Many groundbreaking changes were provided by using blockchain technology in traditional settings. From digital currencies to decentralized finance, blockchain has effectively driven a revolution in the field of finance. The capability of real-world assets to be tokenized on blockchain networks offers sufficient opportunities to introduce real-world assets, crypto, or RWA crypto projects. RWA tokens have been received as an idea of how to introduce real-world assets into the crypto space supported by growth and stability.

With the help of blockchain, you can tokenize a piece of real estate, a physical artwork, or commodities and get a new approach to investment thanks to RWA tokens. Currently, RWA crypto projects are instrumental in closing the gap between the virtual and physical domains. Most importantly, they provide more effective ways of financing less liquid assets. In this article, we will be talking about what are RWA, the role of RWAs in decentralized finance, the benefits of RWA in crypto, the challenges and risks that are included in it, and some of the top RWA platforms.

What Is RWA?

Real World Assets are the tangible assets that are outside the digital world. It is an outdated kind of asset that we have used for a long time and are still using. These assets include real estate properties, commodities, art and collectibles, treasury bonds, and machinery. RWA represents these assets which are outside the digital platforms in the blockchain context. The potential that RWA holds in the blockchain community is immaculate because of its huge market opportunities with a market size of hundreds of trillions of dollars.

Role Of RWA In DeFi

RWA has so many possibilities through tokenization, it finds its place within the DeFi (Decentralized Finance) ecosystem which will create more opportunities increase the availability of so many financial tools that are not that accessible, and also create more openings for new applications. The RWA has a broader acceptance in the crypto industry because of its tokenization. It has a vast amount of opportunity to influence the global economies.

Benefits Of RWA In Crypto

Many benefits have been in lined with crypto. Blockchain-based Real World Asset tokenization can assist in the transformation of conventional markets with a host of related advantages. Tokenization plays an added role in increasing efficiency while dealing with fractionalized assets making the process trustworthy. In trading, Real World Assets can be accessed when needed, and you do not have to depend on over-the-counter brokers.

• Blockchain allows for the security or breaking up of assets that may be hard to sell or, in other words, illiquid. For example, real estate, carbon credits, pre-IPO company shares, and others. This feature opens up the future of non-standard ownership options and financial tools. Access and liquidity are granted to assets that are worth trillions of dollars.
• Firms can explore foreign markets without the difficulties of dealing with cross-boundary regulation and complications of foreign exchange which are characteristics of overseas investments.
• The security measures on blockchain platforms can be integrated to the benefit of companies, where its assets are to be placed. It involves the possibility of incorporating regulatory compliance rights in the token, thus achieving involuntary compliance with local legislation.
• Tokenization helps businesses increase the number of products they offer by representing RWA in digital tokens. This suits an assorted customer base and also strengthens the total tangible fixed assets, which in turn insulates against market risks.

RWA Challenges And Risks

• The most important challenge, and the main concern, is the ability to steer the company through the dynamic and, at times, confused environment of rules and regulations that strongly differ from one jurisdiction to another. To address legal concerns that may pose a threat to any given tokenized asset project it is appropriate that it complies with the set securities laws and other legal measures. 
• Preservation of the fundamental financial or legal capital that digital tokens represent is essential. Due to the value of these assets deciding on custody solutions free from risks of theft, fraud or mishandling is critical.

Top RWA Platforms

Some of the top platforms of RWA are mentioned below

1. Ondo Finance: Ondo is focused on the tokenized US Treasuries, which are yield-bearing stablecoin substitutes. The platform targets mostly conservative investors who look for relatively secure and steady income from the government.
2. Centrifuge: Centrifuge’s principal application of blockchain is the tokenization of invoices, loans, and other financial assets. Its system connects to such protocols likes Maker Decentralized Autonomous Organization (MakerDAO) so that real assets can be used as collateral for stablecoin issuance.
3. Swarm: Swarm provides tokenization services on equity, debt, and other investment products. It is very much controlled to meet international legal requirements involving securities.

Conclusion

Real World Assets are reviving the asset environment by combining old and new technological approaches. Since practically anything can be tokenized, the possibilities with RWAs are staggering, especially in the fields of art, real estate, carbon credit, bonds, and stocks. Valuation and auditing, custody and security, governance, trust, interoperability, and scalability are examples of many issues that arise when implementing RWAs. To overcome these challenges a significant engagement of all major market players, including the asset originators, token issuers, service providers, regulators, and traders is needed.