RWAs in DeFi

Tokenized RWAs possess the potential to significantly transform the landscape of decentralized finance (DeFi). DeFi, in many respects, has served as a proof of concept for on-chain finance, presenting a technologically superior layer for facilitating financial and economic activities.

Nonetheless, a vast majority of assets remain outside the blockchain ecosystem, yet they stand to benefit from the advantages offered by this technology. This underscores the importance of tokenized RWAs in advancing the digital asset industry exponentially, allowing assets currently excluded from the blockchain ecosystem to leverage blockchain infrastructure.

Enabling assets outside the digital asset ecosystem to be blockchain-enabled will foster a financial system characterized by enhanced liquidity conditions, greater transparency, reduced systemic risks, and infrastructure free from conflicts of interest, thus promoting a fairer environment where exploitation by a privileged few is mitigated.

Tokenized real-world assets have been experiencing significant growth within the DeFi ecosystem, with the total value locked in RWAs reaching approximately $5 billion by December 2023, as reported by DefiLlama.

Additionally, real-world assets can facilitate the development of innovative financial products. For instance, MakerDAO, a leading DeFi protocol in terms of total value locked, utilizes a diverse range of real-world asset collateral to back the stablecoin DAI, exemplifying a novel approach to creating new financial assets by integrating both traditional and blockchain-based assets and technologies.