Comprehensive analysis of the RWA track

牛霸天 · 2023-07-15T03:28:28.000Z

Since the beginning of the year, the market has increasingly discussed #RWA (real world assets), and some believe that RWA will trigger the next bull market. Some entrepreneurs have also adjusted their direction to RWA-related tracks, hoping to promote rapid business growth with the support of the gradually warming narrative. RWA maps assets in traditional markets onto the chain in the form of tokens for web3.0 users to buy and sell. RWA tokens have the right to earn income from assets. A few years ago, the scope of STO was mainly focused on corporate bond financing, but now the scope of RWA is broader: it is not limited to the primary market of traditional assets, any assets circulating in the primary and secondary markets can be tokenized On the chain in a way that allows web3.0 users to participate in investment. Therefore, the narrative of RWA includes a wide variety of assets and a wide range of returns.

Since the beginning of the year, the market has been discussing #RWA  (real world assets) more and more frequently, and some believe that RWA will trigger the next bull market. Some entrepreneurs have also adjusted their direction to tracks related to RWA, hoping to boost the rapid growth of their business under the blessing of the gradually warming narrative.
RWA maps assets in the traditional market to the chain in the form of tokens for web3.0 users to buy and sell. RWA tokens have the right to the income of assets. A few years ago, the scope of STO was mainly focused on corporate bond financing, but now the scope of RWA is broader: it is not limited to the primary market of traditional assets. Any assets circulating in the primary and secondary markets can be tokenized and put on the chain, allowing web3.0 users to participate in investment. Therefore, the narrative of RWA contains a rich variety of assets and a wide range of yields.
RWA has gradually attracted the attention of the market. There may be several reasons: First, the current crypto market lacks low-risk U-based assets, and under the wave of interest rate hikes in the traditional financial market, the risk-free interest rate of major economies has risen to 4% or even higher, which is attractive enough for investors in the crypto-native market. Corresponding to this phenomenon, during the bull market of 2020-2021, a lot of traditional funds also entered the crypto market to earn low-risk returns through arbitrage and other strategies. The introduction of low-risk and high-yield products in the traditional market through RWA may be welcomed by some investors; secondly, the crypto market is not in a bull market now, and even in the crypto-native market, there is a lack of enough narratives. RWA is one of the few tracks currently seen with solid income support, and may achieve explosive growth in business; finally, RWA is one of the bridges connecting the traditional market and the crypto market. Through RWA, there is also an opportunity to attract incremental users in the traditional market and inject new liquidity, which is undoubtedly a good thing for the development of the blockchain industry.
However, judging from some RWA projects we have seen so far, their business indicators such as TVL have not grown rapidly, and the market may have too high short-term expectations for RWA. For an RWA project, the following dimensions need to be considered:
Underlying assets. This is the core issue of the RWA track. Choosing the right underlying assets is very helpful for subsequent management. Standardization of underlying assets. Due to the different "heterogeneity" of different underlying assets, the difficulty of standardizing underlying assets is also different. The more heterogeneous the assets, the higher the standardization requirements and the more complicated the process. Off-chain cooperation institutions and forms of cooperation. High-quality off-chain cooperation institutions can not only smoothly fulfill their obligations, but also fully release the value of the underlying assets. Risk management. The maintenance of underlying assets, asset chain, and income distribution all involve risk management. If it is a debt-type asset, it also involves risk management in asset liquidation and collection after the debtor defaults.
The risk management of RWA is mainly divided into two dimensions: 1. Risk management of underlying assets. The lower the degree of standardization of assets, the higher the risk management capabilities required. Compared with forests and farms, treasury bonds have a high degree of standardization, better asset liquidity, and stronger price discovery capabilities. Therefore, it is easier to manage treasury bonds. However, even for the same type of assets, the difficulty of management varies in different regions and countries. For example, the level of electronicization in some developing countries is low, and debt assets may still exist in paper form. This requires that during the period of holding large bonds, the project party needs to find a place to store the bonds where they cannot be damaged. Assets in paper form are also likely to be "replaced by a cat", and this type of incident has occurred in many regions. In short, for the risk management of underlying assets, the most basic thing is to ensure that the underlying assets are real and valid during the project's duration, the second is to ensure that the value of the underlying assets will not be lost due to human factors, the third should also ensure that the underlying assets can be realized at a fair market price, and finally, it should ensure that the income and principal can be safely and smoothly delivered to investors. This type of risk has a large degree of overlap with the attributes of traditional assets, and there are risk management measures that can be used as a reference.
2. Risk management on the chain. Because it involves data on the chain, if the off-chain institutions are not adequately managed, there may be cases of false reporting of data. Similar negative cases often occur in the traditional financial field. For example, in the fields of commercial bills, supply finance, commodities, etc., there have been huge amounts of fraud. Even through real-time monitoring by sensors and fixed delivery venues, there is still no way to avoid risks 100%. For the RWA industry, which is still in its infancy, I believe that similar situations will occur. Moreover, there is a lack of corresponding regulatory details, and the cost of violating the law is too low. The risk of data fraud on the chain cannot be underestimated.
If you think it's good, please like, follow and forward it to support it. You will gain more valuable information, including the code of wealth, by checking the historical articles! I believe that you are smart enough to find me and make some money together!