Real World Asset (#RMA) will be the revolutionary factor for DeFi to expand.
The only thing it needs is time.
These are not bold claims, lemme tell you why.
A 🧵 about RWAs and some notable projects on the field.
0/22
What to expect from this thread:
1️⃣ RWAs overview
2️⃣ Lending in RWA
3️⃣ Defi derivative and synthetic with RWAs
4️⃣ Related segments with RWAs.
5️⃣ Thoughts
First, definition.
1️⃣ RWAs overview
Real World Assets (RWAs) are assets that exist in the real world, but are tokenized and brought to the blockchain as a source of yield within DeFi.
1.
Assets could be:
🏠 Tangible: real estate, artwork, precious metals, commodities
🧾Intangible: equities, government bond, trade finance
Therefore, RWAs are the driving force that connect Defi with multi-trillion-dollar Trafi industry.
Or, simpler, a BRIDGE of both worlds.
2.
Advantages:
🔼 Increase liquidity: illiquid assets will have another solution to boost the cash flow.
🔼 Capital efficient: Fractionalizing RWAs allow user to make investment regardless of capital.
🔼 Transparent ownership: on-chain data could prove user's ownership easily
3.
🔻Lawsuit: Limited crypto regulation in some countries makes licensing or paying tax difficult.
🔻KYC/AML: this is a must with RWAs, which affect privacy in crypto.
🔻Asset risks: the government could freeze RWAs.
🔻Liquidation problem: RWAs take time to change ownerships.
4.
2️⃣ Lending in RWA
Let's begin with Lending, where assets from Defi can break out of the 'digital assets' stereotype, by attaching them with RWA.
These protocols borrow assets from Defi investors (in USDC mostly), then invest in real-world projects to create real value.
5.
On top of that, borrowers can use their real assets as collateral through these lending protocols, to access the fund in crypto.
In the end, the protocol profits, along with tokenized RWAs on blockchain, create a new source of capital flow to Defi.
6.
➡️ Notable project
One notable project in this field is @defactor_, an integration layer for TradFi businesses to leverage alternative finance with DeFi.
In short, Defactor creates the connection between Trafi borrowers and Defi lenders, with the use of RWAs as collateral.
7.
Why $FACTR from Defactor?
💎 As an integration layer, Defactor could partner with great RWA lending protocols in the field, like @centrifuge
💎 Interesting token usecase, hold $FACTR to get access to the platform.
💎 Token buyback mechanism help reduce inflation.
8.
RWA lending creates a new source of capital flow to Defi, but where exactly will it flow to?
3️⃣ Real Assets Defi
These protocols allow users to trade assets like commodities, precious metal, bond, stocks, and currencies right on blockchain.
9.
There are 2 types:
🔵 Public equity RWAs: equity and real asset instruments are stored off-chain, owning the tokenized version equal to ownership of the asset in real life.
🔵 Synthetic and derrivative: investors gain exposure to RWAs without owning the underlying asset.
10.
🔵For public equity RWAs:
By backing 1:1 with real-world assets, the tokenized version can be easily swapped for real assets, and are tradable in the public marketplace.
11.
One decent project that uses public equity RWAs is @BackedFi
Backed finance makes capital markets more accessible and equitable, by bridging real-world assets to blockchain.
Their tokens are freely transferable across wallets, and are 100% backed by the underlying asset.
12.
Currently on Ethereum Blockchain, Backed tokens are only sold to eligible professional investors, who have passed KYC.
After that, these qualified parties may make tokens available on the secondary market, where others could buy or sell normally.
13.
Next, let's move to the second type of Real Assets Defi:
🔵 Synthetic and derivative
On these platforms, users get exposure to real-world assets by trading or leveraging RWAs through interaction with smart contracts, without actually owning the underlying assets.
14.
For Synthetic and derivative project, I think of @landxfinance
This project bring real-world production to DeFi with tokenized agricultural commodity vaults.
That makes Landx the very first Perpetual Commodity Vault Protocol for RWAs on blockchain.
15.
The protocol issues Xtokens, which represent agricultural derivatives such as xSoy, xWheat, xCorn, and xRice.
By obtaining these tokens, investors can gain exposure to the output of real-world that is unaffected by inflation, political instability, and market volatility.
16.
In addition, Landx benefits:
✨ Farmers: access fast, competitive loans by pledging a portion of their harvest to LandX.
✨ Users: get profit through real yield and arbitrage in commodity markets.
✨ Validators: connecting users and farmers for mutual revenue benefits.
17.
Finally, saved the best for the last.
To diversify investor portfolio & create more opportunities with RWA, we discuss:
4️⃣ Related segments with RWAs
If RWAs become a trend, these related segments will definitely be benefited
18.
3 segments that I think are very promising currently:
🔵 Oracles: an effective option to get up-to-date price and data of RWAs, especially for trading platforms.
Some suggestions: Chainlink ($LINK), Band Protocol ($BAND), or API3 ($API3)
19.
🔵 Regulation and Enforcement
Project in my list: @FirmaChain ($FCT)
Firma Chain solves the problems of tampering and forgery, high management costs, and other limitations of contracts by using the decentralized nature of blockchain technology.
20.
🔵 RWAs supported Layer 1
@realio_network
This L1 is built for the issuance and management of digitally native real-world assets.
Realio will eliminate the barriers to invest-in, trade, and leverage exclusive real estate, private equity, and other RWAs through DeFi.
21.
Anddd.. that concludes my 7 days researching RWAs.
5️⃣ Thoughts
Long story short, RWAs are gradually making a great impact in connecting Defi and Trafi, which we can see by the performance of a lot of RWAs projects recently.
Will it be the future of Defi? Time will tell.
22.
Tagging some Chads that give me the idea for this thread:
@IamZeroIka
@0xTindorr
@CryptoShiro_
@ViktorDefi
@TheDeFISaint
@alpha_pls
@IamZeroIka @0xTindorr @CryptoShiro_ @ViktorDefi @TheDeFISaint @alpha_pls Some chads that are making a great impact on the community. Please keep it up:
@crypto_linn
@Only1temmy
@OnChainWizard
@RuggedWojak
@0xkyle__
@poopmandefi
@Louround_
@Hercules_Defi
@ZoomerOracle
@Cryptotrissy
@JackInabinet
@IamZeroIka @0xTindorr @CryptoShiro_ @ViktorDefi @TheDeFISaint @alpha_pls @crypto_linn @Only1temmy @OnChainWizard @RuggedWojak @0xkyle__ @poopmandefi @Louround_ @Hercules_Defi @ZoomerOracle @Cryptotrissy @JackInabinet That's it. You've finished this thread, you're the real one ❤️
If you like my content and look forward to seeing more, please leave a like, follow for @NathanDegen_ , and comment.
That would help me a lot.
Thank you.
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