Looking to bolster your portfolio with classic assets? But the decentralized way?

Real World Assets are bridging the gap between Web2 and Web3 for users to take advantage. As the name suggests they are real world, tangible assets that then become tokenized on the blockchain thanks to smart contract technology.Whether they use them for investment purposes or as a means to execute business, Real World Assets are taking the blockchain by storm.

Read on to learn more about Real World Assets and how they could be exactly what the crypto space needs to make that all-important leap into the mainstream!

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What are real-world World Assets? 

Real-world World Assets (RWA) are an emerging asset class within the world of crypto. RWAs are backed by real-world tangible assets and are then placed onto the blockchain for further use and development. They range from real estate to gold all the way to bonds. 

These asset classes are incredibly popular within the financial world and have been used as investments and ways to hedge inflation. 

Leveraging an on-chain asset against a RWA creates a somewhat better playing field. Investment yields do not face a backlash when markets take a turn for the worse. With how volatile crypto markets can be, this gives newcomers peace of mind. 

Overall, introducing RWA to crypto gives users more ways to diversify their investments and earn yield. With them being backed by less volatile asset classes, this gives them less risk than would normally be associated with a Web3-related investment. 

Who are the key players in this untapped sector of the blockchain? Let’s look further into this…

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What are some examples of Real World Asset projects in crypto?

To make use of Real World Assets in DeFi, businesses and projects have different providers and lenders they can turn to. 

At the moment, there are some key protocols leading the way, offering organizations more accessible ways into the blockchain than traditional lenders. 

• Goldfinch 

Our first example of a RWA protocol is Goldfinch. They are a well-established financial body offering investments to organizations in emerging markets. They have a $101,344,767 active loan value and are receiving further backing from the likes of Coinbase Ventures and A16Z. 

• Maple Finance 

Another big lender in RWA is Maple Finance. They have distributed well over $2 million in funding. They are described as “the only on-chain marketplace focused exclusively on serving institutional and Individual Accredited Investors and their needs”. They provide treasuries and refinancing for organizations, acting as a bridge onto the blockchain from TradFi. 

• MakerDAO

Our third example is MakerDAO. This provider has made their own stablecoin, $DAI, which is used by businesses and organizations for lending. Being pegged against the dollar gives this provider extra value. So far, 400 apps, services, and games have signed on with MakerDAO, showing the importance of this RWA protocol. 

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Pros and Cons of Real World Assets

When discussing a topic like RWA, it is always best to have an open and fair discussion. Highlighting strengths and pain points gives you a clear understanding and allows you to form your final conclusion. 

This is especially useful if you are looking to utilize any asset on the blockchain, Real World Assets included!

Pros 

Firstly, RWAs are backed by tangible assets and markets, as previously mentioned. This helps them hedge against inflation and makes for a less volatile investment. 

Furthermore, investing in RWA gives you access to the blockchain. This means that transparent transaction data from large organizations is available for all to see.

Thirdly, it can be argued that by storing transaction data on the blockchain, businesses can save time and money on resources. Data is stored conveniently without the need for administration or storage fees.

Cons

Real World Assets are fractionalized, giving people the opportunity to own parts of an asset. If this becomes fragmented, then ownership may become too diverse, causing conflicts of interest regarding the specific asset. As a result, this could devalue the asset. 

While the RWA is backed by regulated assets, the crypto industry can still be considered unregulated. While new regulation is being enforced, the current lack of it may pose an issue for some outsiders looking for access to the blockchain. 

A final point to consider is: are they really accessible? While they give investors another route to earning a high yield, many are still uneducated on the wider Web3 paradigm. This could pose an issue with onboarding investments through RWAs. 

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The Final Verdict on RWA 

The future is bright for RWA. We have considered the pros and cons of them, and while there are drawbacks, we feel that over time they can be overcome. 

Crypto analysts seem optimistic about the growth of RWA. The Boston Consulting Group (BCG), a huge body in traditional finance, is speculating that this sector of Web3 could grow to a $16 trillion industry by 2023.

What is your opinion on Real World Assets? Are they the future of crypto? Let us know your thoughts. 

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