What are Real World Assets (RWA)?
What are Real World Assets (RWA)?
What is RWA?
Real World Assets include tangible assets that are tokenized from the traditional economic system and transferred to the digital space. Essentially, these are the same assets from the "real" financial world, but they are issued as tokenized
Why were RWAs needed?
To avoid overhauling economic systems and reinventing the wheel, blockchain developers have chosen not to create entirely new means of payment with unique operational rules. Instead, they adapted past experiences by creating Real World Beings.
Real World Entities act as a kind of "bridge" between two worlds: real and digital. The value of existing assets has been transferred to decentralized financial applications.
The RWA “bridge” enables the incorporation of real-world tangible value with the core benefits of blockchain, such as accessibility, speed, and adaptability to a new currency.
What qualifies as RWA?
The RWA market is not yet fully established, but several categories of tokenized real-world assets can be identified.
Real World Assets include:
Centralized stablecoins
Token lending markets
Token securities
Real estate (mortgage bonds as collateral for crypto loans)
Artifacts and collectibles (NFT Market)
Government bond (USDT is backed by short-term US Treasury bills)
Precious metals (Tether's XAUT)
Despite the RWA aiming to advance the global financial system by incorporating progressive technologies for improved usability and management, notable challenges remain.
Regulatory challenges in the RWA market,
Global financial regulators and traditional security institutions are slow to adapt to innovations in digital markets. Since Real World Beings bring two worlds together, the rules for them must be twice as comprehensive. The problem is that different jurisdictions have different laws, and some may conflict with others. Unfortunately, some countries find it easier to ban the use of DeFi (or ignore its existence) than to revise their legislation for it.
security concerns,
The concept of RWA involves transferring value from assets in one domain to another. While it is obvious to secure resources in the real domain and the digital domain, ensuring security during the transition between the two is not simple. There is a high probability of disruption in the connection between the token and its physical counterpart due to technical malfunctions or hacking attacks, leading to loss of funds and bringing RWA into disrepute.
Scalability issues,
To process all RWA data, platforms need to handle large transaction volumes without sacrificing performance. Achieving this is extremely difficult in current technological conditions, where the speed or cost of data processing often suffers.
The future of the RWA market,
The main question on the minds of investors interested in Real World Assets is whether the new market is promising or just a short-lived trend. We should note that the “real assets” sector is huge right now. The value of the real estate market alone is projected to reach US$637.80tn in 2024. Such a large industry, combined with the power of blockchain technology, seems to make the RWA market a very promising and attractive segment.
