RWA (Real World Asset) refers to physical, tangible assets that exist in the real world, such as real estate, commodities, or even stocks, which can be tokenised and brought onto blockchain networks for use in decentralised finance (DeFi) and other blockchain-based applications. By tokenising RWAs, they can be more easily traded, utilised in smart contracts, [...]

By Published On: December 5, 2024

RWA (Real World Asset) refers to physical, tangible assets that exist in the real world, such as real estate, commodities, or even stocks, which can be tokenised and brought onto blockchain networks for use in decentralised finance (DeFi) and other blockchain-based applications. By tokenising RWAs, they can be more easily traded, utilised in smart contracts, and accessed by a wider range of people, increasing their liquidity and accessibility.

Key Features of RWAs:

  1. Physical or Tangible: Unlike digital assets, RWAs exist in the real world, such as land, buildings, gold, or even commodities like oil.
  2. Tokenisation: RWAs can be represented by digital tokens on a blockchain, making them tradable and usable in the digital economy.
  3. Liquidity: Tokenising RWAs helps in unlocking liquidity that is otherwise tied up in physical assets.
  4. Collateralisation: RWAs can be used as collateral for borrowing or lending in DeFi ecosystems.

Examples of RWAs:

  1. Real Estate: Property or land that can be tokenised and used for DeFi lending or as collateral.
  2. Commodities: Physical assets like gold, silver, or oil that can be tokenised for trading or investment.
  3. Art: Physical artworks or collectibles that can be digitised and sold as NFTs (non-fungible tokens).
  4. Equities: Shares of companies or assets that can be tokenised to enable more liquid trading.

Use Cases in DeFi:

  • Collateral for Loans: RWAs can be used to secure loans on decentralised lending platforms.
  • Fractional Ownership: Tokenising RWAs allows for fractional ownership, enabling smaller investors to participate in markets like real estate.
  • Asset Backing: RWAs can be used to back stablecoins or other digital assets, providing a real-world asset base to enhance credibility.

By bridging the gap between traditional financial systems and blockchain-based solutions, RWAs have the potential to revolutionise the way we invest in and interact with physical assets.