Written by Jie Xuan Chua, Binance Research
Compiled by: TechFlow
Introduction
The RWA narrative has been on fire lately.
As the user base continues to expand, the tokenization of physical assets (RWA) is in a stage of rapid growth. In an environment where the Federal Reserve continues to raise interest rates, investors are earning rich returns through tokenized U.S. bonds.
Recently, Binance Research released the RWA market report, which deeply analyzed the development status, ecosystem and major participants of RWA.
The report shows that traditional financial institutions are also actively developing the RWA market. Goldman Sachs, Fidelity Financial and others have launched related businesses, and some institutions have built their own private chains to tokenize assets. Regulatory authorities are also studying the direction of RWA supervision.
The report predicts that the total value of tokenized assets will reach $16 trillion by 2030, with huge room for growth. RWA is profoundly changing the way assets circulate and ushering in a new era of integration of traditional and digital assets.
Shenchao compiled, organized and interpreted the report, and systematically sorted out the development trends of RWA to allow readers to fully understand this emerging and rapidly growing market.
Key Takeaways:
The tokenization of real-world assets (RWAs) continues to gain momentum as user adoption increases and large institutional investors get involved.
Combined with relatively low decentralized finance (DeFi) yields, rising interest rates have fueled the growth of RWAs, especially tokenized Treasuries.
Investors are currently effectively lending over $600 million to the U.S. government through the tokenized Treasury market and are being rewarded with an annualized yield of approximately 4.2%.
The tokenized asset market is expected to reach $16 trillion by 2030, showing huge room for growth compared to $310 billion in 2022.
Many protocols have already integrated RWAs or are participating in their growth. MakerDAO, Maple Finance, and Ondo Finance are briefly covered in this report.
RWA Definition and Market Overview
RWA definition: Assets that are mortgaged and brought to the blockchain through tokenization, including real estate, bonds, commodities, etc.
Types of RWA:
Tangible assets: real estate, commodities, collectibles
Intangible assets: bonds, stocks, carbon credits, etc.
By tokenizing RWAs, market participants can enjoy greater efficiency, increased transparency, and reduced human error as these assets can be stored and tracked on-chain.
The general process of RWA on-chain is summarized as follows:
Origin: Asset issuers, token platforms and related parties discuss on-chain matters;
Conception: Discuss, conceptualize and finalize the terms of the offer;
Subscription: Participants interested in the asset decide the size of their investment and subscribe to the asset;
Mint and Distribution: Tokens are minted on-chain and distributed to investors. The raised amount is distributed to the asset issuer;
Secondary trading: If the tokens are tradable, a secondary market may be established to facilitate the circulation of token transactions;
Maturity stage: When the investment terms expire, participants receive the principal and additional returns. Tokens are destroyed.
RWA Ecological Panorama:
The RWA ecosystem has become diverse and expanded steadily. The report divides RWA-related projects into two major categories:
RWA Rails: Provides the regulatory, technical, and operational conditions that RWA relies on, known as rails (guide rails, which means guidance or infrastructure)
Asset Providers: RWAs that focus on originating and creating a variety of assets. These include real estate, fixed income, equities, and other
In the ecological panorama, each subcategory can be broken down into:
Blockchain infrastructure: permissioned chains and public chains dedicated to RWA, providing infrastructure for RWA.
Securitization/tokenization services: services that put RWA on the chain.
Compliance services: Ensure that investors and issuers follow compliance requirements.
Real Estate: Develop and create demand for real estate mortgage RWAs.
Climate Assets: Develop and create demand for climate asset-backed RWAs.
Private Credit: Develop and create demand for private credit mortgage RWAs.
Public Credit/Equity: Develop and create demand for public credit and equity-backed RWAs.
Emerging Markets: Develop and create demand for RWA in emerging markets.
Trade Finance: Develop and create demand for trade finance collateral RWAs.
RWA track growth and outlook
Overall situation:
The RWA market is in the early stages of its development but is already seeing increasing adoption and rising TVL.
According to the protocols tracked by DeFi Llama, RWA has become the 10th largest category in DeFi, with a total locked value of about $6 billion. At the end of June, RWA ranked 13th. A huge contributor to this rise is stUSDT, which was launched in July, allowing USDT stakers to earn RWA-based returns.
There are currently over 41. 3K RWA token holders on the Ethereum blockchain. While this may not seem like a lot in total, the number of token holders has grown significantly from a year ago, more than doubling. The data for the same period last year was about 17. 9K.
The rise of the US national debt:
Yield is an important incentive: U.S. Treasury bonds are widely regarded as the benchmark for risk-free assets in traditional financial markets.
The yield has been steadily increasing slightly and now easily exceeds the DeFi yield.
And assets always seek where profits are greatest, and to prove the utility of RWA, today’s investors can take advantage of real-world returns by investing in tokenized treasuries without leaving the blockchain.
Market size and returns: The tokenized Treasury bond market is currently valued at approximately $603 million, with investors effectively lending the loan to the U.S. government at an APY of approximately 4.2%.
Product Type: Agreements and companies in the Treasury market include Franklin Templeton, Ondo Finance, Matrixdock, etc. Robert Leshner, the founder of Compound, also recently announced that he has established a new enterprise called "Superstate" and has submitted documents to the U.S. Securities and Exchange Commission to set up a short-term government bond fund and use the Ethereum blockchain as an auxiliary record-keeping tool.
RWA Future Outlook
Market Space Forecast: According to a report by Boston Consulting Group, the market size of tokenized assets is expected to reach $16 trillion by 2030.
By the end of the decade (2030), this will account for 10% of global GDP, a significant increase from $310 billion in 2022.
This estimate includes on-chain asset tokenization (more relevant to the blockchain industry) and traditional asset tranches (exchange-traded funds "ETFs", real estate investment trusts), etc. Considering the potential market size, even capturing a small portion of the market would be a boon to the blockchain industry.
Protocols that are developing RWA business
Maple Finance ：
Business model:
Maple Finance is an institutional capital network that provides credit experts with the infrastructure to run on-chain lending operations.
Connecting institutional borrowers and lenders
There are three key parties: borrowers, lenders, and pool agents
Market size:
Maple Finance is one of the market leaders in private lending
Currently, its business has over $300 million in outstanding loans
Product benefits:
In April, products backed by U.S. Treasury bonds were launched
The target annualized rate of return is the 1-month US Treasury yield minus 1% in fees
Providing cash management solutions for users holding stablecoins
Business Value:
Users can obtain on-chain U.S. debt returns without leaving the chain to participate in traditional markets
The chain has high transparency and can monitor asset status in real time
Helps expand the business scope of decentralized finance
Providing an off-ramp for stablecoins
Maker DAO :
Business model:
MakerDAO lends DAI stablecoins through collateral
Borrowers deposit collateral into Vault and obtain DAI loans
Collateral types include crypto assets and RWA
Market size:
MakerDAO is one of the leading protocols in decentralized finance and the third largest in total locked value
RWA assets account for nearly half of total assets, about $2.3 billion
Key Stats:
RWA's revenue contribution has increased significantly to about 50% in the past year
The most recent purchase in June was $700 million worth of Treasury bonds, bringing its total holdings to $1.2 billion. A diverse collateral base allows MakerDAO to take advantage of the current yield environment while diversifying its risk profile.
Ondo Finance :
Business model:
Provide institutional investors with blockchain-based investment products and services. Investors deposit USDC to purchase products such as bond funds and receive tokens of equivalent value. When redeeming, the tokens are destroyed and USDC is returned.
Provides 4 products based on real assets, such as money market funds, short-term government bonds, etc.
The annualized yield of the product ranges from 4.5% to 7.76%.
Market size:
It ranks second with a market share of nearly 26% in the tokenized U.S. bond market
Business Value:
Allow investors to obtain blockchain-based institutional-grade investment products, expanding the investor base of traditional assets
Users can obtain returns from products such as bonds and money markets on the chain, and tokenization improves the liquidity of assets
RWA Noteworthy Developments
Asset tokenization has become a buzzword, with JPMorgan calling it the “TradFi killer app.” In 2023, Blackrock CEO Larry Fink called it the “next generation of the market.”
Interestingly, in addition to DeFi protocols, traditional financial institutions have also shown increasing acceptance of RWA tokenization:
First, global asset manager Franklin Templeton launched its own fund on a public blockchain; in addition, institutions have begun to explore building their own private blockchains to tokenize assets. Looking ahead, it is not inconceivable that traditional exchanges will promote the development of secondary markets. Trading of tokenized RWAs may become popular as adoption increases.
The key events and timeline of RWA are summarized below:
Conclusion
The tokenization of real-world assets provides a powerful use case for blockchain technology, potentially bringing the next wave of users into the cryptocurrency space.
By providing greater transparency and improved efficiency, tokenization could be an attractive alternative to existing mechanisms. We are already witnessing early signs of institutional adoption: traditional companies are exploring a technology that can address the inefficiencies of today’s solutions. The surge in RWAs is also a positive development for crypto investors, who now have access to more opportunities outside of the crypto ecosystem. In addition to being able to take advantage of higher Treasury yields, the integration of risk-weighted assets has introduced more stable assets into DeFi and increased the diversity of the collateral space. Looking ahead, we hope that continued innovation and development in the RWA space will bring more use cases and help drive cryptocurrency adoption.
Original report link:
https://research.binance.com/static/pdf/real-world-assets-state-of-the-market.pdf
