Real World Assets (“RWAs”) are assets that exist off-chain, but are tokenized and brought on-chain to be used as a source of yield within DeFi.
The potential impact that RWAs could have on DeFi seems transformative.
RWAs can offer yields to DeFi which are sustainable, reliable, and backed by traditional asset classes.
RWAs can render DeFi to become more compatible with external markets, resulting in greater liquidity, capital efficiency, and investment opportunities.
RWAs allow DeFi the ability to bridge the gap between decentralized financial systems and traditional financial systems.
RWAs can represent tangible assets, such as gold and real estate, as well as intangible assets, such as government bonds or carbon credits.
The main driving force behind bringing real world assets onto the blockchain is the belief that, in the long-term, DeFi will offer unique opportunities and market efficiencies to asset holders, which cannot be found in traditional financial systems.
The ability to easily fractionalize and disperse RWAs in DeFi renders previously unfractionalized, total sum, private credit investments to become accessible to a new set of investors.
Fixed income is the predominant market in the RWA space.
There are a number of topical trends that are shaping the evolution of the RWA ecosystem: layer 1 RWA protocols, regulation and enforcement mechanisms, macro environment.
Real World Assets: The Bridge Between TradFi and DeFi
Binance Research (Mac Naggar)
Mar 2nd, 2023