Cointime

Download App
iOS & Android

The Happy Birth of Baby RWA Occurs When Crypto and the Real World Get Married and Have Children

Validated Individual Expert

Innovation is quietly crackling and popping in a quiet corner of the normally very public crypto world, with hundreds of millions of dollars already moving almost daily.

It’s not hot. There is nothing criminal or hacking-related. From TV and Twitter feeds, there are no big names boasting. Additionally, the commercial banks, investment banks, and large, stoic global corporations of the past have stepped up to the plate.

It is not only where the action is, but it will also be the engine that propels stablecoins and blockchain into mainstream use, away from the hordes of agitated people gathered around noisy cryptocurrency markets.

Sadly, however, it now goes by the name “dumb enough to glaze the eyes of the most attentive” in the crypto world.

It is known as RWA, which stands for “Real World Assets.” Additionally, it merely refers to the application of cryptographic technologies to real-world activities, particularly finance.

What is taking place is as follows: Somewhere beneath the stern facades of all financial institutions is a well-worn set of machinery that provides financial services, typically in the form of loans, to enable the construction, manufacturing, transportation, distribution, beneficiation, buying, selling, and trading of everything that citizens ultimately consume and use. the sum required to transport automobiles from China to Australia. The loan to cover the time between sending a large invoice and getting paid and settled on it. the loan to construct a Vietnam-based Italian manufacturing facility.

The majority of people are unaware that commerce is disappearing due to this complex, grindy, and gnarly set of cogs and wheels. Until something doesn’t show up on our doorstep, on the shelf at our neighborhood store, or in the medicine storage facility at the hospital where our child is waiting for a crucial procedure. Then we take note. loudly and indignantly.

Producers, shippers, distributors, retailers, customs officials, lawyers, brokers, handlers, fixers, regulators, port authorities, and, of course, capital providers whose money greases the many wheels along the way are all present at the machine that makes this all happen.

Numerous actors flaunt their talents in the hopes of earning a living. so that the chicken drumstick or the fuel end up in our stomachs or in the aircraft we are flying. Under the hood, there are frequently 10, 20, 30, or even more people involved in the chain of events, sometimes acting simultaneously or in succession.

It’s a terrible mess. I’m aware that I attempted to comprehend the transportation chain for a fleet of automobiles from one nation to another. I was shocked and grateful that I had chosen a career that was simpler.

This brings us to cryptocurrencies. Stablecoins worth approximately $160 billion are currently held in a variety of cryptocurrencies wallets, pools, and projects. Most of it is unoccupied, and its owners are waiting for an opportunity. These stablecoins have a price that is, well, stable; there is no extreme volatility here. However, as long as the risks were low, all of these owners of stablecoins would adore to earn handsome returns.

Additionally, there is room for discussion when projects require capital and there is ample capital available. Many of these projects, like manufacturing finance or construction finance, are actually low-risk, well-understood, and process-hardened. They have been carried out for hundreds of years by traditional finance. As a result, financial institutions are aware of the risk and credit levers that should be pulled to free up capital.

However, due to the fact that one side of this business operates in the traditional world and the other in the crypto world, there has largely been silence between them due to their different languages and cultures.

Until RWA became a thing, beginning with a few small experiments over the past two years and suddenly emerging as the next big thing in institutional finance with the rise of JP Morgan, Goldman Sachs, and the other looming towers of global big money.

A disclaimer before we get too excited here.

Trade finance and supply chain complexity are still as confusing as ever. The majority of this early RWA innovation focuses on how to use crypto to finance the loans that lubricate large commerce. Defi has a lot of other things going on to try to fix this in the world of supply blockchains. how to make it simple, quick, and effective for old-world financiers to gain access to crypto capital that is not being used. And equally important, how to democratize access to large, low-risk institutional finance deals for small investors, all the way down to retail peons like me, who would otherwise have no chance of getting a piece of these obscure instruments, which were previously only available to the upper financial hierarchy, which the majority of us never see (or even know exists).

Take a look at the screenshot below, which comes from one of the tracking websites for RWA deals (https://app.rwa.xyz/), to illustrate just how crucial it is for institutions to change their mindset. Pay close attention to the jaw-dropping interest rates that are being offered for each and every one of these real-world, crypto-capitalized loans, which are open to anyone, regardless of whether they have $100 or $10 million to invest (see the APY column).

Goldfinch, Maple, TrueFi, and Centrifuge are just a few of the new crypto businesses that have sprung up specifically to serve this new market opportunity. Their names can be found in the “protocol” column on the left.

What size is this market, too? Large financial debt instruments receive hundreds of trillions of dollars annually. Given the additional advantages of blockchain, such as security, instantaneous settlement, low cross-border friction, and the other shiny buttons of cryptocurrency technology, the demand for the $160 billion that is currently stored in stablecoin wallets is likely to be strong and ongoing.

This infant, how are things going so far? $4bn complete advances, almost 1600 dynamic credits, normal of over 13% return for the stablecoin moneylenders (this last figure likely unreasonable at that rate, yet). Next year, right? I’m going with a 10-fold increase in RWA activity as my prediction.

Using solid real-world objects as collateral for cryptocurrency loans is a contradiction in terms. which will also fuel the desire of new crypto investors to seize this new opportunity.

forming a positive cycle.

Even as we shied away from the toxicity of hacker, barker, maxis, and grifters, who have for far too long dominated the news cycle, it’s possible that this is precisely the circle that everyone in this field has been waiting for.

Comments

All Comments

Recommended for you

  • Tapioca DAO suspected of security attack

    According to Aggr News, Tapioca DAO, a full-chain currency market based on LayerZero, may have been subject to a security breach. The specific details are currently unclear, and users should remain vigilant and avoid interacting with unknown links or suspicious activities.

  • EigenLayer X account suspected to be hacked, posting fraudulent links

    EigenLayer X account is suspected to have been hacked, and a tweet was posted about the re-allocation of the remaining EIGEN tokens for the 2nd season Stakedrop, which includes a fraudulent link. Users should be cautious when interacting with it.

  • UAE to introduce legal framework for DAOs

    The United Arab Emirates is focusing on introducing a legal framework for decentralized autonomous organizations (DAOs) in the Ras Al Khaimah Digital Asset Oasis (RAK DAO), a free economic zone dedicated to digital assets. Law firm NeosLegal and RAK DAO announced that the new system will be launched and discussed at the DAO Legal Clinic on October 25th. Irina Heaver, a partner at NeosLegal, said that the framework is expected to clarify how DAOs can remain legally compliant, and she believes this will have a significant impact on decentralized governance in the UAE and the wider Web3 ecosystem. The announcement emphasizes that the legal structure will clarify tax obligations and benefits. It will also establish property rights for on-chain and off-chain assets and provide legal protection for the founders, members, and contributors of the DAO from personal liability. The legal framework will also enable DAOs to enter into legally binding contracts and establish guidelines for resolving internal and external disputes.

  • Data: U.S. public debt surges in the past three weeks, increasing by $455 billion

    On October 18th, according to Bloomberg terminal data, as of October 15th, 2024, the total amount of US public debt reached a historic high of approximately $35.75 trillion. In just the past three weeks, US debt has increased by $455 billion.

  • Montenegro to determine Do Kwon's extradition fate this weekend

    According to Cryptoslate, the Minister of Justice of Montenegro, Bojan Božović, confirmed that a decision has been made regarding the extradition of Do Kwon, co-founder of Terraform Labs, and the extradition agreement will be signed before the end of this week. This decision was made after a long and controversial legal process that lasted for several months. Božović did not provide further comments on the details of the case, nor did he disclose where Kwon will be extradited to. He said, "As Minister of Justice, I have no further comments other than those already ruled by the Supreme Court."

  • Shenyu: The widespread existence of blind signature issues provides hackers with opportunities to take advantage of, and the problem must be solved

    Bitfish (@bitfish1) posted on X platform, stating that when there are security risks on the front end, hardware wallets should ensure asset security as the last line of defense. However, at present, blind signature issues are prevalent, which provides hackers with opportunities. This problem must be solved.

  • Deutsche Börse Clearstream: D7 platform has issued over 10 billion euros in digital bonds

    Deutsche Börse's Clearstream announced that its digital securities platform D7 has issued over 10 billion euros (11 billion US dollars) in digital bonds. Currently, D7 is mainly used for two types of issuance, namely large digital bonds and structured products. From a technical perspective, the D7 platform uses DAML smart contracts, and the latest version of DAML supports the Canton blockchain. Previously, Clearstream also participated in a practical experiment using the French wholesale central bank digital currency CBDC for settlement.

  • US CFTC: Federal court was "wrong" to allow Kalshi to launch prediction market

    Lawyers from the US Commodity Futures Trading Commission (CFTC) argued in a brief submitted to an appeals court that a federal judge "wrongly" allowed Kalshi to list and trade election contracts, and reiterated many of its arguments made in a lower court. Last month, a judge ruled that the CFTC could not prohibit Kalshi from listing election contracts. The regulatory agency applied for a stay to prevent the company from launching the product before the appeal's outcome, but the court's judge ruled that the CFTC failed to prove irreparable harm would be caused.

  • Careers in Crypto: 5 Insights for 2024

    In an overwhelming job market, leaning into personal networks and connections are more important than ever. Emily Landon, CEO of The Crypto Recruiters, outlines what is happening in the crypto job market and how you can position yourself or your company in 2024.

  • Crypto Needs to Radically Rethink Token Distribution

    The prevailing “low float, high FDV” model can generate significant initial interest in project but benefits tend to disintegrate in the long-term, says Lava Network's Ethan Luc.