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Industry data shared by Antpool, Bitfufu and other institutions

1. Definition of RWA

In June this year, the well-known Bitcoin Layer2 project BEVM announced that it would vigorously develop the RWA ecosystem, backed by its investment institution, the industry leader Bitmain, and launched a $10 million RWA ecosystem support plan. Recently, BEVM has organized a RWA track summit with Bitmain, Antpool, Bitfufu and other global top computing brands to deeply explore the future of RWA and its value to the Crypto market.

This series of measures has attracted widespread attention in the market, and the RWA track has become a hot topic for everyone to discuss. In this report, we will explore the connotation and market potential of RWA in depth, and analyze its value to the entire Crypto field.

Before conducting an in-depth analysis, let's first understand what is computing power RWA?

RWA (Real World Assets), that is, real-world assets, refers to the mapping of assets in the traditional market to the chain in the form of tokens for users to buy and sell. It includes tangible and intangible assets, such as real estate, bonds, commodities, etc.

Computing power refers to the ability to process data through a certain computing device or computing resource. It is a new productivity in the digital economy era, and it cooperates with data and algorithms to form the most basic production factor in the digital economy era. The computing power in the Crypto field refers to the mining power of POW mining machines such as Bitcoin Litecoin. The computing power represents the real mining machine capacity.

So computing power RWA actually converts computing power assets in the real world (such as the mining power of various mining machines) into tokens/NFT assets that can be traded and managed on the blockchain.

The traditional computing power distribution model is mainly through the sale of mining machines or cloud computing power. As off-chain assets, it is difficult to release the financial value of these computing powers through on-chain financial instruments. For example, the market has always lacked large-scale on-chain computing power lending and computing power trading products, which are the rigid needs of miners. At the same time, after miners obtain mining income, they are generally stored in cold wallets or traded in the secondary market. Few miners will continue to release greater asset value in the on-chain DeFi protocol.

Computing power RWA is different. Computing power RWA is naturally distributed on the chain, and mining income is also circulated on the chain. Both the computing power assets themselves and the PoW tokens produced by computing power can be seamlessly connected with on-chain financial instruments, thereby releasing the financial value of the computing power asset market, which is a market worth hundreds of billions of dollars.

2. Potential market size of computing power RWA

From the perspective of hardware demand, the statistics and forecast data of QYR market research agency show that the global ASIC Bitcoin mining hardware market sales have reached 14.1 billion US dollars in 2023, and it is expected to climb to 26.04 billion US dollars by 2030, which undoubtedly planted a seed of great potential for the computing power market.

From the perspective of hardware demand, the statistics and forecast data of QYR market research agency show that the global ASIC Bitcoin mining hardware market sales have reached 14.1 billion US dollars in 2023, and it is expected to climb to 26.04 billion US dollars by 2030, which undoubtedly planted a seed of great potential for the computing power market. According to data from platforms such as Hashrate Index, after Bitcoin experienced its fourth halving in 2024, the average daily income of miners remained at about 33 million US dollars, which is still a considerable figure. In the first quarter of 2024, according to the IR presentations, official press releases and financial reports of some of the leading mining companies listed on the market, the world's leading mining companies had mining revenues of about 672 million US dollars, of which Marathon produced 165 million US dollars, ranking first in the world, BitFuFu produced 144 million US dollars, ranking second in the world, Bitdeer produced 120 million US dollars, ranking third in the world, CleanSpark, Riot, and Hut8 ranked fourth, fifth, and sixth respectively.

（Source: IR presentations, official press releases, and financial reports of the related companies as of 31/03/2024, except for Marathon as of 28/02/2024.）

Among them, Bitcoin, as the pioneer in the field of blockchain, has an annual market size of about 17.5 billion US dollars in computing power, occupying the vast majority of the global computing power market.

Daily PoW mining coin output ranking https://www.f2pool.com/coins

Looking further, the combined hashrate market of Dogecoin and Litecoin is about $1 billion. With Ethereum switching from Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism in September 2022, Dogecoin has become the second largest PoW cryptocurrency, second only to Bitcoin. Dogecoin and Litecoin are closely linked because they both use the Scrypt algorithm, and Dogecoin is often regarded as a derivative of Litecoin, so the mining hashrate of the two is basically synchronized. In addition, as one of the earliest meme coins, Dogecoin quickly became popular with the support of celebrities such as Musk and accumulated a large number of loyal users.

The new mining coin Kaspa occupies the third echelon with a hashrate market size of $450 million per year. Since Ethereum switched to PoS, a large amount of idle hashrate has emerged in the market. Kaspa based on the GhostDAG consensus algorithm has emerged in 2023. Kaspa has attracted a large number of ordinary miners to join with its higher security performance, scalability and other functions.

At the same time, most of Ethereum's hash rate has been transferred to Ethereum Classic (ETC), and its computing power market size is about 150 million US dollars per year. As a fork chain of Ethereum, ETC inherits Ethereum's technical advantages and part of its community foundation, and its computing power market is not low.

In addition to the above mainstream cryptocurrencies, the computing power market size of other PoW mining coins is about 200 million US dollars per year. These smaller computing power markets are scattered in various emerging PoW projects, such as Bitcoin Cash.

Therefore, we assume that 20% of PoW computing power will be distributed in the market through computing power RWA (real world assets) in the future, which means that the computing power RWA track will become a market of 4 billion US dollars per year. With various on-chain financial products, the overall market size is expected to exceed 100 billion US dollars in the next 3-5 years. This huge market size will bring more narratives to the DeFi ecosystem.

3. Current market status of computing power RWA

The computing power market has only achieved rapid growth in the last decade, mainly due to the increasing recognition and acceptance of blockchain technology worldwide. The early computing power represents the total computing power used for mining and processing transactions in the blockchain network, and the main computing power comes from Bitcoin mining. However, with the rapid development of technologies such as AI and big data in recent years, the demand for high-performance computing resources has surged, so many "AI+Web3" computing power projects have emerged, further promoting the expansion of the computing power RWA market.

At the same time, global mining companies will move from mainland China to North America and Europe in 2021, and the global computing power distribution center will also shift to the United States, which will stimulate the compliance operation and financing listing of mining companies such as Bit Digital and Bitfarms to a certain extent, further accelerating the commercialization of the computing power market.

Cambridge Bitcoin Electricity Consumption Index

Currently, the sources of computing power for the entire computing power RWA market are diversified. Traditionally, miners mined by purchasing mining machines and building their own mining farms, and later evolved to professional mining companies building mining pools. During this period, a new model of cloud computing power was born. Cloud mining service providers integrated their own resources to provide users with convenient computing power leasing services, allowing users to bypass complex links such as hardware procurement and operation and maintenance, and directly enjoy mining benefits.

In addition, the PoW ecosystem is gradually returning to market topics and popularity, especially when the Bitcoin ecosystem Ordinals, Inscriptions and other protocols caused an explosive response last year, and simultaneously spawned many new popular PoW projects, such as Dynex, which uses GPU computing power for mining, and Bittensor, which combines PoW and AI to make a large model. The emergence of these projects has also attracted more institutions and communities to pay attention to the PoW track.

According to public data, the total purchase volume of the POW computing power market is currently about 20 billion US dollars per year. With the rise in the price of POW tokens, especially Bitcoin, the market size is gradually increasing. However, the market size of computing power RWA accounts for less than 1% of the entire computing power market.

Since 2021, the on-chain financial infrastructure has been continuously improved. Whether it is on-chain transactions, on-chain lending or on-chain derivatives, they have gradually matured. Off-chain assets such as U.S. bonds, gold, and even real estate have been gradually introduced into on-chain finance through RWA. As the off-chain high-quality asset closest to Crypto users, the process of RWAization of computing power RWA has just started.

Assuming that 20% of the computing power can enter the chain through RWA in the next 3-5 years, the entire computing power RWA track still has 20 times of growth space. With the growth of the computing power market and the deep integration of computing power RWA and on-chain finance, this track will become a market with huge potential of hundreds of billions.

Fourth, different product types of computing power RWA track

Faced with such a huge computing power, mining enterprise resources, cloud service providers and other channels, how to link various channels so that the computing power RWA track can meet the needs of different users and markets?

First of all, we need to make it clear that computing power RWA is a relatively broad concept, which can include computing power RWA of PoW projects and some DePIN computing power RWA. The former computing power RWA is mainly calculated by professional organizations for the computing power of real assets, and then the computing power RWA assets are generated by the organization. However, for DePIN computing power RWA, it is also possible to first gather computing power through the computing power distribution platform, and then generate RWA assets based on these computing powers. Therefore, this also creates some product forms unique to the computing power RWA track.

1. On-chain computing power distribution market

The on-chain computing power distribution market refers to the sale and distribution of PoW computing power on the chain after RWA. Users around the world can purchase PoW computing power without geographical restrictions and KYC restrictions. For example, in the on-chain computing power distribution project BitTera, which was recently launched on BEVM, users can participate in Bitcoin mining by purchasing computing power NFT. And CycleX, a computing power fund RWA project that will be launched on the BEVM chain, users in any region of the world can participate in Bitcoin mining by purchasing RWA shares of the computing power fund.

Not only that, as the scale of the on-chain computing power distribution market grows, a series of new formats that have never been seen before will gradually emerge.

Currently, most of the PoW computing power is distributed off-chain through mining machine sales, cloud computing power sales, etc. After miners obtain mining income, most of them choose to store it in wallets or sell it in the secondary market. A small number of users choose some centralized financial management tools for gains. However, a large number of PoW tokens are separated from the rich financial tools on the chain. Miners, as the core and basic infrastructure of the entire Crypto, have not captured the dividends brought by the prosperity of the Crypto chain.

In the future, if users can purchase computing power through the on-chain computing power distribution market, the PoW tokens produced by these computing powers can naturally circulate on the chain full of various DeFi protocols. Therefore, these PoW tokens can release their greater financial value through various DeFi protocols from the moment they are mined. At the same time, the PoW tokens produced by miners will also capture the value of the on-chain protocol itself. For example, miners can enjoy various PoW token-exclusive DEX, lending, derivatives, etc. on the chain.

Imagine that in the future, Dogecoin miners can directly mortgage the mined Doge through the Doge Lending protocol, or mint Doge-exclusive stablecoins through the Doge CDP protocol. In addition to enjoying mining income, Doge miners can also obtain convenient on-chain financial services, and have the opportunity to capture the token value of various DeFi protocols themselves because of participating in various DeFi protocols. These are new formats that will be brought about by the growth of the on-chain computing power distribution market, and they also breed huge entrepreneurial opportunities.

2. DeFi protocols related to computing power RWA

The ultimate goal of computing power RWA is to convert computing power resources into digital assets. In the process of tokenizing and mapping them to the chain, computing power Token/NFT was born. In order to make Token/NFT release financial value, it is necessary to introduce the DeFi mechanism.

DeFi has been developed for many years, and common business models have matured. The only problem is that the professional DeFi of computing power RWA, which combines computing power RWA with mature business models, is still in its early stages of development.

In addition, in the future, a variety of existing DeFi products can be combined with some of the latest DeFi gameplay, such as computing power RWA lending agreement, Swap agreement based on computing power RWA, CDP agreement based on computing power RWA, principal and interest separation agreement based on computing power RWA, etc. The combination of computing power RWA and DeFi helps to release the financial value of computing power RWA itself. At the same time, users who hold computing power RWA can not only obtain mining rewards, but also participate in the DeFi ecosystem and enjoy compound income.

3. Various DeFi protocols around PoW hashrate tokens (PHA)

In addition to the on-chain hashrate distribution and the DeFi protocols around hashrate RWA itself, when the on-chain hashrate scale gradually increases, a large number of PoW tokens will naturally circulate on the chain, which will give birth to a new DeFi ecosystem around PoW hashrate tokens (PoW Hashrate Assets). Before the hashrate RWA was widely adopted, a large number of PoW hashrate tokens were only stored in the miners' wallets after being mined, and were not really used. Miners were not aware of using these PoW tokens on the chain, and there was a long-term gap between on-chain finance and mining coins. This is also a point that PoW tokens have been criticized for, and it is also one of the important reasons why other PoW tokens are gradually declining except Bitcoin.

However, as computing power RWA is adopted on a large scale, more and more PoW tokens begin to be distributed on the chain. Miners purchase computing power on the chain and obtain mining income on the chain. These PoW tokens, such as Bitcoin, Litcoin, Dogecoin, ETC, BCH, Kaspa, etc., are naturally integrated by various DeFi protocols, such as lending agreements and swap agreements based on Litcoin and Dogecoin, and CDP agreements or derivative agreements for mining coins such as ETC, BCH, Kaspa, etc. In addition to mining income, miners can naturally capture the value of various mining coins DeFi. This is a new form of DeFi that will inevitably appear after computing power RWA develops to a certain scale. As inferred above, if 20% of the computing power is distributed on the chain in the future, nearly 4 billion US dollars of mining coins (PHA) assets will circulate on the chain every year, forming a new type of DeFi protocol around mining coins.

According to BEVM's computing power RWA support plan, the project has decided to promote the distribution of a large amount of computing power income on the BEVM chain in the future, and plans to provide mature DeFi products such as DEX, lending, stablecoins, and derivatives protocols for computing power RWA products. Through the running of the complete DeFi protocol, in addition to the miners themselves, more individuals or organizations can be supported to participate in this link and enjoy the dividends brought by the computing power financial market, thereby quickly building a rich computing power DeFi ecosystem.

The figure below is the computing power RWA ecosystem officially announced by BEVM. From the figure, you can explore BEVM's thinking on the combination of computing power RWA and DeFi.

As shown in the figure, the BEVM computing power RWA ecosystem is divided into two parts. One part is that Hashrate RWA assets directly enter the BEVM DeFi protocol, and use financial instruments such as DEX protocols, lending protocols, stablecoin protocols, derivative protocols, and pledge protocols to release the financial value of computing power RAW itself. For example, computing power RWA can be traded in DEX (such as Bitdrome) to achieve free trading of computing power, and can be mortgaged in lending protocols (such as Blend, Lambda, etc.) for lending.

The second part of computing power RWA is to build DeFi applications around PHA. PHA is the abbreviation of POW Hashrate Assets, that is, the POW tokens mined by computing power RWA that are directly circulated on the BEVM chain, also known as mining coins. DeFi applications can continue to be built around these mined PHAs (such as Bitcoin, Dogecoin, Litcoin, Kaspa, etc.). For example, a lending protocol around Dogecoin can be built, and miners can pledge Dogecoin on the BEVM chain to complete lending. For example, a BTC pledge interest-bearing protocol can be built around the BTC produced by the computing power RWA, bringing more BTC income to miners, etc.

V. The value and significance of computing power RWA for the Crypto market

According to CoinMarketCap data, the current global DeFi market value is close to 100 billion US dollars.

In the wave of DeFi, computing power resources are the cornerstone of the cryptocurrency ecosystem. What new value and significance will the RWA products built on them give to the crypto market?

1. The birth of a new group of on-chain miners

As the computing power RWA market continues to grow, a new generation of on-chain miners will naturally emerge. Unlike traditional miners, this generation of miners purchases computing power on the chain, and mining revenue is also circulated on the chain. Naturally, they will use various on-chain financial tools to release the value of their computing power assets.

Compared with traditional miners, on-chain miners have higher capital efficiency and a higher ability to capture the financial value of computing power assets on the chain. They are a new group of Crypto users that will inevitably emerge as the computing power RWA market continues to grow.

The rich application scenarios in the DeFi ecosystem will provide a variety of on-chain revenue models for computing power RWA, bringing new sources of income to the miner group.

Miners of various PoW projects can use these tokenized computing power assets to participate in DeFi protocols, and obtain additional income and more asset liquidity through lending, liquidity mining and derivatives trading. When opportunities for additional income are found on the chain, more miners will be attracted to participate. On the one hand, this can attract the original miner group to participate in the computing power RWA market; on the other hand, the emergence of computing power RWA provides ordinary users with the opportunity to become "on-chain miners".

Traditionally, cryptocurrency mining requires a lot of expertise, hardware investment and energy consumption, and is mainly dominated by large mining farms and professional miners, with a high threshold for most users. The computing power RWA allows ordinary users to easily purchase and hold computing power tokens without having to buy mining machines themselves or bear high electricity bills. This model greatly reduces the entry threshold, enabling more individuals and small and medium-sized enterprises to participate in mining, thereby increasing the participation in the mining market.

The introduction of this new group of miners will also help improve the decentralization of the blockchain network. Extensive participation can promote a more even distribution of computing power, reduce the concentration of computing power in a few large mining pools or mining farms, and further improve the anti-attack ability of the blockchain network.

2. Bring sustainable commercial products to the chain

When more and more investors, enterprises and users participate in the computing power RWA and the demand becomes more and more vigorous, more computing power RWA products will be encouraged to go online, forming a positive cycle.

Specifically, as a core target, computing power RWA can attract a large amount of funds into the DeFi ecosystem, which comes not only from miners, but also from investors who have demand for computing power assets.

With these funds, financial institutions can develop more diversified financial products based on computing power tokens, such as computing power futures, options, computing power index funds, etc. These financial instruments not only enrich the investment options in the crypto market, but also provide market participants with more hedging means and risk management tools. Computing power futures and options can help investors hedge the risk of computing power price fluctuations, while computing power index funds allow investors to diversify their investments in multiple computing power resources with lower risk exposure.

With the increasing number of computing power RWA products, financial institutions can also launch insurance products based on computing power RWA to provide risk protection for investors; or develop computing power RWA-related financial products to provide investors with more stable returns.

In addition, computing power RWA projects can also provide more financial services and products to meet the needs of different investors by cooperating with existing DeFi projects. For example, computing power RWA projects can cooperate with decentralized lending platforms to launch lending products with computing power tokens as collateral, so that computing power token holders can obtain liquidity without selling computing power tokens.

In this way, the RWA of computing power assets is of great significance to the entire crypto market. It can not only attract more participants to enter the cryptocurrency market and generate new groups of on-chain miners, but also promote the widespread implementation of blockchain technology in commercial applications.

For the miners, computing power RWA provides a new source of income, while lowering the entry threshold and attracting more new miners to join; for investors, computing power RWA provides a new investment option that can diversify investment risks and improve investment returns; for the broader crypto market, computing power RWA brings more sustainable commercial products to the chain, enriches the types of DeFi products, and decentralizes computing power to reduce market manipulation and promote the healthy development of the market.

As the computing power RWA market gradually matures from initial exploration, the transaction volume generated by related computing power RWA products and the huge amount of funds they bring will prove that computing power RWA is not a concept hype, but a practical and 100 billion track that can help the crypto market flourish.

VI. Analysis of institutions focusing on the development of computing power RWA

Since computing power RWA is crucial to the development of the industry, which institutions/projects are vigorously developing computing power RWA? For this reason, we have selected several organizations on the market that focus on supporting or betting on computing power RWA to see how they plan computing power RWA and what changes they will bring to computing power RWA?

1. Bitmain

Bitmain (BITMAIN), an industry giant established in 2013, has now become the world's leading encryption mining machine manufacturer, with customers covering more than 100 countries and regions around the world, especially in the field of Bitcoin mining machines, with market share ranking first for many years, and computing power energy efficiency ratio has always been at the forefront.

Although computing power RWA has only become a widely mentioned track in the past year, Bitmain made corresponding attempts last year.

In 2023, Bitmain and Element reached a strategic cooperation on the Pizza Festival event and jointly launched the world's first Bitcoin computing power rights NFT-Pizza Hashrate NFT. Users can obtain the right to pick up 1000T S19 XP series computing power by purchasing Pizza Hashrate NFT, which means that the delivery of property rights can be achieved through NFT. In addition, users can also trade Pizza Hashrate NFT on the NFT market, thereby realizing the buying and selling of computing power and liquidity.

Bitmain has issued Pizza Hashrate NFT and put Bitcoin computing power on the chain as RWA, realizing the bridge between physical assets and digital assets. This is the industry's first mining machine computing power RWA and Bitmain's first product in computing power RWA.

So far, Bitmain has started the development idea of betting on computing power RWA, and in April this year, it invested in the Bitcoin Layer2 network BEVM, which features the development of computing power RWA. It also expressed its continued optimism about computing power RWA at the 2024 Global Digital Mining Summit (WDMS) that ended last month. It is expected that there will be more actions to support the development of computing power RWA.

2. BEVM

BEVM, as the Bitcoin Layer2 that Bitcoin Mainland is optimistic about and invested in, officially launched a $10 million computing power RWA ecosystem support plan in June this year, aiming to support 10-20 computing power RWA startups and provide comprehensive development support, including brand promotion, investment, computing power resources, liquidity incentives, etc.

In addition, BEVM will also cooperate with investment institutions to provide startups with various PoW computing power resource support, including Bitcoin, Litecoin, Dogecoin, Kaspa, ETC, etc., and through the active development of the computing power RWA ecosystem, deeply integrate the trillion-dollar computing power market and on-chain DeFi, and further release the financial value of computing power assets.

We know that the main logic of RWA products lies in the transmission of trust, which requires a role with sufficient endorsement to move real assets to the chain, and secondly, a sufficiently secure decentralized environment is needed to support the safe operation of assets after they are on the chain.

BEVM has a good advantage in developing computing power RWA. On the one hand, as the only Bitcoin Layer2 invested by the global mining giant Bitmain, Bitmain, which has many years of R&D strength and rich computing power resources, is an excellent entity to endorse computing power resources, which will also bring enough cost-effective computing power products and computing power resources to BEVM's computing power RWA.

On the other hand, as a team that has been deeply involved in the Bitcoin ecosystem for more than 7 years, BEVM's technical background is also the leading existence in the industry. It uses Taproot Consensus as the underlying technical framework, integrates Schnorr signatures, MAST contracts, Bitcoin light node networks and other Bitcoin native technologies, and realizes a completely decentralized and code-driven verification mechanism. This is considered to be the best Bitcoin asset cross-chain custody technology at present, with high security and scalability. Therefore, as a sufficiently decentralized Bitcoin Layer2, BEVM will also be a high-quality platform for carrying computing power RWA products.

At present, BEVM has developed computing power RWA as its top product in the Bitcoin Layer2 track. In the future, BEVM will provide mature DeFi products such as DEX, lending, and stablecoins for computing power RWA products, and build a rich computing power financial ecosystem for the miner group. BEVM will also join the active PoW currency community to jointly promote the publicity and education of computing power RWA, and bring together the crypto communities of several major PoW asset holders in the industry into a larger computing power RWA community. All signs indicate that BEVM, which is currently valued at US$200 million and backed by Bitmain, is expected to become an important driving force in the computing power RWA track.

3. Lumerin

The Lumerin protocol is a decentralized Web3 data flow routing protocol that promotes data ownership, transmission, and exchange in blockchain networks through smart contracts. In addition to Bitcoin mining, data flows are also essential in various applications. They are essential for decentralized physical infrastructure networks (DePIN), AI systems, and real-world asset tokenization (RWA). The computing power market launched by Lumerin has changed the way cryptocurrency mining computing power is traded and promoted global peer-to-peer, decentralized computing power transactions.

The Lumerin protocol was launched by a US Bitcoin mining software and service provider founded in 2018. Titan has partnered with CoinMint and CoreScientific, two other major mining infrastructure providers in the United States, to launch Titan Pool, the first enterprise-level Bitcoin mining pool in North America, and has received financing from well-known institutions such as Coinbase Ventures, Fenbushi Capital, and HIVE Blockchain. The specific amount is unknown.

In February 2024, Lumerin announced a strategic partnership with the decentralized artificial intelligence network Morpheus to develop applications using AI. Lumerin will use Morpheus's proxy router and wallet technology to coordinate the allocation of artificial intelligence resources across the network in a secure and decentralized manner. As the core node software and protocol of Morpheus' decentralized AI routing technology, it allows users to purchase sessions and reasoning through smart contracts. Lumerin is gradually expanding its boundaries, from the application of PoW computing power RWA to the RWA level of data flows involved in AI and other DePIN projects, further expanding its development territory.

4. Compute Labs

Compute Labs is a Solana-based RWA tokenization protocol with computing (CPU and GPU processing power) as the underlying asset. It is a project incubated by NVIDIA Inception VC Alliance, which uses its self-developed computing tokenization protocol to financialize artificial intelligence, achieve direct access to computing assets, and create computing derivatives, allowing investors to benefit from future monetary computing effortlessly. Its mission is to build a financial ecosystem for computing as an emerging asset class from scratch, aiming to reshape AI investment and create diversified opportunities for investors.

Compute Labs announced on July 4, 2024 that it had completed a $3 million Pre-Seed round of financing at a valuation of $30 million, led by Protocol Labs, the team of the well-known DePIN project Filecoin, and also attracted the participation of many well-known institutions and well-known project founders, including but not limited to Blockchain Coinvestors, OKX Ventures, CMS Holdings, HashKey Capital, Amber Group, P2 Ventures (formerly Polygon Ventures), Sandeep Nailwal of Polygon, Austin Federa of Solana Foundation, and Hushky, the founder of io.net, etc.

Compute Labs aims to become the premier platform for computing derivatives, offering a comprehensive range of products, including swaps, options, perpetual contracts, LP pools, lending, pledging, re-pledging, forwards/futures, structured products, synthetic products, etc. On June 19, 2024, Compute Labs announced a partnership with io.net to financialize AI so that everyone can invest in enterprise-grade, high-performance GPUs such as H100. The yields on enterprise-grade GPUs make them an attractive asset to many investors, but GPUs are not an asset class traditionally available to retail investors, but Compute Labs can solve this problem through GPU Vaults, which is an excellent use case for generating revenue using GPUs.

VII. Infrastructure related to the development of computing power RWA

If computing power RWA is to develop, it still needs a lot of infrastructure, just like DeFi developed in the past. First of all, it needs good assets as a prerequisite, followed by a safe on-chain trading environment and various protocol products that promote investment. This has brought about the explosive growth of DeFi, and the same is true for computing power RWA.

We believe that in addition to the advantages of computing power resources themselves, computing power RWA needs some special infrastructure to consolidate the industry to a big step. As far as the current situation is concerned, they are reliable computing power RWA oracle, credible computing power RWA asset proof mechanism and rich computing power RWA financial tools. Only the combination of these three can make computing power RWA take off. Let's disassemble them one by one below.

1. RWA oracle

If the development of DeFi is the stacking of trading and money-making effects, then before that, most of the on-chain activities must start with "Oracles", because without the existence of Oracles to transmit real-world data, most on-chain products will stagnate, which is why institutions like ChainLink have become the top 20 head projects in the last cycle.

Similarly, for RWA, its essence is to map real assets to the chain, and this behavior must be inseparable from the oracle to transmit data, and it is real and reliable off-chain data, otherwise subsequent products will be "idle" due to missing data. We expect that in this track, there will also be oracle services like ChainLink dedicated to RWA. As for whether ChainLink itself will achieve this through horizontal expansion, it will take time to verify, but it is also an opportunity for other teams.

2. Computing RWA asset proof mechanism

In addition, since we have talked about the need for off-chain data for computing RWA, then logically, who guarantees these real-world data, or to make proofs, also requires an organization to be responsible for it. It includes asset proofs of mining machines, asset proofs of computing products themselves, and proofs of the capabilities of related affiliated institutions. These are the prerequisites for ensuring the healthy and safe development of computing RWA. Once this prerequisite is in place, it is like the DeFi world has Ethereum, a financial asset that can be circulated on the chain, and other on-chain products can be developed.

And when there is a basic asset proof institution or proof process, it is also necessary to establish a complete proof mechanism to make the computing RWA industry a "bulk RWA" that everyone trusts. Otherwise, the existence of the "black box" will make the development of computing RWA only stay in the vision of a small number of people and cannot enter "thousands of households." This mechanism can be an open and transparent product on the chain, or it can be an open rule set by major industry players. Of course, if there can be an industry self-discipline committee for supervision, it is also a good way.

Therefore, how to establish a complete computing power RWA asset certification mechanism is not only the unilateral work of a certain institution or organization, but also an important cornerstone for the development of the track.

3. Computing power RWA financial tools

After the above infrastructure is completed, the development of computing power RWA will also require more financial tools to enrich products, such as various derivative tools, or basic stablecoin protocols, transaction-end products, etc., because one of the major advantages of on-chain DeFi is that it can be combined at will, thereby deriving more products and additional benefits. For example, miners can purchase computing power RWA assets at the same price as traditional computing power, and while enjoying mining benefits, they can also obtain computing power RWA re-staking benefits.

And industry public chains such as BEVM can provide strong support for applications within the ecosystem. Miners can enjoy BEVM token airdrop incentives and Alpha benefits brought by other DeFi protocol token airdrops in the process of participating in these DeFi interactions, allowing miners to obtain multiple benefits that have never been available before, further improving the operating returns of the mines, and these are all important prerequisites for the development of computing power RWA - bringing more secure benefits to PoW miners, otherwise why should miners become computing power RWA players?

Of course, the above three key infrastructures are only the prerequisites for the development of the track. Whether computing power RWA can ultimately bring explosive growth requires more industry capital and resource investment, as well as the participation of more talents.

VIII. Current Challenges and Risks of the RWA Track

RWA projects belong to the subdivision track of RWA, so there will be challenges and risks faced by the RWA track itself, and some specific precautions will be extended due to the characteristics of RWA itself.

1. Risks of Fluctuation in Calculation Power and Profit

The real assets corresponding to RWA usually have fluctuating prices, and the factors affecting RWA are not only the price fluctuations of the assets corresponding to the calculation power, but also the revenue of the calculation power will be affected by the design of the project itself. For example, the calculation power and revenue of the mining machine will be affected by many factors such as hardware performance, network difficulty adjustment, changes in the number of miners, and halving of block rewards, which will directly affect the value of RWA tokens. The uncertainty of profit will increase the investment risk of RWA.

Compared to general RWA, computing power RWA has more influencing factors, which will place high demands on the team responsible for on-chain. For example, when a new mining machine is launched or the mining mechanism sees a halving of revenue, a re-evaluation may have to be conducted. However, some volatility issues can be resolved by reserving price space to resist risks through over-collateralization.

2. Hardware depreciation and technology iteration risks

The hardware equipment corresponding to the computing power RWA assets in reality will age over time and reduce efficiency after long-term use. In addition, the maintenance, repair and electricity costs of mining machines are also an important consideration affecting revenue. With the introduction of a new generation of mining machines, old mining machines may depreciate, which will cause the organizations responsible for putting these assets on the chain to review the value of these assets more frequently, increasing the cost of re-evaluation.

3. Regulation and compliance

Since PoW projects and DePIN projects usually consume a lot of resources, as many countries and regions pay more attention to the energy consumption of cryptocurrency mining, countries may introduce restrictive policies, and computing power RWA projects will also face regulatory uncertainty and asset ownership certification.

For example, if some countries or regions issue corresponding policies to prohibit mining, it will directly affect the redemption of local RWA computing power products, which will seriously affect the value of the products. The corresponding RWA assets can only restore their corresponding value after the mine is relocated to the new site for re-evaluation.

4. Centralization risk

PoW projects may have multiple mining pools with a large proportion. If competition between mining pools leads to multiple mining pools jointly targeting computing power RWA products, it may affect the stability of the project. There are also certain centralization issues in the management of off-chain institutions. RWA projects need to be guaranteed by off-chain institutions before they are put on the chain, and the transaction parties need to rely on the credit endorsement of the institution. If there are some legal risks and other problems in the off-chain institutions, it may affect the computing power RWA products.

IX. Future Prospects of the Computing Power RWA Track

From the perspective of development logic, we believe that computing power RWA will gradually develop into PoW computing power RWA and DePIN computing power RWA in the future. The two have similarities, but also different fundamentals. Both will lead the development of computing power RWA for a period of time.

1. PoW computing power RWA

At present, some projects based on PoW computing power RWA have appeared on the market, and the project backgrounds are all supported by top resources such as Bitmain and Coinbase, which means that the narrative is recognized and excavated at the institutional level. At the same time, since the track is still in its early stages and the asset value involved in PoW computing power RWA is relatively large, the market space for this subdivided track is huge, and new projects can have obvious room for growth.

Although some countries are regulating mining, some countries are more likely to include it in management. For example, the United States already has several listed companies whose main business is mining. This will accelerate the legalization and compliance of the industry, introduce more traditional capital, and accelerate the development of the industry.

The development of PoW computing power RWA will improve the capital utilization rate of mining companies and invest more funds in the purchase of new mining machines. The increase in demand for mining machine business will also increase the research investment of mining machine research and development companies, promote the updating of mining machine equipment and the iteration of technology, thereby accelerating the development of the entire mining industry. But at the same time, this will also increase the overall computing power of PoW projects and improve their network security.

In addition, not only do miners need to use computing power RWA products to improve capital efficiency, computing power RWA products also provide investment tools for more investors who want to participate in mining but do not have the technical ability or are unwilling to bear the maintenance costs of mining machines, and provide more investment products for the market. Such two-way demand will promote the rapid development of DeFi built around computing power RWA products.

2. DePIN-type computing power RWA

A major premise for the current development of the world is that the process of digitalization is irreversible, and human technological development must be moving towards a richer digital infrastructure, that is, faster network bandwidth, more storage space, and more computing resources. Especially since the launch of ChatGPT by OpenAI at the end of 2022, the world has set off a wave of AI, and countries are exploring the direction of large models + high computing power, which has also stimulated a large demand for providing computing power for AI and helped NVIDIA become the world's largest company by market value.

In essence, PoW computing power RWA and DePIN-type RWA are very similar in how to put real assets on the chain. Both belong to the chain of (computing) resources corresponding to hardware devices. Therefore, the infrastructure and DeFi ecosystem of the computing power RWA established can be used interchangeably with DePIN-type RWA.

The difference between the two is that the resources of DePIN-type RWA can be used for practical purposes, such as AI reasoning, image rendering, etc. Just as PoW computing power RWA will promote the development of mining and DeFi, DePIN-type RWA will also promote the development of DePIN upstream and downstream (such as hardware manufacturers, etc.), the utilization of idle resources, and the development of ecological applications built around DePIN.

Both have a considerable market size, but the relevant DeFi infrastructure is still in the early stages of development, so there will definitely be some DeFi focused on this direction. Development, and form a similar industrial agglomeration effect, building a relatively complete computing power RWA DeFi infrastructure ecosystem such as lending, trading, and derivatives.

Therefore, there will be many application development opportunities. It may be seized by old well-known DeFi projects, and these emerging assets may be used in their mature businesses; it may also be seized by some emerging DeFi, and with the help of the massive funds of computing power RWA, it will quickly grow into a DeFi rising star that competes with old DeFi projects.

And from behind BEVM, Lumerin, and Compute Labs, we can see that well-known leading companies such as NVIDIA, Bitmain, and Coinbase are promoting the development of computing power RWA. It can be foreseen that computing power RWA may become a blue ocean market in the current Crypto industry, and will also become an important part of the RWA track.

Click for more information: https://drive.google.com/file/d/1XuTcBZe4RlwJ3e0Xd7ubCDYv2vKxaJzu/view

References:

https://news.marsbit.co/20230331155436990992.html

https://www.bitmain.com/pizza

https://foresightnews.pro/article/detail/62627

https://www.chaincatcher.com/article/2104 186

https://panewslab.com/zh/articledetails/5ixu3p6759vo.html

https://www.qyresearch.com.cn/reports/3753677/asic-bitcoin-mining-hardware

The article comes from the submission and does not represent the views of BlockBeats.

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