Real World Assets & DeFi
Overview of the current state of RWAs & DeFi protocols leveraging RWAs
The DeFi revolution of Real-World Assets is already here, however, many have yet to take notice. This article will provide an overview of the current state of RWAs, helping you to ride this wave.
The digitalization of real-world assets (RWAs) will be a momentous theme for institutional crypto in the year ahead, with stablecoin technology at its core. RWAs have the advantage of exhibiting a low correlation with other traditional financial assets such as commodities and bonds, making them attractive for investors looking to diversify their portfolios. The DeFi sector is actively pursuing the introduction of classes of tokenized collateral from the traditional finance world, recognizing the lack of correlation between RWAs and other assets as an asset rather than a flaw.
RWAs can be brought on-chain using the same structure employed for fiat-backed stablecoins. It is natural to extend the same tokenized structure to public stocks, bonds, ETFs, and other assets. In addition, many of the same features that make stablecoins valuable—such as the ability to transact quickly and without the need for a centralized third party—also make them attractive for other classes of tokenized real-world assets. As such, the potential for RWAs to be tokenized and transferred on-chain is immense.
“This could have compelling use cases for settlement and cross-border payments alongside innovations in the tokenization of real-world assets (RWA). Permissioned DeFi would likely target different use cases and solve for different problems (like undercollateralized credit) compared to permissionless DeFi.”
Read more RWAs at Coinbase’s 2023 Crypto Market Outlook Report
What are Real-World Assets (RWAs)?
Real-World Assets are physical assets that can be tokenized and represented on-chain. Real-world assets are tangible or financial items that can act as collateral in the DeFi industry. These are the most common RWAs:
Cash
Precious metals (gold, silver, etc.)
Real estate
Corporate debt
Insurance
Salaries and invoices
Consumer goods
Credit notes
Royalties, etc.
RWAs are already used in the traditional finance world to back loans and yield generation. However, they are yet to be fully utilized in DeFi. Unlocking their potential value, as well as that of the off-chain financial system, is key to creating sustainable yield models without the volatility that is often associated with DeFi.
Why Now?
Decentralized finance (DeFi) primitives, including stablecoins, swaps, lending, derivatives, insurance, and prediction markets, have been making financial products more accessible. Nevertheless, DeFi returns have taken a hit due to bearish conditions. DeFi yields usually come from a recursive activity tied to crypto assets on-chain. Investors earn a yield by providing liquidity to borrowers and traders on decentralized exchanges (DEXes) or overcollateralized lending platforms and are rewarded with inflationary tokens or one-time treasury boosts. These activities generate yield in a bull market, yet quickly become a death spiral when asset prices fall and on-chain activity declines.
The DeFi landscape has struggled to scale, as the yield generation mechanism only functions when prices rise. This unsustainable yield model is best demonstrated by the cumulative total value locked (TVL) in DeFi protocols, which has dropped from nearly $180 billion to nearly $50 billion since the market peak. The pressing need for sustainable income in DeFi has ignited the growth of protocols that generate a yield from real-world assets (RWAs).
How do Real-World Assets (RWAs) Factor into DeFi?
The primary use case for current RWA protocols is to collateralize these assets in order to obtain loans denominated in cryptocurrencies, typically stablecoins. Many protocols were created to tokenize RWAs, and a few integrated this technology to provide investors across DeFi and TradFi yields that tap into some of the world’s biggest financial credit markets.
Real-world assets (RWAs) are tangible assets that are linked to real-world entities, in contrast to digital cryptocurrencies which exist solely within the digital realm. Thanks to blockchain technology, RWAs can now be connected to DeFi, making it possible to tokenize these assets and create tokens that are redeemable for the underlying asset outside of the blockchain. Smart contracts are often used to ensure that the tokenized asset is always redeemable.
The term “real-world assets” first came into use to distinguish between digital cryptocurrencies and traditional financial holdings. This is because RWAs are tangible, physical items that have value that is verifiable in the real world. As such, they are much more reliable and secure than digital cryptocurrencies, which may be subject to rapid fluctuations in value. Additionally, RWAs often have legal backing and are regulated by the government or other regulatory bodies. This creates a level of security and trust that is not found with digital cryptocurrencies.
Stablecoins are an ideal example of successful real-world asset utilization in DeFi, with three of the top seven crypto tokens by market cap being stablecoins (totaling $136 billion). Companies such as Circle maintain an audited reserve of USD assets and mint USDC tokens for use across DeFi protocols. This allows users to have exposure to cryptocurrencies without the risk of price volatility, as the value of the tokens remains relatively stable.
Synthetic tokens represent another use case involving the bridging of RWAs to DeFi. Synthetic tokens allow on-chain trading of derivatives linked to currencies, stocks, and commodities. These tokens provide users with the ability to gain exposure to assets that may be geographically or financially difficult to access, while also providing users with a means to hedge against risk. Leading synthetic token trading platform Synthetix had $3 billion worth of assets locked in its protocol at the peak of the 2021 bull run, a testament to the strong demand for synthetic tokens.
Lending protocols are an exciting adoption of RWA in DeFi. Unlike traditional protocols that rely on crypto-native borrowing, RWA-focused DeFi platforms service borrowers with real-world businesses, allowing them to access capital to fund their operations. This model offers relatively stable returns and is insulated from crypto volatility, which makes it an attractive option for both borrowers and lenders. Furthermore, these protocols often utilize smart contracts to automate the lending process, making it more efficient and cost-effective.
How do lending protocols use Real World Assets (RWA) to generate yield?
The DeFi lending business model is the most efficient way to pool and distribute capital between a large group of lenders and borrowers. It eliminates intermediaries and automates money movement while still offering users anonymity. However, these benefits come with a limitation: the focus on serving crypto-native investors reduces the pool of capital available in DeFi, particularly during bear markets. It also excludes the world's largest borrowers — real-world businesses without any crypto assets to use as collateral.
Lending protocols such as Goldfinch tackle these issues by creating a model that allows businesses with real-world economic activity to access DeFi capital. Audited firms, which have millions of dollars tied up in RWAs, enter into legally-binding agreements to obtain loans with these assets as collateral. The DeFi protocol gains yield from interest earned on issued loans, fees collected from the treasury, and additional token incentives.
Active loans on Goldfinch | Source: Goldfinch dashboard on Dune
Goldfinch's yield is protected from crypto volatility since borrowers use funds for real-world activities. The average loan term on Goldfinch is 3-4 years with a fixed interest rate, so the USDC yields from interest remain stable despite crypto market fluctuations. There is also reliable capital demand, guaranteeing the best interest rates for deposited assets. Let's examine how this works in more detail.
It is becoming increasingly apparent that RWA adaptation in DeFi will soon gain major traction. A few of the most promising ones are:
Promising RWA integrated protocols
LandX - @landxfinance
LandX is a platform that is revolutionizing the way people buy, sell and manage their real estate assets. The platform is creating a unique ecosystem that is powered by three core participants: farmers, validators, and investors.
Farmers are the backbone of the LandX ecosystem. They are responsible for producing high-quality crops that meet the needs of the market. This is where the platform comes in. LandX provides farmers with an opportunity to raise funds from DeFi in exchange for regular crop share payments. This means that farmers can now access the capital they need to invest in their farms and grow their businesses.
Validators, on the other hand, are responsible for ensuring that the farming process is transparent and reliable. They ensure that the crops are of the highest quality, and that they are delivered to the market on time. Validators are also responsible for maintaining the integrity of the LandX platform. They do this by ensuring that all transactions on the platform are secure and transparent.
Investors are the final piece of the puzzle. They are responsible for providing the capital that farmers need to grow their businesses. In exchange, investors receive exposure to the crop share of farmland commodities. This is made possible through the use of xTokens, which offer tokenized exposure to the crop share of farmland commodities. These xTokens generate yields in cTokens (commodity tokens), which can be exchanged on the platform at the market value of 1 kg of the product (wheat, soy, rice, or corn).
But that's not all! LandX has also created a unique governance system that is powered by the LNDX token. LNDX token is used for governance and staking, which means that 6% of xTokens yield will be distributed to LNDX holders. This creates a unique opportunity for investors to earn additional rewards for holding the LNDX token.
RealT - @RealTPlatform
RealT is a decentralized platform that allows users to tokenize and trade real estate assets. is a decentralized platform that is revolutionizing the real estate industry. It allows users to tokenize and trade real estate assets in a completely transparent and secure manner. This means that anyone, from anywhere in the world, can invest in US real estate without any of the traditional barriers to entry.
With RealTPlatform, investments can be as small as $50, making it accessible to a wider range of investors. This means that you don't need to have a large amount of capital to start investing in real estate.
One of the greatest benefits of RealTPlatform is that it offers a 3-10% APY from rent payments. This means that investors can earn a steady stream of passive income from their real estate investments.
In fact, RealTPlatform has the biggest TVL (Total Value Locked) of all RWA (Real World Asset) protocols, with a staggering $73M in assets. This is a testament to the trust that investors have in this platform and its ability to deliver solid returns.
To learn more about how RealTPlatform is transforming the real estate industry, you can visit their website at wiki.realt.co.
Centrifuge - @centrifuge
Centrifuge is a blockchain protocol that allows the tokenization of real-world assets such as goods, mortgages, and other similar assets. This protocol is built on Polkadot for speed, and bridged to Ethereum for DeFi liquidity, making it accessible to a wider audience. The investments are only accepted in the form of $DAI, a stablecoin that is pegged to the US dollar, making it a safe and secure investment.
One of the key benefits of using the Centrifuge protocol is access to a stable income that is backed by real-world assets. This means that investors can enjoy a steady income stream without having to worry about the volatility of traditional investments.
The $CFG token is an integral part of the Centrifuge ecosystem, as it can be used for governance, fees on the Centrifuge Chain, staking, and grants. This token provides users with a range of benefits, making it a valuable asset for those looking to get involved in the Centrifuge community.
In summary, Centrifuge is a revolutionary protocol that is changing the way we invest in real-world assets. With its innovative approach to tokenization and its focus on stability and security, it is quickly becoming one of the most popular protocols in the DeFi space.
Land Share - @Landshareio
Land Share is a new and innovative platform that allows individuals to own fractional shares of real estate assets. This is a great opportunity for those who have always wanted to invest in real estate but didn't have the capital to do so.
One of the key features of the platform is that it brings tokenized real estate assets on Binance Smart Chain, making it a secure and reliable investment opportunity for users.
Another great feature of the platform is that rental income is sent directly to your wallet each month. This is a hassle-free way to generate passive income and grow your wealth over time.
Additionally, Landshareio has a unique feature called House Flipping. This allows users to invest in undervalued real estate and flip it in 3-6 months, potentially earning a significant return on investment.
Overall, Landshareio is a promising platform that offers a range of investment opportunities in the real estate market. With its innovative features and secure investment platform, it is definitely worth considering for those looking to diversify their investment portfolio.
Goldfinch - @goldfinch_fi
Goldfinch is a decentralized platform that enables users to tokenize assets and create investment products. This allows for more efficient and accessible investment opportunities. The platform also offers a decentralized credit protocol that allows anyone to be a lender. This is a significant development in the world of finance, as it opens up lending to a wider range of people and allows for greater financial inclusion.
One of the key features of @goldfinch_fi is that it allows you to lend USDC to real businesses worldwide. This means that you can support small and medium-sized enterprises in developing countries, which can have a positive impact on local economies. Additionally, the platform is backed by reputable investors such as, and other VCs, which adds to its credibility and reliability.
Another interesting aspect of @goldfinch_fi is the Senior Pool, which automatically diversifies your investment across all pools. This helps to mitigate risk and ensures that your investment is spread out among multiple borrowers. This is a great way to invest in a diversified portfolio without having to actively manage it yourself.
Overall, @goldfinch_fi is a promising platform that has the potential to revolutionize the way we invest and lend money. It offers a range of features that make it more efficient and accessible, and its decentralized credit protocol has the potential to bring financial services to people who were previously excluded from the traditional banking system.
All of these platforms are poised to revolutionize the RWAs space, and it is only a matter of time before they gain substantial traction.
The invaluable tool available to assess the current state of RWA protocols is app.rwa.xyz. This comprehensive resource offers a detailed overview of all RWA protocols, their associated loans, borrowers, and APYs. With this user-friendly platform, users can quickly and easily access comprehensive information about the various RWA protocols, allowing for a better understanding of the current state of the market. Furthermore, this platform also provides users with a variety of powerful analytical tools and features, enabling them to make informed decisions about RWA protocols and investments. Ultimately, app.rwa.xyz provides users with an invaluable resource for understanding the current state of RWA protocols and making informed investments.