Revolutionising DeFi: The Role of Real-World Assets

SubQuery Network
4 min readMay 17, 2024

Introduction

The Real-world Assets (RWAs) idea is one of the most compelling applications of blockchain technology, leveraging its ability to tokenise diverse items of value — whether physical, digital, or data-based.

From art and collectibles to real estate, commodities, and personal data, various tangible and intangible assets can now be digitally represented on-chain through token issuance. This tokenisation of RWAs introduces innovative methods for transferring ownership, sharing revenue streams, and enhancing liquidity for previously illiquid or non-commercial assets.

In this article, we will explore the definition of RWAs, their role in DeFi, some of the obstacles they currently encounter, and showcase the RWA projects among our existing customers.

What are RWAs?

These are tangible assets that exist in the physical world, such as real estate, commodities, and art. They represent a substantial portion of global financial value.

Real-world assets play a huge role in traditional finance. However, these assets are hardly tapped into in the decentralised finance (DeFi) world, beyond fiat-backed stablecoins like USDT and USDC. This offers opportunities for web3 businesses to tap into the benefits of blockchain technology and DeFi for more growth and innovation within their ecosystems.

How are RWAs being used in DeFi?

The rise of DeFi has opened new opportunities for real-world assets. Integrating these assets can help DeFi evolve into an inclusive financial system that connects both traditional and crypto markets, offering investment options similar to those of traditional financial institutions.

Here are some of the benefits of RWAs in DeFi:

  1. Enhanced Liquidity: Unlike traditional markets, crypto exchanges offer 24/7 trading, providing more flexibility.
  2. Accessibility: Tokenisation lowers entry barriers by enabling fractional ownership, making high-value assets accessible to more investors.
  3. Global Reach: Blockchain technology transcends geographical and regulatory restrictions, allowing global access to assets.
  4. Improved Transparency: Blockchain’s transparency boosts investor confidence by minimising fraud and ownership conflicts.
  5. Trust: Tokenisation allows real-world assets to be settled instantly without needing a third party like traditional clearinghouses. Blockchain’s built-in consensus mechanisms ensure smooth and trusted transactions, enhancing efficiency and reliability.

Challenges facing RWAs

One of the key factors for the liquidity challenges of RWAs is the lack of transparent price action mechanisms. For example, tokenising real estate would require an accurate valuation of assets validated by users on-chain.

Also, as RWAs are not on-chain assets, risk management becomes crucial. RWAs are often held in custody by third parties, which means that there is a risk of counterparty default. This can lead to losses if the counterparty is unable to meet its obligations.

As cryptocurrency, DeFi, Fintech, and related technologies advance rapidly, the global legal and regulatory framework for this sector remains inadequate. Regulatory clarity is essential before we can fully realise the benefits of asset tokenisation.

RWA Projects using SubQuery

SubQuery’s data indexer SDK is used by a variety of different projects across all verticals and ecosystems. Below are a few of our customers who are exploring the potential of Real World Assets.

1. Centrifuge: Centrifuge is an on-chain finance platform, providing the infrastructure and ecosystem to tokenize, manage, and invest into RWAs.

2. OriginTrail: OriginTrail is a platform that uses both a blockchain and a technology called a decentralized knowledge graph (DKG) to manage data about RWAs in the digital space.

3: MoonBeam: Moonbeam is a platform for cross-chain connected applications that unites assets and functionality from many blockchains. Moonbeam currently offers a unique and powerful platform for tokenising RWAs on-chain using the Substrate framework.

4. Polymesh: Polymesh emerges as a pioneering force in the realm of RWA tokenisation, offering a unique blockchain infrastructure tailored for the digitisation of traditional assets.

Future trends and developments

In conclusion, RWAs is a promising area of growth in the blockchain space but face challenges such as transparency, accurate valuation, and risk management. Despite these hurdles, tokenisation is set to drive mainstream blockchain and cryptocurrency adoption by transforming asset ownership. Success hinges on streamlined regulations, robust infrastructure, scalability and security innovations, and support from traditional finance (TradFi).

Currently, most of the growth of RWAs on DeFi is being driven primarily by increasing demand from institutional investors. As the DeFi space continues to grow, it is likely that RWAs on DeFi will become an increasingly important part of the web3 revolution.

About SubQuery

SubQuery Network is innovating web3 infrastructure with tools that empower builders to decentralise the future. Our fast, flexible, and open data indexer supercharges dApps on over 180 networks, enabling a user-focused web3 world. Soon, our Data Node will provide breakthroughs in the RPC industry, and deliver decentralisation without compromise. We pioneer the web3 revolution for visionaries and forward-thinkers. We’re not just a company — we’re a movement driving an inclusive and decentralised web3 era. Let’s shape the future of web3, together.

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