Real-World Assets (RWAs): Tokenizing the Physical World

Real-world assets (RWAs) are digital tokens representing physical or financial assets outside the blockchain, such as real estate, commodities, bonds, equities, artwork, and intellectual property.

Real-world assets (RWAs) are physical or financial assets outside the blockchain, such as real estate, commodities, bonds, equities, artwork, and intellectual property. These assets can be tokenized, meaning they're represented by digital tokens on the blockchain.

This process involves replacing sensitive, private data with a series of non-sensitive, randomly generated data, referred to as the token. Tokenization is used in data security and payment processors, not just blockchain ecosystems, and it's usually carried out with cryptography.

In the context of cryptocurrencies, this is essentially the creation of a token for a tangible or non-tangible asset (which may be traditionally illiquid), dividing (possibly) it into smaller, more accessible units on the blockchain.

Types of RWA Protocols

The integration of RWAs into decentralized finance (DeFi) platforms has created new possibilities for financial services. RWAs can serve as collateral for loans, be included in index funds, or be managed through autonomous protocols, bridging the gap between traditional finance and the crypto world. This convergence has the potential to create a more inclusive and efficient financial system, offering investment products similar to those found in traditional finance but with the added benefits of blockchain technology.

There are various types of Real-World Asset (RWA) protocols, each targeting different asset classes:

Public Credit/Equities

These protocols tokenize traditional financial assets like stocks and bonds. Examples include Ondo Finance and Backed Finance, which allow investments in tokenized US Treasuries and fixed-income products.

Real Estate

Platforms like Tangible enable real estate tokenization, allowing users to mint stablecoins backed by real estate and offering fractional property ownership through NFTs. This increases market access with lower capital requirements and enhanced liquidity.

Debt/Private Credit

These protocols tokenize loans and private credit. MakerDAO and Centrifuge are notable examples, with MakerDAO expanding into real-world lending and Centrifuge tokenizing various debt instruments.

Climate/Carbon Credits

These protocols tokenize carbon credits and other environmental assets, facilitating efficient trading and management of climate-related financial instruments as businesses and individuals seek to offset their carbon footprints.

Precious Metals and Commodities

The tokenization of commodities like gold, silver, and oil allows for fractional ownership and easier trading. Pax Gold is a notable protocol that tokenizes gold.

Emerging Markets

Accessing traditional loans is difficult in these countries because the financial infrastructure is often underdeveloped. However, several protocols, like Goldfinch, focus on providing access to emerging markets, which are often challenging to invest in through traditional means.

Oracle/data feeds

Protocols like Chainlink provide essential infrastructure for tokenizing and managing real-world assets on the blockchain by offering Oracle services that connect off-chain data to on-chain smart contracts.

Top RWA Protocols in 2024

The protocols below were chosen in no particular order rather than innovations, amount of TVL, popularity, and other social and financial metrics. Let’s look at the best RWA protocols in the crypto industry without further ado.

Ondo Finance

Ondo Finance is the largest RWA protocol in 2024. As such, Ondo Finance is a blockchain-based protocol that provides institutional-grade financial products and services. It focuses on tokenizing stable, yield-generating assets from traditional finance —such as treasury bonds— to offer individuals the reliability of conventional financial systems mixed with blockchain accessibility.

The protocol has integrated its tokenized products into multiple blockchain networks, including Ethereum, Aptos, and Solana, to expand the accessibility and utility of RWAs.

Key Features:

Provides a decentralized platform for tokenizing and trading real-world assets (RWAs)

Offers a range of financial products, including tokenized US Treasuries and fixed-income assets

Enables fractional ownership and trading of RWAs, increasing market accessibility

Facilitates the integration of traditional finance and DeFi ecosystems

Founders & Investors

Nathan Allman founded Ondo Finance in 2021. He’s the company’s CEO, has a background in traditional finance, and previously worked at Goldman Sachs.

According to Crunchbase, Ondo Finance has raised over $34M in over 3 rounds, with Wintermute, Founders Fund, and Pantera Capital being the leading and most frequent investors.

Centrifuge

Centrifuge is one of the largest RWA protocols. Its primary goal is to lower the cost of capital for small and mid-size enterprises (SMEs) while providing investors with a stable income source.

Centrifuge offers SMEs liquidity through blockchain technology by tokenizing real-world assets into collateral. These assets can be pretty much anything from the real world—bonds, invoices, real estate, revenues, and more.

Overall, Centrifuge seeks to create a trustless, transparent, and accessible financial system by allowing borrowers and lenders to transact peer-to-peer with no intermediary fees or hidden costs.

Key Features:

Provides a decentralized platform for tokenizing and trading real-world assets (RW

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