Real World Assets (RWA) refers to the tokenization of assets with stable value and income in the real world (such as real estate, cars, artwork, etc.) into the chain for use or trading.
RWA is a bridge connecting the real world and the DeFi field, but this track did not attract the attention of the industry at the beginning. As early as the end of 2020, MakerDAO released plans and guidelines to formally incorporate RWA into its strategic focus; Aave announced the launch of the RWA market at the end of 2021, allowing mortgage lending of real assets; until March this year, three cases occurred in the industry Hot events drove the further development of RWA: Citi once released a report, which mentioned that almost all valuable things can be tokenized; Binance announced that it has become a Layer 1 blockchain Polymesh node operator; ) Institutions such as Goldman Sachs, Hamilton Lane, Siemens, and KKR have indicated that they are working hard to put their real-world assets on the chain.
SharkTeam's statistics on some characteristics of DeFi and TradFi are as follows:
It can be seen that the transaction of actual assets on the chain greatly reduces the transaction cost of TradFi, and the use of point-to-point transactions on the chain reduces the participation of middlemen, and the transaction assets on the chain are transparent and open, which cannot be tampered with, which improves capital efficiency and reduces transaction risk.
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1. RWA track analysis
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1. Stocks
Swarm Markets will be launched in October 2021. As of February 2023, Swarm will launch the world's first DeFi public investment product targeting Apple, Tesla and two U.S. Treasury bond ETFs. It is worth mentioning that Swarm is decentralized but licensed, they link users' wallets to their identities through the KYC process, so as to achieve user self-custody (decentralization), while providing anti-money laundering to law enforcement through KYC and information needed to counter terrorism (licensing and regulation). Users need to go through a process to be approved before the wallet can interact with the Swarm platform smart contracts.
Swarm Markets provides Swap, liquidity pool, pledge and other functions. Different from other exchanges, before Swarm conducts the first transaction, users will be reminded to set up their proxy contract, and the first transaction will include the network fee for deploying the personal proxy contract, but Swarm will use proxy in subsequent transactions Contracts are traded to save gas costs. Additionally, Swarm can also be redeemed for crypto vouchers. Swarm crypto vouchers are similar to gift cards but denominated in cryptocurrencies and are currently available in both WBTC and ETH. Users can use Yoti (a digital identity app that provides a secure way for individuals to prove their identity and age to thousands of UK businesses online and in person) and its partner free app Purchase vouchers after EasyID verifies identity. Swarm also provides decentralized over-the-counter trading (dOTC) services, enabling institutions to conduct large transactions on the chain. Through peer-to-peer (P2P) contracts, it will facilitate high-value transactions, reduce slippage and eliminate counterparty risks, while charging 0.3 % of transaction fees.
SMT is a token based on the ERC 20 protocol on the Ethereum blockchain. The distribution details of SMT are as follows:
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2. Bonds
Bonds are low-risk safe-haven assets and the main investment product for fixed income. Among them, U.S. Treasury bonds are generally recognized as the risk-free interest rate in the market, but with changes in the market environment, the current overall performance is not satisfactory. In the encryption industry, take the lending projects Compound and Aave as examples. According to LoanScan data, in January 2023, USDC’s deposit rates on Compound and Aave dropped to 0.81% and 0.65%, lower than the interest rates on U.S. Treasury bonds. In order to balance risk exposure, many crypto projects have switched to national debt. For example, MakerDAO previously allocated 500 million DAI to invest in US treasury bonds and corporate bonds.
In January 2023, Ondo Finance announced the launch of a tokenized fund, providing users with the opportunity to invest in U.S. Treasury bonds and agency-grade bonds on the chain. It is understood that Ondo Finance has launched three types of tokens through large and highly liquid ETFs managed by asset management institutions such as Blackrock and PIMCO: U.S. Government Bond Fund (OUSG), short-term investment-grade bond fund (OSTB) and high-yield Corporate Bond Fund (OHYG). Ondo Finance will charge an annualized management fee of 0.15% (0.0125% monthly), which can be found on the fund's product page.
OUSG, a treasury bond fund designed to appreciate in value as interest increases, had a token price of $96.83 as of May 29.
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3. Real estate
Through the tokenization of real estate, RWA converts real estate into NFT for transactions or as collateral for loans; real estate on the chain can fragment housing sources, allowing multiple users to hold part of the ownership, which is generally very beneficial to retail investors.
Tangible Protocol leverages real estate-backed native yield stablecoin Real USD (USDR), providing users with access to tokenized and segmented RWA real estate through its marketplace. On Tangible, anyone can use USDR to purchase valuable physical goods from the world's leading suppliers. USDR is a US dollar-pegged stablecoin launched by Tangible in 2022. It can be minted with TNGBL or DAI at a ratio of 1:1, and can be redeemed at any time by converting it into DAI at a ratio of 1:1. Using the redemption function will generate 0.25% cost.
TNGBL is the governance token of the Tangible market with a maximum supply of 33,333,333. TNGBL can be used as a reward Token to encourage the use of the market and subsidize USDR income. At the same time, it has a sharing mechanism (incentives lock TNGBL), and can also be used as USDR support, which can be used to mint USDR. The initial distribution plan promises to distribute the majority to the DAO and the community (70.8%). The rest is mostly reserved for the team, investors, advisors, and Tangible Labs. Another 1.25% will be sold through PeakDeFi's IDO in April 2022.
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2. On-chain data performance
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1 . Top 10 RWA Cryptocurrencies by Market Cap
Below are the top 10 RWA tokens ranked by market capitalization:
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2. Changes in the number of RWA token holders on Ethereum
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3.Swarm Markets
Since the beginning of this year, Swarm Markets TVL has been rising all the way. On April 5, TVL reached a record high of 1.9267 million US dollars, and then showed a downward trend. As of May 31, 2023, the TVL of Swarm Markets is US$933,000, of which 64% is provided by SMT, 14% comes from WETH, and the stablecoins USDC and DAI account for 12% and 9% respectively.
On August 8, 2021, not long after Swarm Markets went online, its market capitalization rose to US$33.3778 million, and its trading volume on that day was US$842,500, a decrease of 122.62% from the previous day (the highest trading volume in history was US$1.6493 million). Since then, the data on the chain has performed mediocrely. The average TVL in 2022 is 1.280 million US dollars, and the average transaction volume is 11.9239 million US dollars. From March 2023, the market has improved slightly. On April 6, the daily trading volume was 1.2076 million US dollars, and the TVL reached 10.5134 million US dollars, a record high in the past year.
As of May 31, the total number of SMT holders is 2,309. The following figure shows the top 10 addresses on Ethereum ranked by currency holdings:
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4.Ondo Finance
Ondo Finance launched on-chain bonds in January this year. On May 20, TVL reached a record high of US$138 million, and has since declined slightly. As of May 31, TVL was $103 million.
SharkTeam’s statistics on the top 10 fUSDC holders on Ethereum are as follows, among which the top 3 addresses account for 72.88% of the total currency holdings.
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5. Tangible
Tangible’s performance has been mediocre since its launch. Until February 3 this year, its TVL began to grow continuously. As of May 31, it reached 33.3168 million US dollars, an increase of 370.95 times compared to February.
From February 2023, the market value and trading volume of USDR will show a trend of substantial growth. On May 12, the transaction volume reached 3.4174 million US dollars, a record high since its launch, and the TVL on that day was 23.1973 million US dollars. On May 30th, TVL reached its historical peak of US$31.3644 million. In just half a month, TVL rose by 35.2%.
The figure below shows the APY changes of USDR on the Polygon chain. Annual Percentage Yield (APY) refers to the amount earned by compounding interest (interest + principal) in one year. It can be seen that the current APY has not changed much compared with the initial stage of launch, and has a slight downward trend, with a decrease of 5.78%.
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3. Influence and controversy
RWA lowers the barriers between TradFi and DeFi, and the way of tokenization attracts more traditional funds into the DeFi market, adds more types of assets available to the DeFi market, and promotes the interoperability between traditional finance and the encryption industry . At the same time, RWA reduces the cost of financial transactions, avoids complicated intermediaries and handling fees, and breaks geographical restrictions, allowing assets to circulate globally, forming a faster and simpler transaction system. It is worth mentioning that RWA is not a new concept. The common stablecoins USDC and USDT are essentially RWA, which is a mapping of the real US dollar on the chain.
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