The State of RWAs: A Multi-Trillion Opportunity
Article1,620 words
Long-form tour of onchain RWAs by category: stablecoins, treasuries ($1.9B), private credit ($8.4B active loans), bonds, commodities ($890M) and stocks ($6M). Ends with an endgame thesis of chain-abstracted, agent-driven access to tokenized assets.
Key claims
$1.9B of US treasuries onchain, led by BUIDL at $519M
$890M in tokenized commodities, $886M of it gold
53% of USDT on Tron, 46% on Ethereum
The State of RWAs: A Multi-Trillion $$$ Opportunity
Tokenizing real world assets might be the biggest opportunity in crypto history. However, finding reliable data and identifying the right plays is hard. That's why today, I will take you on an alpha-packed journey through the RWA space to assess the current state of RWAs onchain.
Already last October, @21co__ estimated the market size to surpass $10 Trillion dollar in market size within only a few years in their bullish scenario.
More recently, @BCG has called tokenization a $16 Trillion dollar opportunity.
I would argue, the market is even bigger. Keep reading for alpha anon.
⚠️ Warning: This content might make you too bullish.
📊 Stablecoins
Stablecoins are the by far most established category of RWAs that have made their way onchain.
The total market cap of $160B is evidence to that.
The dominant stablecoin in the market is $USDT with a market dominance of roughly 70%.
Since we're talking $USDT: 53% of $USDT sits on Tron, 46% is ERC20 on Ethereum, while all other networks combined make up for just 1% of total $USDT supply.
Recently, the stablecoin inflow in the market has been increasing again. This tends to be a bullish indicator and often coincides with periods of strong $BTC price movements.
There are many different stablecoin models out there. While $USDT and $USDC fall into the category of centralized and collateralized stablecoins, there are also more decentralized models such as $DAI or $FRAX in the market. However, these remain insignificant in terms of market cap compared to the leading giants.
Experiments with algorithmic stablecoins such as $UST have failed in the past, but due to increased capital efficiency, have been able to scale much quicker than over-collateralized assets like $DAI.
A huge issue in the stablecoin market that has to be solved, is the fragmentation of liquidity through various, bridge-specific wrapped assets across chains. Natively multichain token frameworks such as @Wormhole's NTT framework are the potential solution here.
Stablecoins are not only the fuel that powers multi-billion dollar DeFi economies. Within our crypto bubble, they have also found adoption as a means of payment.
However, the potential of stablecoins goes far beyond that. Especially in developing countries, stablecoins can power real world economies and stablecoin-based payment systems could be one of the first mass adoption ready apps built on blockchain (that we still really haven't managed to solve).
Over 40% of global GDP sits in non-USD currencies. Over 90% of stablecoin supply sits in USD. In the context of non-USD stablecoin opportunities, study @MentoLabs.
📊 US Treasuries
With approximately $27 trillion in size, the US treasury market is the largest and most significant financial market in the world.
So far, roughly $1.9B in US treasury bills have made it onchain.
The leading treasury product in terms of onchain market cap is @BlackRock's $BUIDL launched with @Securitize, which sits at $519M.
Followed by @FTI_US's onchain US government money market fund $FOBXX ($422M) and @OndoFinance's US Dollar Yield $USDY ($306M) product.
The clearly dominant chain in the game is Ethereum with $1.4B in tokenized treasuries market cap. In second place, maybe slightly more surprising, sits @StellarOrg, before @Solana and @0xMantle.
As other ecosystems such as @avax are gearing up to get a piece of the cake and as modular app-chains focused on RWAs such as @MANTRA_Chain, @plumenetwork or @CantoPublic's L2 are emerging, I expect the growth in this market to go higher.
📊 Private Credit
Another huge opportunity are real yields from investing in private credit loans to businesses, which is a $1.6T market in TradFi.
How do things look onchain today?
Total active loans (value of all outstanding loans across protocols) currently stands at $8.4B, with a total loan origination volume of over $13B.
What is interesting, is that the market is heavily dominated by one protocol.
@Figure on @provenancefdn.
It currently accounts for roughly $7.8B in active loans.
The remaining $500-600M mainly lives on Ethereum.
While there is less data on the exact composition of the @Figure loans, consumer and auto loans are dominant on Ethereum.
Notable protocols include, @maplefinance, @centrifuge, @goldfinch_fi or @TrueFiDAO.
📊 Global Bond Market
The tokenized bond market refers to digital assets backed by public debt issued by governments and treasuries.
Compared to the already much more mature (crypto wise) US treasury or private credit markets however, this sector has remained largely irrelevant in the context of tokenization so far.
Only $22M in bonds have been tokenized so far, with the clear leader in the game being @BackedFi that accounts for $20M or 90% of value locked. The entire TVL sits on Ethereum.
📊 Commodities
The global commodities market includes various sectors such as energy, metals, agriculture, and more. The market is projected to reach around $136.8 trillion by 2029.
Gold alone has an estimated market cap of $16B today.
So how much of that have we tokenized yet?
Currently, we have $890M in tokenized commodities onchain.
Roughly $886M is in tokenized gold assets, which clearly dominate the space so far. In addition, we have marginal amounts of Silver and Platinum onchain (roughly $4.3M).
The potential here is evident, with the tokenization of these assets making exposure to their price movements much more widely accessible.
With roughly $880M on Ethereum and $10M on Stellar, leading issuers in the market include @Paxos, @Tether_to, @AurusOfficial or @WisdomTreeFunds.
However, the potential for tokenization goes further.
In this context, @Oasis_Pro_ is another example that's pushing the boundaries of innovation by tokenizing assets like:
✦ Fine Wines with Wine Fund Capital
✦ Diamonds with @DiamondStandard
There is a so much more to come anon.
📊 Public Stocks
One largely untapped sector where I expect tokenization to be huge in a few years time is the public stock market.
So let's look at the global stock market today. With a market capitalization of approximately $109 trillion, this is one of the largest financial markets in the world.
However, only $6M have been tokenized so far.
The top three tokenized stocks are $bCOIN, $bNVDA and $bCSPX, which are also the only ones with market caps above $1M.
What is interesting, is that the leading chain in terms of onchain market cap is @gnosischain, with a market share of >50%. In second place sits Ethereum with 36% market share, which translates to $2.2M market cap.
🔮 The Endgame Thesis
In the flood of information that is crypto & CT, it's often hard to keep track of the big picture.
RWA narrative here, infra fomo there, but hey, don't miss out on AI agents and chain abstraction!
Take a step back. Think of crypto 365 days from now.
Imagine a world where scalable and decentralized, modular infrastructure enable performant app- and vertical specific execution layers that provide the basis for true mass adoption.
Imagine fragmentation of liquidity and UX across chains is solved. Abstracted away for users that don't have to care about the chain they interact with on the backend.
One unified UI. Universal stablecoin gas you can charge with your credit card and a unified balance across all chains and apps.
A singular frontend for users across the globe to access financial services directly from the comfort of their wallet.
Allowing anyone to invest in tokenized stocks, commodities or native crypto assets, earn passive income through yield farming strategies and take out loans in local currency based stablecoins to pay for stuff IRL.
Even better: No need to be an onchain degen and know your way around all the fancy crypto apps.
All the complexity of cross-chain app interactions will be eliminated and users can automate their onchain workflows through prompt-based interactions with AI agents.
The user simply expresses an intent as a prompt (e.g. "allocate 5% of my portfolio to $NVDA stocks" or "buy $10'000 worth of gold and exit either when the price has risen 20% or fallen 10%".
This intent or automation strategy is then seamlessly executed across chains in the most efficient way.
Depending on the type of agent, the degree of automation and task sophistication varies. We are already moving towards autonomous AI agent today though, which enable open-ended automation that responds to arbitrary state changes or events in their environment.
Simpler agents which are already accessible today, are basically trading bots that allow for trigger/condition based automation of onchain activities, pre-dominantly trading.
You bullish yet anon?
🧠 Conclusion
With the institutional interest in / adoption of cryptocurrencies and blockchain technology on the rise, I expect the tokenization trend to accelerate in the months to come.
This will bring billions and eventually trillions of $$$ in capital onchain and unlock huge amounts of liquidity for DeFi. With the big picture use use case thesis (as outlined in the previous chapter) starting to become more tangible too, I think the RWA market is set for the next wave of growth. And this time, it's a big one.
As highlighted in this report, the potential that slumbers in major TradFi asset classes is still huge. As people are increasingly aware of the opportunity that lies in moving those assets onchain, this will skyrocket. 100s of players will pile into the space and new, disruptive products will find their way to market.
I mean if @BlackRock is looking to tokenize $10T alone, imagine how big this market will be in a few years as other follow suit.
Larry Fink is bullish and you're still bearish anon?
Really?
Also worth mentioning that there is also trillions of dollars in carbon credits, private equity or real estate that could move onchain in the coming years.
Might cover these asset classes in another report within the next few weeks.
In the meantime, DYOR.
⚠️ This report is not sponsored by any third party.
What came next · since 24 Jul 2024
Since then
Zero has written 2 more pieces on BlackRock since this one.