By bringing tangible assets like US Treasuries, real estate, and even art onto blockchain networks, RWAs enable the tokenization of value that exists in the physical world, making it accessible, transferable, and tradable in decentralized ecosystems.
Such assets, where conventional value meet cutting-edge DeFi innovations, sparked significant interest, from industry giants like BlackRock's Larry Fink to new web3 protocols. The potential benefits — greater accessibility, improved liquidity, and enhanced efficiency — could transform the way financial markets operate. Yet, challenges remain, from navigating complex regulatory landscapes to ensuring adequate liquidity across fragmented blockchain ecosystems.
In this article, we’ll explore how RWAs are bridging the gap between traditional finance and web3, the opportunities they unlock, and the path forward for mainstream adoption.
Real World Assets (RWAs) refer to tangible and/or intangible off-chain assets that are tokenized and brought onto blockchain networks. At the time of writing, the value of RWAs on-chain is nearly $13 billion.
By “tokenized”, we don’t mean the asset itself is brought on-chain. Rather, the rights to that asset are on-chain and they are pointed through digital representations like a JPEG, PDF certificate, or something else.
For example, assets like US Treasuries, commodities, real estate, and even art, can have tokenized digital representations that allow them to be traded and transferred more efficiently in an electronic and intermediary-free ecosystem.
By doing so, blockchain technology helps unlock new liquidity, accessibility, and operational efficiencies for assets that traditionally operate within slow and often cumbersome financial systems.
And now, tokenized real world assets are playing a part in supercharging traditional financial systems.
One of the most compelling benefits RWAs bring to the table is the operational efficiency enabled by self-sustaining and tamper-resistant blockchain networks.
Traditional financial systems are often bogged down by intermediaries, complex settlement processes, and limited hours of operation. By contrast, blockchains are accessible 24/7, provide faster settlement times, and reduce reliance on middlemen.
For example, in traditional finance, securities and bonds can take days to settle due to the involvement of custodians, transfer agents, and clearinghouses. Tokenized versions of these assets, however, can be settled within minutes on the blockchain, reducing the friction and cost associated with moving assets. This speed and efficiency are significant improvements for institutional investors, who are accustomed to long settlement periods in legacy systems.
RWAs also adopt increased transparency and automation thanks to smart contracts. By programming certain conditions into the smart contract, many of the manual processes involved in asset management. For instance, dividend payments or coupon distributions can be automated, thereby reducing human error and increasing trust.
On one hand, traditional financial systems are built on decades of legal frameworks, oversight, and trust in centralized institutions. On the other hand, web3 relies on decentralized trust, where the code, rather than intermediaries, ensures the validity and execution of transactions — plus the “degenerate” nature of the crypto-natives and early adopters does little to instill trust among the masses where serious finances is concerned.
Therefore, while blockchain technology offers clear advantages in terms of efficiency, trust remains a critical issue in bridging TradFi and web3.
Tokenization of RWAs helps to build trust by enabling the seamless movement of real-world assets into a digital environment while still maintaining the legal and regulatory assurances that institutions require. For example, a tokenized US Treasury bond still represents the same legal claim as its traditional counterpart (only difference is that the data is now on a blockchain), and it can now be transferred and traded with more efficiency and fewer intermediaries.
Bringing assets on-chain also improves access and ownership verification. On the blockchain, ownership records are immutable and transparent, reducing the risks of fraud or error that can occur in paper-based or centralized record systems.
Above all, the most innovating vertical of RWAs to close the TradFi-Web3 divide is enabling new forms of PayFi (payment financing). By tokenizing traditional assets such as invoices, or future income streams, platforms like Huma allow users to access "tomorrow's money today."
What that means is tokenized assets allow individuals and businesses to unlock liquidity tied to future cash flows, turning illiquid assets into liquid on-chain assets that can be used to access financing in the present.
The time value of money (TVM) is a fundamental concept in finance that drives the valuation of assets, interest rates, and the willingness of lenders and borrowers to engage in financial transactions.
In simple terms, TVM acknowledges that money today can be invested or used productively to generate returns over time. This means that $1 today is worth more than $1 a year from now because of its potential to earn interest, dividends, or other forms of income.
In traditional finance, the time value of money is realized through loans and credits that allow individuals or businesses to leverage future earnings for accessing capital in the present. However, this process often involves intermediaries such as banks, credit rating agencies, and other centralized institutions that impose high barriers to entry, especially for those with limited credit history or access to financial services.
RWAs, through PayFi, eliminates many of these barriers by allowing individuals and businesses to tokenize their future earnings or assets and use them as collateral for immediate financing. This enables the realization of the time value of money in a decentralized, permissionless, and global environment, where users can access liquidity without needing to rely on traditional financial institutions.
While retail investors stand to benefit from RWAs, institutional adoption will play a pivotal role in truly bridging the gap between TradFi and web3. But they need [institutions] assurances around compliance, security, and governance before fully embracing tokenized assets.
To encourage institutional adoption, blockchain projects must focus on creating interoperable and compliant solutions that align with the regulatory and operational needs of these institutions. And Huma already does that.
By enabling the tokenization of future income streams, Huma unlocks the time value of money for individuals and businesses traditionally excluded from conventional finance. As a result, Huma bridges the gap between TradFi and web3 very effectively.
Huma also empowers a new generation of entrepreneurs and investors through on-chain payment financing. On the platform, anyone can access large liquidity with minimal efforts and paperwork using a wide array of assets.