Understanding and Analysis of the RWA Track

There were two questions asked by readers in the comments section:

Can the tokenization of U.S. Treasury bonds in the AKB and Maker DAO projects be understood as these two tokens representing the purchase of U.S. Treasury bonds?

I looked up the yield on U.S. Treasury bonds, which is around 5%. This yield is not very attractive in the crypto space; what are the advantages of introducing tokenized U.S. Treasury bonds?

These are questions about RWA, and both are very good, worthy of us taking this opportunity to review and examine the RWA sector.

Let’s first look at the first question.

I searched online, and perhaps my search method was incorrect, as I couldn't find information related to AKB and U.S. Treasury bonds; however, I found information related to Maker DAO and U.S. Treasury bonds.

What I found is that Maker DAO recently announced plans to invest $1 billion in tokenized U.S. Treasury bonds. The issuers of these tokenized U.S. Treasury bonds mainly include BlackRock and Ondo.

I wonder if this is what the reader was referring to regarding the tokenization of U.S. Treasury bonds?

If so, according to my understanding, Maker DAO's investment is essentially a way of purchasing U.S. Treasury bonds through buying tokens, where the value of the token and the interest earned are completely equivalent to U.S. Treasury bonds.

Here, there is a detail worth noting, which is that the issuers of tokenized Treasury bonds include BlackRock and Ondo.

BlackRock goes without saying, and Ondo itself is also closely related to traditional centralized institutions. So we can see what kind of institutions are so active and engaged in this sector.

Now let’s look at the second question.

Even with this 5% yield, it really has no appeal for investors in the crypto ecosystem, so what exactly are the advantages of such products?

Last year or the year before, when RWA was just emerging and being hyped, I wrote an article sharing my thoughts on the RWA sector in detail.

In that article, I expressed a similar viewpoint: the yields brought by the tokenization of physical assets are actually not attractive to investors (retail) in the crypto ecosystem.

Let alone the 5% yield on Treasury bonds; even a stock that could generally be considered good with an annualized yield of 15% is not that appealing to us.

In that article, I also expressed the following viewpoints:

What kind of tokenized assets might be attractive to certain investors?

Only those that have high yields and are generally not easily accessible to the average person.

Such assets generally fall into two categories: one is real estate from around the world; the other is the stock market, financial assets, or financial derivatives from traditional finance.

Is there any country's real estate yield that can compete with assets in the crypto ecosystem? I don't think so.

Can the yields from the stock market, financial assets, or financial derivatives in traditional finance compete with assets in the crypto ecosystem?

I also think that is unlikely.

When it comes to high and stable yields, the annualized yields of Bitcoin and Ethereum exceed many financial assets; in terms of excitement and adrenaline, the crypto ecosystem offers over 100 times leverage, which is just as stimulating as the stock market, financial assets, and financial derivatives in traditional finance.

So purely from an investment perspective, I find it hard to see any type of tokenized asset (RWA) that can match the yields of the crypto ecosystem.

If I had to say there is one, it might only be the tokens of the RWA projects themselves. These tokens currently generally only have governance functions; perhaps in the future, these tokens can be empowered by the project's earnings.

However, if the token is tied to the project's earnings, its price would be valued purely in the traditional stock way (like P/E), and the upside potential from such valuation is very limited.

If these tokens are evaluated based on imagination and emotional value rather than fundamentals, I might as well play with MEME coins.

Therefore, my long-held view remains unchanged: the RWA sector is not very meaningful for us retail investors; rather, it holds greater significance for institutional investors and traditional financial institutions—because it has a sufficiently large imaginative space to tell a story: tokenizing everything.

This way, traditional financial institutions qualified to handle the tokenization process will have enough business to engage in.

Thus, I mainly observe the RWA sector and have very little real participation.