- Real World Assets (“RWAs”) are assets that exist off-chain, but are tokenized and brought on-chain to be used as a source of yield within DeFi.
- The potential impact that RWAs could have on DeFi seems transformative.
- RWAs can offer yields to DeFi which are sustainable, reliable, and backed by traditional asset classes.
- RWAs can render DeFi to become more compatible with external markets, resulting in greater liquidity, capital efficiency, and investment opportunities.
- RWAs allow DeFi the ability to bridge the gap between decentralized financial systems and traditional financial systems.
- RWAs can represent tangible assets, such as gold and real estate, as well as intangible assets, such as government bonds or carbon credits.
- The main driving force behind bringing real world assets onto the blockchain is the belief that, in the long-term, DeFi will offer unique opportunities and market efficiencies to asset holders, which cannot be found in traditional financial systems.
- The ability to easily fractionalize and disperse RWAs in DeFi renders previously unfractionalized, total sum, private credit investments to become accessible to a new set of investors.
- Fixed income is the predominant market in the RWA space.
- There are a number of topical trends that are shaping the evolution of the RWA ecosystem: layer 1 RWA protocols, regulation and enforcement mechanisms, macro environment.
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