The speculative aspect of the crypto industry is loosely governed by one major rule: GET IN ON THE NEXT BIG THING!
It almost sounds brashy to base a trillion-dollar Industry on such a loose sentence but times have proven this is true.
In 2017, the first year 1 Bitcoin was to be bought above 15,000 US Dollars, there was the ICO rush. In many people’s opinion, the rush was worse than the Tulip Mania of the 1900s. Ponzi websites promising to build the best blockchain or blockchain-based protocols cashed out millions of dollars while selling soon-to-be worthless tokens to Individuals who themselves are goblins in the market.
It didn’t matter that the so-called companies had their CEOs’ pictures cropped from a picmix of Ryan Gosling and Ranbir Kapoor; All that mattered was the hype the project had generated. The more the hype, the more likely it was for these projects to sell out faster to ‘whitelisted investors’ who couldn’t wait to unload it to other ‘investors’ gobbling the paltry coins at 50-100x the amount it was offered at the Initial Coin Offering.
2021 was no different. The NFT mania was backed by the same energy; projects with poorly built websites cashed out tens of millions of dollars selling digital art that had generally unremarkable characteristics. The rush was even different this time; traditional Institutions were getting in on the rush, and there was almost a competition on who would be the first to release the coolest metaverse. For some time, traditional companies were promoting the potential of blockchain.
Despite the above statements that had based many of these events on accepted popularity, the success of those seasons was based more solely on a concept called Narrative.
Narratives are a way of identifying the collective points of view that speculators in the crypto industry have, at a given point in time. In the purest form of truth, narratives have never been about the speculator. It always starts as a potential use case of Blockchain technology. Most narrative ideas were developed as a way to promote the everyday use of the blockchain, and most importantly widen the reach of the technology, as the use of blockchain is still in its nascent stages, globally.
So many good things have come out of trending narratives in the Industry.
For Example, during the 2017 ICO run, many credible companies found ways to raise funds for their new/existing projects and were able to build platforms that are still functional to date. The ICO run brought about a different way to raise money for platforms and even transitioned to the very popular Initial Exchange Offerings,(IEOs), where Exchanges now raise money for projects by selling the projects’ blockchain-based tokens.
2021 was the Year of the NFT Narrative. It was the Year when one of blockchain’s applications was transformed into a language that many traditional companies understood. The wide range of the use cases of NFTs meant that there was something in there for everyone; Users can create digital Identities using Non-Fungible Tokens while still maintaining some form of anonymity, and companies can now expand their brands into virtual worlds.
Financially, Narratives have proven to be a good thing for both speculators and builders alike. For Example, Nike bought RTFKT, a fashion NFT Brand, and has since made their mark as a formidable company in the growing fashion metaverse. Speculators who bought the RTFKT NFTs on the market are not left behind, as the value of the NFTs increased exponentially to give abundant gains.
There is a performance history that indicates that trading narratives in the crypto space are bound to pay off; either in speculations or in building decentralized applications that work with the narrative. It gets better; the use case of a narrative can be built upon, in another narrative. This means that the next narratives can incorporate the good of the former narrative, improving on it.
This build-upon narrative has been known to improve the decentralized finance sector so much, that the arrival of NFTs has launched a new set of applications in the sector.
It is also worthy of note that Narratives aren’t time-based, at least not in their utilities. Narratives, when found early, can yield maximum potential to anyone in the crypto space.
2023 has started as the Year of the AI (Artificial Intelligence) Narrative. With the release of ChatGPT and the subject of harvesting and monetizing big data being actively discussed in the crypto space, it is clear that the AI narrative is here to stay. Companies are now raising money through Initial Exchange Offerings, and building AI-influenced platforms.
Another budding crypto narrative of 2023 is the tokenization of the Real World Assets (RWA) narrative. Real World Assets (RWA) are assets that we are used to, in real life. They could be a piece of art, a 120 sqm house in the Netherlands, or the gold chain that has been a family heirloom. They could also be the certificate of bonds issued or a company’s stocks.
The tokenization of RWAs is the process of digitizing these real-world assets and giving them an identity on the blockchain. This identity could be in fungible or non-fungible form. The process of RWA tokenization has a lot of pote that it unlocks both for Investors and Asset holders alike
For Asset holders, the advantages of RWAs tokenization include
Elimination of middlemen
A bigger market for assets
Reduced Costs
Fractionalized Options
For investors, the advantages of tokenized RWAs include
Access to assets that would otherwise be impossible to own
Liquidity provision opportunities and rewards
Fewer charges to pay for acquiring assets
Beyond the advantages the tokenized RWAs have for investors and asset owners, it also opens up a new world of opportunities for decentralized finance and enables it to scale beyond loan over-collateralization and inflationary yield farming.
The concept of Digital RWAs has been around for a long time in the crypto space. However, a lot of factors have prevented them from becoming a sustained reality; Factors such as verified monetary value, regulatory authorities, and proof of ownership have largely deterred the growth of RWAs on the blockchain. The emergence of stablecoins, which are in themselves prime examples of RWAs, was enough to accelerate the possibilities of RWAs tokenization and solidify the concept of trading RWAs on the blockchain.
To date, RWAs on the blockchain have pooled in over 10 billion dollars and have been a source of real yield to decentralized finance (DeFi) protocols, whilst also giving traditional finance opportunities to benefit from DeFi features. There already exists a diverse set of markets that tend to RWAs as an asset class in the crypto Industry. These markets operate mostly as protocols, with different protocols having some specific markets that address certain RWAs.
For Example, Synthetix is a DeFi protocol that provides a market for derivatives and synthetics of RWAs.
Maker, a debt platform that lends DAI to its customers whilst taking RWAs as collateral, makes over 23 million dollars in annual revenue from their RWA vaults.
Goldfinch, Centrifuge, Ondo Finance, ClearPool, Truefi, are some of the more recent protocols that specialize in specific markets for RWAs. These protocols have been able to onboard many traditional Finance Investors through collateralized and uncollateralized RWAs.
Discussing Tokenized RWAs as a crypto narrative implies that at some point in the year 2023, RWAs will be largely discussed as an everyday topic in crypto circles and non-crypto circles too.
There are already budding discussions of RWAs in almost every media outlet currently, and just like NFTs, traditional financial institutions are also very much talking about it.
Protocols are already emerging with different proposals to address several facets of the RWAs class, and how best to onboard them.
Admittedly, there will be a few bad participants that will offer absurd yields but the hype that will be generated will keep the word ‘RWAs’ in many projects’ whitepapers and many speculators' mouths for a long time.
There are several ways that a speculator can benefit from RWAs as a crypto narrative. One of the ways is by speculating on the prices of tokens that are derivatives of RWAs protocols or are in some form related to RWAs. For instance, one could buy a token such as $GFI which is currently trading at 0.65$ at the time of this writing. With RWAs trending as a narrative, $GFI could get close to its all-time high of $43. If this happens, the investor has made at least 20x his capital. (This is not investment advice. This is just an example!)
One can also look at https://app.rwa.xyz/ and analyze the data by protocols on the space. One can also check the Investor platform section and get more information on how best to benefit as an investor in RWAs.
Another way to benefit from RWAs as a trending narrative is by building or joining protocols that are RWAs specific. This is more complex than speculating, but it is also more rewarding in terms of building a profile in the finaRWAs-specificnce sector. The RWA narrative can essentially incorporate one or all of IEO, NFT, and AI to form a formidable sector that will have yields that can take the crypto market capitalization above 10 trillion dollars in the nearest future.
Conclusively, RWAs could be the crypto narrative of 2023. A lot of activities are happening behind the scenes and protocols are emerging with concepts that could easily onboard more than 30 trillion dollars in traditional finance to the crypto industry. When the possibilities of this become clear to the ordinary speculator, it is easy to see how this narrative will come to stay.
To learn more about RWAs, please visit
https://blockworks.co/news/what-are-real-world-assets-defis-newest-yield
https://blog.chain.link/tokenized-real-world-assets/#post-title