Will the RWA narrative become popular again, will it become the next wave of large-scale innovation in DeFi?

Original source: Sammi 西米

The birth of any phenomenon-level enterprise or project has a prerequisite, which is The restrictive conditions that once restrained the market have changed, and the ceiling that suppressed the market has been opened. A new layer of market space has emerged.

What is RWA?

RWA (Real World Assets, RWA), in one sentence: "Tokenization of real assets", any physical object that can be tokenized and represented on the chain Assets can all be referred to as RWA. For example: real estate, cash (US dollars), metals (gold, silver, etc.), luxury goods, bonds, insurance and any real assets.

Example of RWA in DeFi

Stable Coin

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Stable currency is one of the products with the highest market fit in RWA in DeFi today. At present, the total market value of stable currency is about 130 billion US dollars, of which USDT accounts for 62%, and the total market value is 81.6 billion Dollar. Tether was one of the first cryptocurrencies to peg its market value to the fiat currency, the U.S. dollar. Other stablecoins include USDC, BUSD, DAI, and more.

Synthetic tokens

Synthetic assets replicate stocks, commodities, precious metals, etc. The price of the asset is traded on the chain. At present, Synthetix, the leader of this subdivision track, is a synthetic asset issuance and trading platform on Ethereum, with a circulating market value of 620 million US dollars and a market value ranking of 70.

Lending agreement

The DeFi agreement uses RWA as collateral for lending services. Great development. MakerDAO is a mortgage lending platform on Ethereum, and it is also the leader of RWA in the lending segment. Currently, MakerDAO's RWA treasury is worth more than 700 million US dollars.

Who is driving the RWA narrative?

Abandoning profit-driven, talking about narratives is tantamount to playing hooligans.

Every big track needs capital to build momentum before it breaks out. RWA is gradually gaining momentum, which reflects that the old narrative markets such as Web3 and Metaverse that have been popular in the past two years no longer buy it, and it is difficult to obtain financing in the primary market. In addition, the DeFi industry has entered a deep bear, and capital urgently needs to find new outlets.

Narrative is the driving force of the financial market. If an industry wants to continue to develop, it needs to continuously increase funds and users to enter the market. The upstream and downstream of the encryption industry are mining circles-exchanges/investment institutions-project parties-media-community-retail investors. The rise of RWA is a model of "top-down" narrative creation by capital and institutions:

The report RWA, a bridge between TradFi and DeFi"

Goldman Sachs (Goldman Sachs) launched GS Dap to integrate traditional assets Tokenization;

The Monetary Authority of Singapore is testing asset tokenization through Project Guardian;

p>Siemens issues €60m bond via Polygon;

......

How high is the ceiling for the RWA narrative ?

The birth of any phenomenon-level enterprise/project is an explosive growth, and the explosion must come from a blank. The so-called gap means that the restrictive conditions that once constrained the market have changed, and the ceiling that suppressed the market has been opened. A new layer of market space appeared, and there was no one there.

For players advocating the RWA narrative, we can see this argument: RWA is a bridge for DeFi to enter the next incremental era, expanding DeFi to the whole world , RWA is the next wave of massive innovation in DeFi.

From the data point of view, the current total market value of the cryptocurrency industry is about 1.2 trillion US dollars (according to coingecko, 2023/4/25), and the global real estate market is about The total market value of gold is about 12.4 trillion U.S. dollars, and the total size of the global bond market is about 133 trillion U.S. dollars.

In contrast, the DeFi market has fallen all the way to the current US$48.1 billion since it reached a historical peak of US$180 billion in December 2021.

(data source: DEFELLAMA)

RWA aims at the trillion-level incremental market, trying to tear a hole from the traditional financial market and create a new market for the DeFi market Inject massive liquidity and broad market opportunities.

If the barriers of traditional financial chaining are really broken, the DeFi market will be greeted with exponential growth.

How to confirm the arrival of RWA narrative?

Because the imagination space is large enough, the incremental market that RWA can bring is very considerable, and it can be classified as the same level of macro narrative. Such large narratives are usually driven from the top down.

Suppose we deduce the general conduction link of a large narrative:

The first stage: The key events/phenomenal products launched and the narrative appeared when the cross-border cooperation of giants collided with sparks;

The second stage: Capital and media began to build momentum, and various research and articles appeared. At this stage, the market began to "shift its attention";

The third stage :The first batch of Alpha players with a keen sense of business began to ambush in Dex or exchanges, and the effect of making money spread in a small area;

No. The fourth stage: Whales are gradually deployed, and capital pulls leading coins to attract the attention of the market. RWA-related currencies have climbed the rising list for several days in a row, forming a sectoral profit-making effect. The public players gradually confirm that the RWA narrative has arrived;

Phase 5: Some non-native RWA tracks in the secondary market but active project parties began to take advantage of the RWA concept, take the opportunity Hype, entrepreneurial projects in the primary market begin to add RWA or direct transformation, and a large number of projects undergo "track transfer" at this stage;

The sixth stage : The entire encryption market has entered the Fomo stage. Twitter Space, summits, various Web2 and DeFi cross-border cooperation phenomena emerge in endlessly. With the support of the whole market, several phenomenal projects may emerge, which are truly DeFi Injecting new market vitality and bringing incremental funds to the market, the valuation of related concept projects has repeatedly hit new highs, and the market value of RWA leaders has entered the top 20 (due to the high ceiling of RWA, it will inevitably support the market value of leaders to enter the top 20). At this stage Called a "paradigm shift" or "paradigm revolution".

The process of paradigm shift: shift of attention - shift of a large number of project tracks - paradigm shift.

The narrative is not a product of linear development, so its conduction link cannot be perfectly deduced according to the text, and it needs to be adjusted in time according to the actual situation Investment Strategy.

RWA has been hyped by many voices since 2018, and it has been tepid in recent years. It is difficult for us to accurately judge the entry point of narrative initiation. For investors, they only need to focus on when the key market variables (phenomenal products/key events) will arrive; for retail investors, they only need to follow the principle of "pull is justice" to judge, and the continuous profit-making effect is hype At that time.

What programs does RWA have?

In the classification of RWA, in addition to stable currency, synthetic assets and credit, the most common ones are real estate, carbon credit and fixed income.

RWA concept project: https://coinmarketcap.com/watchlist /

RWA data analysis website: https:// app.rwa.xyz/#protocols

After a general understanding of dozens of RWA projects, the author concluded that: the current market Most of the RWA projects are lackluster. From the perspective of products, we have not seen particularly bright innovative projects for the time being. But this does not prevent long-term attention and optimism on this track, and if there are funds willing to hype, pull is justice.

There is nothing new under the sun

The most popular real estate tokenization in RWA, Similar to the "Shenfangli" model in 2021, that is, Pinduoduo crowdfunding to buy a house, 100,000 yuan can participate in the investment of tens of millions of luxury houses. Shenfangli acts as a middleman to hold the real estate on behalf of the participants and draw commissions from it. If the user has no funds , Shenfangli also provides loan services, making full use of the fragmented funds of the society and idle people from all walks of life, and truly achieving zero threshold. This kind of real estate speculation mode made Li Ka-shing silent and Wang Jianlin shed tears.

Tokenization of real estate brings this speculative nature on-chain, with tokens deriving their value from the ability of the speculative activity to generate income.

RAW's idea of trying to make encryption break the circle and innovate, and open up the incremental market is commendable, but in terms of specific operations, we should also take into account the clear policy supervision These factors are the key factors that determine the development of RWA.

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