Real World Assets (RWA) are real-life assets such as real estate, vehicles, precious metals, etc., which are tokenized and brought on-chain for use in DeFi. RWA gives DeFi in particular and the crypto market in general the following benefits:
- Increase DeFi liquidity and TVL: Global real estate’s value was $326.5 trillion in 2020 while gold market capitalization was $12.39 trillion. Therefore, with only a small part of it being tokenized, DeFi’s TVL will also grow strongly.
- Opening up a new industry for the crypto market. DeFi users will have more new types of assets to invest in.
- Enables cross-border asset transfers thanks to blockchain and DeFi technology.
Real World Asset use cases
Stablecoins are a typical example of using Real World Asset effectively in DeFi. This is demonstrated by the fact that 3 out of 7 coins with the highest capitalization are stablecoins. Stablecoins such as USDC, USDT, etc. which are backed by a reserve asset of USD and fully audited have been used in most DeFi protocols.
Synthetic tokens are another use case of RWA in DeFi. Synthetic tokens allow real-world assets like currencies, stocks, and commodities that can be derivatives traded on DeFi through options, margin, futures, and more.
RWA can also be used in lending protocols as a cryptocurrency. Unlike traditional lending protocols that operate based on cryptocurrencies, RWA lending platforms will serve borrowers with real-world businesses. This model offers relatively stable returns and is isolated from the volatility of cryptocurrencies.
Outstanding Real World Asset projects
MakerDAO is a lending project that was launched in 2017 on Ethereum blockchain. It allows users to collateralize assets like ETH to create a stablecoin called DAI for use in DeFi. In March 2023, MakerDAO proposed to buy $750 million in US corporate bonds to take advantage of the profitability of Real World Asset. Although it only accounts for about 12% of the assets that MakerDAO is holding, RWA has brought more than 50% of the total revenue for this project.
Goldfinch is a lending project for real-world businesses and especially businesses in emerging markets. Goldfinch supports a wide variety of businesses and offers attractive yields of up to 30%.
Goldfinch helps businesses borrow crypto without the need to register digital assets as collateral. Instead, the loans are fully collateralized with RWAs. This makes it possible for any business to enter the crypto market.
Maple Finance (MPL)
Maple is a lending project aimed at customers who are organizations and businesses. Maple provides crypto-related businesses with loans without collateral. However, the project is now gradually shifting to providing mortgage loans.
Centrifuge is a project that allows users, small and medium businesses to mortgage real assets to create Crypto loans. The special feature of Centrifuge is using NFT to increase the reliability and security of real assets when lending.
TrueFi is an uncollateralized lending DeFi protocol. TrueFi works by connecting lenders and borrowers together in order to eliminate the intervention of traditional intermediaries like banks. TrueFi helps crypto lenders enjoy attractive, sustainable rates of return, while providing crypto borrowers with predictable loan terms with no collateral required.