$BTC Recently, the popularity of RWA has been quite high, so let's talk about some basic knowledge of RWA. #RWA

First of all, what exactly is RWA?

RWA (Real World Assets) refers to converting valuable real-world assets such as real estate, bonds, artworks, carbon emission allowances, patents, and copyrights into digital tokens on the blockchain through smart contracts, allowing them to be freely bought and sold on-chain.

So how do we turn physical or intangible assets into tokens?

1. Digital tokens are official ownership records that eliminate the need for intermediary custodial institutions, saving on duplicate registrations. This is suitable for digitally native assets, but the legal framework for real assets is still being refined.

2. The custodian truly owns the property or bonds and issues tokens at a 1:1 ratio, which can be exchanged for the underlying assets or equivalent fiat currency at any time. This is the most commonly used approach for stablecoins.

3. Use higher-priority assets to back the tokens, allowing them to withstand price fluctuations. Tether, which is backed not only by cash but also by fixed-income securities, is a typical example.

4. Retain only a portion of the reserves and use algorithms plus market operations to maintain the token's value; the former Terra/Luna is an example of failure.

One of the earliest forms of RWA is stablecoins. In 2019, in addition to creating tokenized versions of fiat currencies, companies like Paxos also launched tokenized versions of gold, which are pegged to a specific amount of price. Tokenized gold is backed by physical gold stored in bank vaults and verified through monthly attestations. In 2021 and 2022, the private lending market saw the emergence of unsecured lending platforms such as Maple, Goldfinch, and Clearpool, allowing established institutions to borrow funds based on their creditworthiness. With DeFi yields plummeting in 2023, tokenized government bonds experienced explosive growth, with providers like Ondo Finance and OpenEden attracting significant capital inflows.