prev
The key logic of RWA operation
The core logic of RWA is to digitize tangible assets with clear monetary value and convert them into tradable digital forms. Off chain formalization is the core mechanism of RWA operation. Before real-world assets can be integrated into digital assets, their value, ownership, and legal status must be clearly determined in the physical world. When estimating the value of RWA, various factors such as market price, historical performance, and physical condition of the asset need to be considered. These assets must have undisputed legal ownership and be evidenced by contracts or invoices.
One of the core logic of digital assetization is to link the real asset world and the digital asset world through an information bridge. Under this logic, the information of assets is transformed into digital digital assets. Data on asset value and legal ownership will be embedded into the blockchain data of digital assets. Due to the transparency of blockchain, anyone can verify the authenticity of digital assets based on blockchain data.
When dealing with assets that fall within the scope of securities regulation or are classified as securities, it is important to ensure that the entire digital assetization process complies with regulatory regulations as a bottom line. On the one hand, it is necessary to hire licensed securities based digital asset issuers, who need to comply with specific standards for cryptocurrency personal identity authentication (KYC) and corporate authentication (KYB). On the other hand, choose approved securities based digital asset trading platforms.
Building an RWA intelligent supply and demand agreement is crucial. The premise for the DeFi protocol with a focus on RWA to take effect is that both the supply and demand sides construct a protocol based on smart contracts. This type of protocol is based on code implementation, and code review requires professional appraisal agencies to identify and review it.
Through the above methods, RWA is no longer just an abstract concept, but a practical key component in the DeFi field, bringing the influence and trust of real-world valuation and legal frameworks into the decentralized digital asset field.
The process mode of RWA operation
RWA is a professional and complex process that converts physical assets or traditional financial assets into digital assets on blockchain technology, typically divided into the following key stages: first, asset selection. The core is to select suitable assets for digital assetization. It can be tangible assets such as real estate, or intangible assets such as stocks or government bonds. Secondly, asset evaluation. Evaluate assets to determine their current market value. This step is crucial for accurate pricing of digital assets. Thirdly, the legal framework. Establishing a legal framework is crucial for ensuring compliance with regulations in the process of digital assetization. This structure defines ownership and legal responsibility. For example, Ondo Finance integrates the asset package invested in US treasury bond bonds and currency on Layer 2 Polygon of ETH. Ondo Finance is an institutional level agreement. The underlying allocation of assets such as US treasury bond bonds and US dollar deposits provides institutional investors with corresponding returns. Fourthly, create digital assets. Casting digital assets on selected blockchain platforms (such as ETH's Layer 2 Arbitrum). Each digital asset represents a partial share of the asset. Fifth, digital asset trading. These digital assets can be traded in the secondary market, thereby increasing their liquidity and allowing more investors to access them. Sixth, asset management. Managing real-world assets is an ongoing process. Digital asset holders receive corresponding returns based on their share of digital assets. Seventh, digital asset redemption. Redemption or repurchase of digital assets according to the terms stipulated in the digital asset securitization agreement.
Case study of RWA operation
Through the process of digital assetization, some illiquid assets become divisible and transferable, providing investment opportunities for a wider audience and increasing investor participation.
As an important channel connecting traditional assets and digital asset fields, RWA has received great attention, with the most famous being the stablecoin USDT issued by Tether. StUSDT is a product launched by Tether based on stablecoin USDT. It allows stablecoin USDT holders to place digital assets on the ETH public chain to obtain returns on short-term Treasury bills (such as 3-month US Treasury bills).
With the continuous innovation and changes in technology and regulations, the development of RWA digital assetization is advancing rapidly, and it is expected that there will be more participants and innovative solutions in the future.
The most exciting feature of RWA may not be the settlement and issuance based on blockchain, but rather the trading in the secondary market of fund digital assets. With the maturity of the RWA market, the fully traded prices of fund digital assets in the secondary market can more accurately reflect the value of the fund, which is conducive to price discovery and provides a basis for fund pricing, rather than trading solely based on the published net asset value like ETFs. Arbitrageurs carry out arbitrage trading based on investor demand and asset price trends, which will eliminate price differences between on chain and off chain.
In addition, the digital assets of RWA funds circulating in the secondary market can also serve as liquidity supplements for fund redemption. Funds can reduce the low yield cash reserves held in response to redemption. Once investors can sell digital assets instead of redeeming shares, the asset size of the fund will stabilize, and the cost of rebalancing will also decrease. If the underlying assets of the fund are also digitized, the fund manager will no longer need to compensate for the liquidity mismatch gap between subscription and redemption by selling underlying assets or borrowing from banks. On the contrary, related underlying assets can be sold directly in the secondary market in the form of digital assetization.