Hey Edge readers,

Imagine owning a piece of a Manhattan skyscraper or a government bond, all from the comfort of your crypto wallet. This isn’t science fiction—it’s the reality of Real-World Assets (RWA) in the crypto space, and it’s revolutionizing how we think about investments. In this issue, we dive into what RWAs are, the trends driving their growth, and spotlight some of the standout projects leading the charge.

Stay sharp. 🫡

-The Exponential team

What are RWAs?

Real-World Assets (RWA) in crypto refer to the process of tokenizing physical or traditional financial assets, such as real estate, commodities, bonds, and art, on the blockchain. This means converting these assets into digital tokens that can be traded more easily, making them more liquid and accessible to a wider audience. For example, instead of buying an entire property, you could own a small fraction through a token, which can be traded 24/7.

Institutional interest is exploding

RWAs are one of the fastest-growing segments in crypto, currently valued at $17.6B, with forecasts estimating a $10T (yes, trillion!) market by 2030. Over the past year alone, the sector has grown by 90%, largely driven by private credit markets and tokenized treasuries. That’s a massive leap, showing the significant demand for tokenized assets.

Wall Street is actively making moves. Traditional finance (TradFi) heavyweights like BlackRock, Goldman Sachs, and Franklin Templeton are jumping in, seeing tokenization as the next big evolution in investing. BlackRock CEO Larry Fink has even urged the SEC to “rapidly approve” tokenization for bonds and stocks, emphasizing its potential to democratize investing and make markets more accessible.

A prime example is BlackRock’s BUIDL fund, launched in partnership with Securitize. This fund tokenizes US dollar yields, allowing institutions to earn passive income while benefiting from instant transfers and flexible custody. Other major issuers include Hashnote’s USYC, Paxos’s PAXG, Franklin Templeton’s BENJI, among others. It’s a clear signal that TradFi and DeFi are converging.

Leading DeFi projects leveraging RWAs for yield

Here are some of the most prominent DeFi players leading the charge in the tokenization of real-world assets.

• Sky (Maker): Sky (formerly Maker) was one of the first major DeFi protocol to embrace RWAs as a source of onchain yield during the 2021 bear market when onchain yields were low (1-2% APY). This enabled the protocol to offer some of the highest USD stablecoin yields at the time.

• Usual: A tokenized short-term U.S. Treasury fund backed by Hashnote’s USYC, giving users a way to earn yield on stablecoins. Governed by the USUAL token, Usual empowers users to participate in decision-making, fostering a community-driven approach to managing its RWA-backed assets.

• Ondo: One of the largest issuers of tokenized U.S. Treasuries, Ondo offers onchain access to yield-bearing RWAs through its OUSG token. Ondo is also developing Ondo Chain, a hybrid blockchain designed to bring institutional investors into the crypto space.

• Ethena: Ethena’s USDe stablecoin uses a synthetic dollar model, hedging crypto collateral with offchain derivatives to generate yield. To bolster USDe’s stability, Ethena introduced USDtb, a tokenized U.S. Treasury bill (backed by BUIDL) that acts as a reserve asset. During periods of market stress, USDtb can provide additional collateral support, reducing reliance on offchain hedging strategies.

By bridging traditional finance and DeFi, RWAs introduce yield opportunities with lower risk than speculative crypto assets. This shift is making DeFi more sustainable, attracting risk-averse investors who seek stability.

Potential DeFi trojan horse?

Despite their potential, RWAs introduce new risks compared to traditional DeFi. Unlike smart contract-based DeFi assets, RWAs rely on off-chain agreements, custodians, and legal frameworks, introducing regulatory dependencies. This makes them less trustless than purely onchain assets, challenging DeFi’s core ethos.

But whether we like it or not, RWAs are here to stay. With institutional adoption accelerating and crypto-native protocols integrating tokenized assets, RWAs are poised to reshape finance as we know it. Keep an eye on this space—the future of finance is being built now.

In the news 🗞️

• Ethena passes first major exchange stress test. Ethena reassured users that USDe remains solvent despite Bybit’s $1.4B exploit. The protocol had $30M in exposure via derivatives but quickly reduced it to zero. Ethena emphasized that all backing assets are held off-exchange with custodians like Copper, minimizing direct risk. While USDe’s yield model remains intact, the incident highlights centralization risks in CeDeFi strategies.

• Ondo is building a ‘hybrid’ blockchain for Wall Street. Unlike public blockchains, validators on Ondo Chain will be invite-only, ensuring compliance with institutional standards. The network will allow institutions to stake RWAs like bonds and stocks to secure transactions and pay fees—removing the need to interact with crypto directly. By combining permissioned security with public blockchain access, Ondo hopes to bring Wall Street fully onchain.

• Tether co-founder takes on USDT with yield-bearing stablecoin. Pi Protocol is set to debut on Ethereum and Solana later this year with USP, a stablecoin backed by bonds and other RWAs, alongside USI, a yield-bearing token. Pi Protocol is betting that yield will be the next big draw for stablecoin adoption.

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