Booming RWA Sector: A Gateway for Capital into the Crypto Market?
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Starting in the first half of 2024, the RWA (Real World Assets) sector has gradually become a hot new concept in the blockchain industry. According to Dune Analytics data, the RWA narrative has shown the second-largest growth since the beginning of the year, with the sector increasing by 117%, second only to the Meme sector. The leading project, Ondo Finance, saw its native token ONDO rise by over 110% within a week, leading the entire RWA sector, with multiple project tokens continually reaching new all-time highs.
Additionally, RWA has attracted the attention of institutional markets, with several institutions highlighting the potential of RWA in their reports, including Boston Consulting Group, Messari, and Binance Research. Traditional financial giants such as Citibank, BlackRock, Fidelity, and JPMorgan have also entered the field. In mid-July, at the China-Hong Kong Financial Elite Exchange Center in Admiralty, Hong Kong, elites from the Academy of Commerce, Hong Kong University of Science and Technology, and various enterprises and associations gathered to discuss cutting-edge issues of cross-border data flow and digital assets. The symposium paid special attention to the combination of Real World Assets (RWA) with digital assets, discussing the latest developments and potential in this field.
1.About RWA
Real World Assets (RWA) is not a completely new concept, but rather a new sector. It represents the combination of real-world assets with tokenization, symbolizing the integration of traditional assets with Web3.0 crypto assets. On the blockchain, RWA tokens represent actual assets that can be traded. These tokens are an on-chain representation of real-world assets, including fixed-income assets (such as government debt and corporate bonds), equities (such as real estate and gold), and more. In recent years, synthetic asset protocols (such as Mirror, Synthetix, MakerDAO) and NFT applications (such as IP tokenization and art fractionalization) have all involved the RWA concept.
Main application scenarios include:
- Asset Tokenization: Representing traditional assets such as real estate, gold, and artwork on the blockchain through tokenization technology, facilitating trading and investment. This approach makes fractional trading of high-value assets possible, lowering the investment threshold.
- Expansion of Financing Channels: Businesses and individuals can obtain new financing channels by using real-world assets as collateral. For example, securing loans through RWA by mortgaging real estate or raising funds by tokenizing artwork.
- Asset Securitization: Converting the income rights of actual assets into digital securities, enabling transparent and efficient transactions through blockchain technology. This method is commonly used to digitize traditional financial assets such as bonds and equities.
- DeFi Integration: Integrating RWA assets into decentralized finance (DeFi) platforms to provide users with more financial products and services, such as RWA-based lending protocols and liquidity pools.
- Smart Contract Applications: Utilizing smart contracts to automatically execute and manage transactions related to RWA assets, such as automatically distributing income and managing rights and obligations, thereby improving operational efficiency and transparency.
Let's take a simple example: USDT, which we often use, is an example of RWA (Real World Assets), where real-world dollars are pegged to on-chain assets. We can imagine this further—real-world assets, whether small items like musical instruments, watches, or even limited-edition sneakers, or larger ones like real estate, can theoretically be represented on the blockchain. We're already starting to see actual cases of RWA emerging more frequently. For instance, in June this year, Animoca and Galaxy Co-founder Yat Siu used a violin that once belonged to Russian Empress Catherine the Great, which he acquired at auction, as collateral with Galaxy and secured a loan worth millions of dollars. For real asset holders, this is undoubtedly beneficial, as it provides liquidity for their physical assets. And for on-chain users, whether they hold assets in the form of tokens or NFTs, having real-world backing adds a layer of security. Both institutional participation and on-chain data show a growing trend.
2.Current State of the RWA Market
In recent years, data elements and digital asset trading have become focal points in policy and market discussions. The establishment of various data institutions marks the growing importance of data elements. For example, RuiHe Capital is in the process of setting up an RWA investment bank, aiming to collaborate with licensed exchanges and Hong Kong-based financial institutions to promote the application of the RWA model. According to Dune's data dashboard, it is evident that the total volume of related tokens on-chain in the DEX has been steadily increasing.
According to CoinGecko's Q2 2024 crypto industry report, the RWA sector accounted for 11.3% of web traffic in the second quarter, second only to Meme tokens, which ranked first with 14.34% of the traffic. These figures indicate that the RWA sector is gaining increasing attention and is poised to become the next leader in crypto wealth growth. Data from RWA.xyz shows that, as of the date of writing, on-chain assets in the RWA sector have reached $11.73 billion, primarily concentrated in private credit, U.S. Treasury bonds, commodities, and more. Various data and analyses suggest that this emerging RWA sector is demonstrating significant vitality.
Of course, while the RWA sector is rapidly developing, it also faces some problems and challenges:
- High Entry Barriers: For traditional asset holders and ordinary users, the knowledge and technical barriers to entering the RWA sector are relatively high. For example, if I want to tokenize my artwork assets, I need to learn a lot about RWA-related technologies and blockchain operations, making it difficult to enter. Additionally, other RWA service products often come with high fees.
- Poor Liquidity: Currently, most RWA products offered by various institutions are concentrated in U.S. Treasury bonds and private credit, with fewer commodity-based products. The lack of an active secondary market leads to poor on-chain trading liquidity for RWA assets at present.
3.The First Modular L2 Public Chain in the RWA Sector - Plume Network
As the first modular L2 public chain in the RWA sector, Plume Network aims to lower the barriers to entry for RWAs and provide participants with a platform to interact with and invest in RWAs through a robust DeFi ecosystem. On one hand, it aims to bring in new users, and on the other hand, it seeks to unlock on-chain liquidity for RWAs, building a vibrant ecosystem.
Plume Network is built on the Arbitrum Nitro stack, which allows for high compatibility with the Ethereum ecosystem. Developers from the Ethereum ecosystem can directly migrate their applications to the Plume chain. Currently, it fully supports various token standards such as ERC-20, ERC-721, ERC-1155, and ERC-3643, giving users more options for asset tokenization.
Plume Network has completed a $10 million seed round led by Haun Ventures, with participation from Galaxy Ventures, Superscrypt, and A Capital. It has also received support from angel investors such as Eric Chen of Injective, Anthony Ramirez of Wormhole Labs, and Calvin Liu of Eigenlayer. The Plume testnet phase has already attracted more than 150 projects, covering areas such as collectibles, synthetic assets, luxury goods, real estate, lending protocols, and perpetual DEXs. Notably, Plume Network's testnet incentive program has garnered widespread attention within the community: the event is themed "Global Travel," where users can earn points and future airdrop tokens by exploring different countries (ecosystems), completing travel tasks, and inviting friends.
4.The Future of RWAs: Industry Support and Market Predictions
- Industry Perspectives
Recently, Ethereum co-founder Vitalik Buterin expressed on social media his support for the idea of selling company shares in the form of tokens, associating this with the concept of Real World Assets (RWA). Vitalik stated that he supports RWA and hopes to see a more diverse range of RWA appearing on the blockchain. This would allow applications to use them without being subjected to the systemic risks associated with a single issuer or asset class.
As a leading global cryptocurrency trading platform, MEXC is actively monitoring and supporting the development of the RWA sector. With the fastest listing speed for new tokens across the network, the widest coverage of tokens, and the highest futures liquidity in the industry, MEXC creates abundant investment opportunities and offers diverse and seamless trading options for investors. With its innovative trading services and advanced technical support, MEXC is expected to provide a strong boost to the liquidity and market expansion of RWA projects in the future, helping this sector achieve broader market application and development.
- Market Predictions
According to a Citibank report, the RWA tokenization market is expected to reach $4 trillion by 2030. Projects like Centrifuge and MakerDAO have already demonstrated the market potential of RWA. According to Boston Consulting Group's forecast, the global tokenization market for financial assets is estimated to reach $16 trillion by 2030. Compared to the current $6 billion market capitalization of the RWA sector, the RWA market still has significant growth potential in the foreseeable future.
5.Final Thoughts
Overall, RWAs, as a bridge connecting traditional finance and cryptocurrency, demonstrate enormous development potential and vast growth opportunities. They hold great promise in improving capital efficiency, reducing financing costs, and enhancing market liquidity, and their application on the blockchain is set to profoundly transform the financial industry. Plume, as the first modular EVM L2 network specifically designed for RWA, is committed to lowering barriers, increasing liquidity, and promoting compliance, and is expected to drive innovation and development in the RWA sector. Although Plume is still in the testing phase, its performance on the future mainnet will be crucial. Regardless, as a promising newcomer in the RWA sector that has garnered significant attention from the community, we look forward to Plume Network playing a pivotal role in the modernization of traditional finance, bringing new momentum and development opportunities to the entire industry.
Disclaimer: This information does not provide advice on investment, taxation, legal, financial, accounting, consultation, or any other related services, nor does it constitute advice to purchase, sell, or hold any assets. MEXC Learn provides information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and exercise caution when investing. The platform is not responsible for users' investment decisions.