# RWA(Real World Assets) Analysis

By [Brillian Research](https://paragraph.com/@brillian-research) · 2023-07-27

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**What is RWA?**
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RWA (Real World Assets)

Tokens representing actual assets that can be traded on-chain, including common tokens and NFTs. They are a type of asset that exists off-chain but is tokenized and brought onto the chain as a source of revenue within DeFi. RWAs can represent many different types of traditional assets. Real world assets refer to tangible assets in non-financial markets, such as real estate, infrastructure, artwork, and any high-value projects used in transactions. These assets occupy an important position in the global economy. According to data, by 2021, the global real estate market size reached $280 trillion. Compared with financial assets such as stocks and bonds, RWA usually has higher stability and lower volatility. Since the early days of blockchain technology, market participants have been seeking to bring RWA onto the chain. However, the recent bear market is a particularly significant period of development and growth in the RWA field.

**Scope of RWA**

The main DeFi directions around RWA are:

1.  Fixed income projects based on off-chain assets such as US debt, stocks, real estate, artwork, etc.
    
2.  Public credit projects based on issuance or trading in the open market.
    
3.  Trading market projects based on virtual assets such as carbon credits.
    

Fixed income projects are based on US debt and stock markets, providing loans to individuals and institutions. The only difference between these projects and other DeFi lending projects on-chain is that the collateral can be real-world assets.

### **Advantages of RWA**

*   Inflation hedging
    
*   Stable returns
    
*   On-chain settlement
    
*   Lower costs, reducing intermediary and legal fees
    
*   Transparency
    
*   Composability
    
*   DAO
    

### RWA Track Data Analysis

![](https://storage.googleapis.com/papyrus_images/a3f531803a7e6a27a5880fb9f5fd38fdc62998bf47101431c4b1ba2dc42a47aa.png)

![](https://storage.googleapis.com/papyrus_images/5d331d2133c1605a2f11e58f10fd1f5eeb2b0f2e351a7da91f713ac323ff7a9e.png)

![](https://storage.googleapis.com/papyrus_images/c26194977622c833659241098919a95f8b084c121f9e17b2752152e77760e7ee.png)

### **Two Factors Affecting the Success of RWA**

One is the perfection of blockchain infrastructure, and the other is legal regulation.

Blockchain involves interoperability, security, and privacy of various protocols and tokens.

Legal regulation refers to whether there is corresponding legal support for off-chain assets, on-chain identity, etc.

### **Conclusion**

Lending protocols are the most successful examples of RWA projects. The uncollateralized lending model was popular with institutions during the bull market but also acted as a catalyst for the bear market, so the biggest challenge for credit protocols lies in the risk of default. Projects based on US debt and US stocks are more mature, and users can also gain higher returns in the bear market.

The development space for institutional credit business is very limited, and user returns mainly come from stablecoins + protocol tokens. Moreover, due to the non-full collateralization, borrowers have to bear certain bad debt risks. In the bull market phase, the risk-free returns of DeFi are also high, so the institutional credit business may not be sustainable.

I believe that government bonds or money market funds, similar to those launched by Ondo, are potentially promising directions for the future. First, these funds are already popular choices among investors in traditional finance and carry lower risk. Second, they provide different choices for on-chain users, while also lowering the entry barrier.

Although RWA projects in the financial sector are in their early stages, there are already many interesting use cases. With the increased composability of various protocols, there might be many gameplay methods and high-yield projects, making it an exciting niche track to look forward to.

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*Originally published on [Brillian Research](https://paragraph.com/@brillian-research/rwa-real-world-assets-analysis)*