One post to understand: ETH only has the advantage of decentralization, and only RWA can bring the underlying logic of new traffic

1. Why only RWA can bring new traffic to ETH

Various Ponzi schemes, memes, NFTs, etc., because of their small size, do not essentially need the security brought by decentralization. After all, they can just reap the profits and run away, and there is no need to worry about the public chain project party getting rid of them.

ETH currently has a high market value, decentralized chips, and many participants. It has become a veritable commodity, and its public chain has become a reliable public service infrastructure that cannot be manipulated by anyone.

Currently, only projects that require large-scale fund custody operations are highly sensitive to the security of non-tamperability. For example, a $5 billion fund with assets placed on a centralized public chain with a market value of $1 billion is like a sheep walking into a tiger's mouth. According to the nature of the project team in the cryptocurrency circle, they will directly tamper with the data on the chain and run away with the money. However, based on Ethereum issuance, it is impossible to be attacked by 51%, avoiding devastating losses. Under this premise, speed and gas are no longer sensitive factors, and decentralization becomes the top priority.

2. RWA implementation logic popularization, taking ondo as an example

1. User deposit: Users transfer USDC (a stablecoin) or other supported cryptocurrencies to Ondo Finance.

2. Convert to fiat currency: If the user deposits USDC, Ondo Finance will convert it into US dollars (USD). This step is carried out through partners such as Coinbase, which is responsible for converting USDC to USD.

3. Purchase ETFs: Ondo Finance uses these dollars to purchase ETFs managed by BlackRock, such as BlackRock's iShares Short Treasury Bond ETF, which was originally BlackRock's iShares Short Treasury Bond ETF, and now BlackRock's tokenized funds (such as BUIDL). This process means that Ondo Finance converts the concentrated cryptocurrency funds into fiat currency, and then uses the fiat currency to invest in traditional financial market products, namely BlackRock's ETFs.

4. Tokenization: These ETF shares are tokenized by Ondo Finance, creating tokens such as OUSG, which represent investments in these ETFs. This allows investors to hold and trade tokens representing physical assets (in this case, US Treasury bonds) on the blockchain.

5. Management and Settlement: By transferring assets to BlackRock’s BUIDL fund, Ondo provides 24/7 instant settlement because BUIDL is a blockchain-based tokenized fund that is not constrained by traditional market hours.

III. Challenges and opportunities in the future

The biggest problem is compliance. Currently, the RWA products issued by Ondo and MakerDAO are not legally registered with the SEC. They rely on large institutions such as BlackRock to take the risk of being sued and punished, and issue projects in the gray area, just like the previous Silvergate and Signature Bank.

But on the other hand, if top-tier institutions dare to do RWA business at the expense of their own credibility, they will certainly invest a lot of resources to promote the compliance of RWA. Eventually, they will achieve a compliance milestone similar to ETFs. However, it is still unknown how long it will take.

Once legal and compliant authorization is obtained, it will definitely be the time for ETH to revolutionize the financial industry. After all, other public chain projects like SOL are highly centralized and can only be identified as securities, not commodities like BTC and ETH.