RWA: Seeking Breakthrough in Asset Tokenization

Preface

The tokenization of real-world assets aims to enhance liquidity, transparency, and accessibility, allowing more people to access high-value assets. While this explanation is common, it is not entirely accurate. This article will interpret RWA from a personal perspective in the current context.

I. Initial Attempts and Challenges

The integration of blockchain with real-world assets can be traced back to Colored Coins on Bitcoin. By assigning properties representing external assets to specific Satoshis, it achieved the first systematic attempt to label and manage real-world assets on the blockchain. However, due to the limitations of Bitcoin's scripting and issues such as centralized trust, this proof of concept ultimately failed.

After Ethereum entered the era of Turing completeness, various narratives have experienced peaks, but RWA division has not been able to break through stablecoins. This is mainly due to the following reasons:

1. The essence of blockchain is inherently difficult to coexist with regulation, while RWA must be built on centralized entities and regulatory foundations.

2. High complexity of assets. Financial assets are relatively easy to tokenize, but the tokenization of non-financial assets faces many challenges.

3. Compared to the more volatile digital assets, the yield of real-world assets is relatively low, lacking motivation for participation.

2. Regulatory Framework Gradually Established

Recently, places like Hong Kong, Dubai, and Singapore have successively introduced regulatory frameworks related to RWA, providing a foundation for the development of RWA. However, fragmented regulation and the cautious attitude of traditional financial institutions towards risk remain major obstacles.

Currently, regulatory frameworks in various regions mainly involve the following aspects:

• Securities identification and registration requirements
• KYC/AML
• Investor Qualification Restrictions
• Information Disclosure
• Stablecoin Management
• Liquidity restrictions

Although the introduction of a regulatory framework has provided conditions for the development of RWA, it has also brought new challenges. Currently, RWA protocols generally lack accessibility and interoperability, creating a "silo" effect.

Some projects are exploring decentralized paths within a compliance framework. For example, a certain protocol avoids its Token being classified as a security through special design and simplifies circulation on public chains via cross-chain bridges. However, this complex method may not be an ideal RWA model.

The key to the future development of RWA lies in how to achieve interconnection within different jurisdictions and interact with the on-chain world to the extent possible, ultimately realizing inclusive finance.

3. Asset Classes and Advantages

The current on-chain RWA assets mainly include private credit, US Treasury bonds, commodities, real estate, and stock securities. They are primarily aimed at traditional financial users, especially small and medium-sized enterprises and institutional-level users.

The advantages of transferring these assets to the blockchain include:

1. 7*24 hours instant settlement
2. Break the regional liquidity segmentation
3. Reduce marginal service costs
4. Provide financing channels for special industries
5. Lowering the entry threshold for investors

For the cryptocurrency industry, the success of RWA will create a huge market space. At the same time, RWA may also provide a more solid asset base for DeFi protocols, offering users more asset allocation options.

4. The Potential Role of RWA

RWA has the potential to become the "sword bearer" of the blockchain world, especially in special areas such as intellectual property. Taking NFTs as an example, current NFT holders often do not possess the actual rights to the related IP. RWA may provide new ideas to solve such issues, allowing investors to gain more substantial rights.

V. Future Outlook

RWA has the potential to reshape the financial system, bringing real-world opportunities into the on-chain world and helping to regulate the blockchain ecosystem. However, the limitations of the current regulatory framework mean it still resembles a private protocol on a public chain. In the future, it is necessary to overcome these obstacles to achieve true global asset management and investment.

The ideal RWA should achieve seamless asset management and investment across time zones and regions, allowing users to freely engage in various financial activities on a global scale. This world operating on a global public ledger is the ultimate vision of RWA.