Introducing $BRLN , and Brillion’s Vision for Web3
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The tokenization of real world assets (RWAs) has been identified as a main driver of growth for crypto and web3 by some of the leading investors in the space. This should not come as a surprise as it’s one of the use cases that is most relevant to the existing world of finance.
Currently, RWAs are experiencing a boom. They’ve seen 286% ROI in Q1 2024 and RWA protocols have grown from a $2 billion to an $8 billion TVL. We’ve even seen institutions such as BlackRock and Franklin Templeton start to dabble with tokenization as well.
Let’s take a look at the current state of RWAs and how we got here.
In case we’re new to the concept of RWAs, in web3 circles the term commonly refers to bringing traditional offchain assets onchain via tokenization. To tokenize an asset is to create a set of smart contracts that give web3 users the ability to mint tokens and treat them as if they were actual representations of the asset — albeit, stored on a blockchain.
What’s appealing about this idea for RWA issuers is that it creates new markets for traditional assets that are more liquid, accessible, transparent, and efficient. They even create new technical possibilities for the assets themselves such as programmability or even fractionalized ownership.
For web3 users, RWAs mean they get onchain exposure to offchain assets. This can include yield-bearing assets where holding a specific token for an RWA results in onchain rewards based on the performance of these assets in the real world.
The tokenization of real world assets has been part of the broader conversation around digital assets since the inception of stablecoins as onchain representations of fiat money. Tether, the first stablecoin, was introduced in 2014 as Realcoin and was designed to be a blockchain-based representation of the US dollar.
Today, stablecoins make up for most of the market in RWAs in formal terms. For our purposes, however, the focus is on the rising $8 billion market for RWAs that exists outside of stablecoins. They are an emerging asset class that takes the basic concept of tokenization even further.
Experimentation with Ethereum smart contracts in 2015 created token standards like ERC-20 and ERC-721 and web3 projects started to look for the best way to represent real world assets in this new digital infrastructure. Nexera (f.k.a. AllianceBlock) even proposed ERC-7208 as a token standard designed for the better representation of complex assets such as these.
This wave of innovation led to the creation of RWAs focused on anything from the tokenization of real estate in 2017 to a boom in private credit platforms by 2022.
Since 2023, RWAs have garnered significant attention in crypto markets. This is due to a decrease in DeFi yields versus the performance of RWA platforms that offered users exposure to US Treasury bills that were outperforming them.
Coingecko reports providers for this particular kind of RWA saw a 782% growth in TVL by the end of the year. This was only a prelude to the recent growth in 2024 as mentioned above.
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Today, RWAs are at the center of an expansive sector in web3 that’s made up of different ecosystems, protocols, and applications. These range from specialized oracle systems to tokenization platforms to distributors and exchanges, each providing RWA-related solutions at every level of the web3 stack.
At the infrastructure level, we’re seeing important developments in layer-1 networks (L1s) including Ethereum and Solana as well as scalability solutions such as Polygon that pave the way for RWAs in important ways. The complexities of representing assets from the real world required advances in scalability that are currently being solved by and for these networks in the form of side chains, rollups, and other modular approaches.
Then we have oracle systems that are in charge of relaying the real-world information that is relevant to these assets in a secure and decentralized way. This is crucial to their proper onchain representation and it’s where projects like Chainlink are playing a key role.
Together, L1s, oracle solutions, and even proposed token standards such as ERC-7208, allow for developers to work on more specialized parts of RWAs. Now that we have the technology to represent these assets, we start to see projects focused on designing them properly.
RWAs can be designed and implemented to bring a wide range of assets on chain. Aside from stablecoins, commodities and private credit currently dominate the market for RWAs with a $1.80 and $8.20 billion share of the $10.843 billion total market as of July 2024. This growth has been thanks to many efforts such as Paxos’ work with commodities or Goldfinch with private credit.
Commodities and private credit are not the only assets that can be tokenized, however. Tokenization platforms such as Polymath and Tokeny allow users to issue securities in a compliant manner. Likewise, many traditional institutions such as Blackrock and Franklin Templeton have started to play a role as RWA issuers themselves in the form of tokenized treasuries.
There are even insurance services such as Nexus Mutual and Propy for real estate. Outside of financial applications we have arts and collectibles on platforms such as watches.io or energy and renewables on Arbol.
Once we have designed and implemented RWAs onchain, we also have to think about the right way to distribute them. Exchanges such as Aconomy, Stobox, and Mauve have led the way with a specialized approach while established DeFi players have explored RWAs as well.
Finally, there are projects such as Brillion who’ve been working on providing RWA holders with the right interface for interacting with these assets across these services. The Brillion wallet has developed features that are focused on meeting the needs of RWA holders in everything from smart wallet features to security.
A look at the landscape for RWAs also reveals that there are important distinctions between them. Not all RWAs are created equal and some are subject to added regulatory hurdles due to the nature of the assets they represent.
This means that we can expect sustained interest in yield-bearing RWAs but also increased interest in alternative forms of RWAs such as tokenized real estate once proper regulations are in place. These markets will also become more appealing as the user base for web3 grows and more people are willing to invest in these assets in digitally-native ways.
An ongoing boom in RWAs since 2023 is reason for cautious, yet firm optimism around this particular sector of the web3 space. Their adoption reflects a slow but steady growth in relevance for both traditional and crypto market participants.
Start using Brillion to participate in RWAs the right way. You can also follow Brillion on X or Telegram and subscribe to the newsletter on brillion.finance for the latest updates on upcoming RWA features.
