Problems and potential solutions in #RWA (Real-World Asset)

3 min readJan 24, 2024

Real-World Assets (#RWAs) refer to physical or traditional financial assets that can be represented digitally on a blockchain. Tokenizing these assets on a blockchain can lead to new opportunities for liquidity, transparency, and efficiency in the financial system. Some examples of #RWAs include commodities, equities, bonds, and others. However, problems and constraints may also be associated with using Real-World Assets on a blockchain.

Regulatory friction

Different jurisdictions may have varying laws and regulations concerning the recognition and validity of tokenized #RWAs, which can create legal and compliance challenges for token issuers and holders.

Loan defaults

#RWAs that have been tokenized can be utilized as collateral for lending and borrowing on decentralized finance (#DeFi) platforms. If the borrowers default on their loans, the lenders may require assistance with recovering their funds or enforcing their rights over the underlying assets.

Underdeveloped niche

The sector of tokenizing tangible real-world assets is rapidly developing. However, there are still several technical, operational, and governance challenges that need to be addressed. For instance, ensuring the security and precision of the tokenization process, validating the ownership and quality of the assets, managing disputes and their resolution, and achieving interoperability and scalability across various blockchains.

The popularity and awareness of blockchain are rapidly growing, leading to mass technology adoption. Blockchain is optimizing use cases and solving Real-World Asset and limitations.

Regulatory alignment

Token issuers and holders should comply with their jurisdictions’ relevant laws and regulations and seek legal advice and guidance from authorities when necessary. They should also collaborate with other stakeholders in the blockchain ecosystem to establish common standards and best practices for tokenization.

Innovation and development

Tokenization projects and platforms should adopt robust and scalable technologies and protocols to ensure the tokenization process's security and accuracy, the assets' verification and quality, and interoperability and compatibility across different blockchains.

Pegging to the stable asset

Stablecoins are cryptocurrencies pegged to a stable asset, such as gold or the US dollar. They can be used to facilitate transactions and provide a hedge against volatility in the crypto market. Tokenized treasuries are digital representations of government bonds that can be traded on the blockchain, providing investors with a new way to invest in government debt.

Conclusion

Integrating Real-World Assets into blockchain technology presents both promise and complexity. This fusion holds potential benefits such as increased efficiency, transparency, and accessibility. Yet, widespread adoption faces challenges like standardization, reliable oracles, regulatory compliance, privacy concerns, and interoperability. The transformative power of blockchain extends to sectors like Real World Assets (#RWA) and Decentralized Finance (#DeFi). Achieving this potential requires collaboration between the economy, regulatory bodies, and industry stakeholders to establish a legal and transparent coexistence of real-world assets with blockchain, ensuring security and decentralization.

About Phyken Network

Phyken Network is a Layer 1 app-chain and DeFi protocol on Polkadot, building an RWA asset fractionalization protocol, particularly emphasizing #GRWA: renewable energies and solar power on the blockchain — Secured by Polkadot.

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Written by: https://medium.com/@rjkesavchandar