Opportunities for Retail Investors in RWA (Part 1)

After yesterday's article was published, there were several comments in the comment section mentioning some interesting questions.

For example, there was a comment asking if my view on the opportunities for retail investors in RWA has changed.

My judgment logic remains exactly the same as before, and today I will share my logic with everyone again.

When I talk about whether retail investors have opportunities in the RWA ecosystem, I mainly refer to:

• Whether the asset classes that may appear in RWA are attractive in terms of returns compared to the purely on-chain assets generated now.

• Whether the assets in RWA are attractive in terms of returns for different investment methods compared to the purely on-chain assets generated now.

In this article, we will first look at whether RWA assets are attractive from the perspective of asset classes.

In my view, there will likely be two types of assets in the RWA ecosystem:

1. Purely on-chain tokens issued by the projects themselves;

2. Assets that are tokenized and mapped from off-chain to on-chain.

Let's first look at the second type: assets that are tokenized and mapped from off-chain to on-chain.

This type of asset is essentially those varieties that we are very familiar with in real life, such as real estate, stocks, bonds, precious metals, foreign exchange…

For me, I currently hold these assets, but they are real assets off-chain. In the future, when they are tokenized and placed on-chain, I might also hold some of these RWA assets. But that would only be for asset allocation; I do not expect to gain very high excess returns from them.

Otherwise, I wouldn't have entered the crypto ecosystem.

It's like how I would hold a large amount of stablecoins during a bear market (which are essentially a type of RWA asset) and also deposit stablecoins in AAVE, but not because I expect to earn a high yield from stablecoin deposits, but to facilitate other operations on-chain in the future.

Stablecoins are like this, and for other potential RWA assets in the future, at least so far, I hold a similar attitude.

So the attractiveness of this type of asset is very limited for me.

Now let's look at the first type: purely on-chain tokens issued by the projects themselves.

This type of token currently has roughly two categories:

One category is tokens linked to project revenues.

These tokens exist now, but there are not many, mainly due to regulation. In my view, these tokens are essentially electronic stocks and are not much different from the stocks and funds we currently invest in.

Investing in these tokens is not significantly different from investing in off-chain stocks and funds in terms of returns.

Additionally, the biggest problem with these tokens is whether retail investors can freely purchase them under the regulations of various countries in the future. Otherwise, there wouldn't be the so-called "qualified investors" defined by the U.S. Securities and Exchange Commission. Not only U.S. regulatory agencies but any regulatory agency globally has strict regulations on what financial assets ordinary retail investors can purchase.

The other category consists of tokens with unclear positioning.

This type of token is mainly represented by governance tokens. It is uncertain whether these tokens will transform into the first category in the future. If they do, their future direction will be that of the first category. But if they continue to exist in the form of governance tokens, they are basically not much different from meme coins.

And if they are meme coins, their future direction becomes very difficult to predict.

Since the institutions capable of conducting RWA operations are primarily traditional financial institutions or organizations with deep ties to traditional financial institutions, how attractive are the meme coins issued by these organizations to retail investors?

It is not clear at this point.

Moreover, how regulatory agencies will handle these institutions issuing meme coins in the future is also a significant question.

Many people cite Trump's issuance of coins, but in reality, he did it just before taking office. Since taking office, at least so far, his actions in the crypto ecosystem have been relatively "regular."

Therefore, from any perspective, the assets in RWA are not very attractive to retail investors like me at the moment. I might hold them for asset allocation, but they are not my main channel for obtaining excess returns.

Additionally, I want to emphasize again:

The reason I entered the crypto ecosystem is fundamentally and corely because I hope that native and disruptive applications and scenarios will emerge in the crypto ecosystem. These applications and scenarios can surpass the forms and models we see in real life, and the crypto assets generated based on these applications and scenarios will definitely bring us returns far exceeding those of RWA assets.