What is Real World Assets (RWA)?

1. Introduction

Real World Assets (RWA) are those that possess inherent value, are tangible or physical in nature, and reside in the physical world. The spectrum of RWA is broad and includes everything from tangible items like real estate properties, wine, commodities, artwork, and vehicles, to contractual or legal rights such as patents and copyrights. These assets often constitute the foundation of financial portfolios in various investment contexts. They function as loan collateral and serve as primary investment targets for both institutional funds and individual investors.

2. Classification of Real World Assets

Tangible Assets

These are physical assets that have a real, intrinsic value due to their substance and properties. Examples include real estate, machinery, commodities (like gold and oil), vehicles, and physical works of art.

Intangible Assets

These are non-physical assets that have value based on contractual or legal rights. They often involve some form of intellectual property. Examples include patents, copyrights, brand names, and trademarks.

3. Applications of Real World Assets

Traditional Investing

RWA play an integral part in traditional investing strategies. For many investors and investment funds, RWAs such as real estate, commodities, or artwork provide a way to diversify portfolios beyond traditional stocks and bonds. For instance, real estate properties can provide steady income through rent, commodities can serve as a hedge against inflation, and artworks can appreciate in value over time.


In the realm of lending, Real World Assets (RWA) frequently act as guarantees to bolster loans. When a Real World Asset (RWA) secures a loan, it decreases the possible risk for the lender. In the event of a borrower’s default, the lender possesses the authority to seize and sell the asset to recover the value of the loan. Common instances where RWAs serve as collateral include home mortgages, where the property itself guarantees the loan, and auto loans, where the financed vehicle stands as the collateral.

Tokenization and Decentralized Finance (DeFi)

Blockchain technology enables the tokenization of RWA, allowing these assets to be represented digitally. Tokenization permits fractional ownership, reducing the barrier to entry and providing increased liquidity. Investors can buy and sell fractions of a property or artwork, for example, instead of the entire asset. Additionally, these tokenized assets can be incorporated into decentralized finance (DeFi) platforms, creating avenues for lending, borrowing, and earning interest in a peer-to-peer manner.

4. Advantages of Real World Assets


Investing in RWA can help diversify a portfolio as their value is often not directly tied to the performance of financial markets. By incorporating RWA into their portfolios, investors can potentially hedge against market volatility in stocks and bonds.


Certain types of RWA, such as real estate and commodities, often provide a measure of stability and can act as a store of value. They can provide a buffer against inflation, especially during times of economic uncertainty.

Income Potential

Several types of RWA, such as rental properties or investments in infrastructure projects, can generate a steady income stream over time, providing both capital appreciation and income.

5. Challenges of Real World Assets


One of the primary challenges with RWA is that they can be difficult to convert into cash quickly without incurring substantial costs. This illiquidity can be a barrier for investors needing to quickly adjust their portfolios or access cash.

Maintenance Costs

Many RWA require significant maintenance and management. For example, real estate properties require upkeep, machinery may need regular servicing, and even intellectual property rights need to be defended legally, all of which can add to the cost of owning these assets.

Regulatory Challenges

The regulatory landscape forthe tokenization of RWA and their integration into DeFi platforms can be complex. As tokenization often falls into a grey area in many jurisdictions, it may be subject to evolving regulatory frameworks and legal considerations.

6. Evolution of Real World Assets: Blockchain and DeFi

The emergence of blockchain technology coupled with Decentralized Finance (DeFi) is transforming our engagement with Real World Assets (RWA). Through the process of tokenization, tangible assets are partitioned into numerous tokens, each of which can be independently traded. This innovative approach promotes fractional ownership, thereby enhancing liquidity and opening doors to a more diverse pool of investors to partake in asset ownership.


Tokenization is the process of converting the rights to a RWA into a digital token on a blockchain. For instance, a real estate property can be tokenized into multiple units, and these digital tokens can be bought or sold, representing fractional ownership in the property.

DeFi and RWA

Tokenized RWA can also be integrated into DeFi platforms. This application provides new avenues for lending, borrowing, and earning interest in a peer-to-peer manner. For example, a token representing ownership in a property can be used as collateral for a loan on a DeFi platform. Similarly, owners of tokenized assets can earn yield by participating in DeFi protocols.

7. Conclusion

Real World Assets are integral components of the global economy, serving dual roles as investment platforms and as security for loans. The introduction of blockchain technology is swiftly altering our interaction dynamics with these assets. Tokenization carries the promise of making these assets accessible to a broader population, thereby transforming the financial arena and paving the way for novel avenues in investment and wealth generation.


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Centrifuge Announces Real World Assets Market on Aave

Key Takeaways

  • Centrifuge’s Real World Assets Market is now live on Aave.
  • The RWA Market is intended to allow users to earn yield against real-world assets such as real estate.
  • Centrifuge has a history of bridging the DeFi space with real-world assets.

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Centrifuge, a platform that allows real-world assets to be bridged to DeFi protocols, has announced a collaboration with Aave to launch its Real World Assets Market.

Aave and Centrifuge Launch Real World Assets Market

Centrifuge announced Tuesday morning in a Medium post that its Real World Assets (RWA) Market on Aave had officially launched. These real-world asset markets allow investors to earn yield against real-world assets that are not correlated to crypto assets. 

The Aave protocol allows investors to borrow tokens against collateral they deposit, with interest rates fluctuating depending on supply and demand. Owners of RWAs can create asset pools (e.g. a real estate pool) from which other investors could buy tokens by depositing stablecoins into the pools. These deposited stablecoins can then be borrowed against the real-world assets. 

Centrifuge’s RWA Market also includes non-crypto assets like tokenized Real Estate Bridge Loans and Cargo and Freight Forwarding Invoices.

The founder of Aave, Stani Kulechov, said:

“The RWA Market is a much needed building block not only for protocols such as Aave, but across DeFi as a whole. Knocking down barriers of entry and making DeFi accessible to all is part of the Aave Companies’ vision, and we are excited to be fulfilling this through the collateralization of real-world assets, made possible by Centrifuge.”

This is not the first time Centrifuge supported the bridging of RWAs to the DeFi sphere. It announced its introduction of RWAs as collateral for Maker in April. The Centrifuge platform currently has over 50 million DAI (the Maker Protocol’s Ethereum-based stablecoin) in total value locked, with a current estimated yield of 24% annually. 

Aave has frequently helped increase the options afforded to DeFi users. Earlier this month, another DeFi staple, Balancer, launched Boosted Pools with Aave, potentially allowing liquidity providers to attain higher yields.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

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MakerDAO founder’s plans to address climate change and pivot back to ETH

MakerDAO founder Rune Christensen has published an essay outlining measures that could be taken to make the protocol a vehicle for addressing climate change.

In a lengthy Oct. 5 post published to the MakerDAO governance forum, Christensen asserts that MakerDAO should strive to ensure that all of its collateral comprises “sustainable and climate-aligned assets that consider the long-term impacts of financial activity on the environment.”

Christensen asserts that the protocol’s collateral should be invested into sustainable real-world assets (RWAs) through senior credit positions in projects that build “solar farms, wind turbines, batteries, recharging stations and other cost-efficient renewable energy solutions, as well as their supply chains, sustainable resource extraction and recycling.” He further stated:

“Today we already have everything we need to begin scaling our RWA exposure to hundreds of billions of USD and beyond, securely and in full compliance with financial regulation, by using the trustee-based model of real-world assets that the community developed over many years.”

Related: MakerDAO to dissolve Foundation and become truly decentralized again

Christensen also expresses the need for MakerDAO to reestablish its commitment to decentralized collateral, advocating that the protocol return to relying on the Ethereum network and Ether token. 

MakerDAO users deposit crypto assets into the protocol to collateralize minting of the Dai (DAI) stablecoin. While Ether was exclusively supported by the protocol initially, it has since expanded to support other assets including USD Coin, Wrapped Bitcoin, and Basic Attention Token.

Maker’s founder emphasized the improved environmental efficiency expected to be achieved through Ethereum’s transition to Proof-of-Stake consensus with Eth2, stating:

“Once the upgrade from proof of work to proof of stake is completed, Ethereum will become a highly energy-efficient blockchain. ETH will become a sustainable contender to Bitcoin’s current role as the primary cryptocurrency.”