF launched by BlackRock and Securitize, it is the first tokenized fund on Ethereum.

Despite the broad prospects of RWA, it still faces numerous challenges, especially in terms of regulatory compliance. Caution should be exercised when investing in related projects, and close attention should be paid to regulatory trends. With the development of technology and the improvement of regulations, RWA is expected to become an important bridge connecting traditional finance and the crypto world, promoting wider asset tokenization and financial innovation.