Why Startups Win the RWA Race
We belive that startups win the real-world assets space. Here's why:
In the landscape of tokenizing Real World Assets (RWA), the dichotomy between startups and traditional financial institutions is more nuanced than a zero-sum game. Analyzing this ecosystem reveals distinctive characteristics shaping the realms of both incumbents and emerging players in the finance sector.
Traditional Finance (TradFi) Incumbents
Centralized Operations:
Predominantly centralized structures define most banks and financial institutions.
Closed-wall Architecture:
Access is restricted to existing clients, reflecting a closed-wall approach.
TradFi Asset Issuance:
Exclusive issuance of traditional financial assets characterizes their portfolios.
Fiat-based Pricing:
Assets are priced solely in fiat currencies, limiting exposure to digital currencies.
Dual Share Issuance:
Utilization of dual share issuance models—paper shares alongside digital tokens.
Private Blockchain Usage:
Implementation of digital forms using private blockchains poses a paradox.
TradFi Constraints:
Adherence to traditional finance constraints with multiple middlemen in transactions.
Inertia and Resistance:
Sluggish pace, internal resistance, and conflicting interests impede the adoption of new technologies.
Stringent Onboarding Criteria:
Reluctance to onboard new, unproven assets; waiting for extended track records.
Fiat Dependency:
Tied to fiat currencies, limiting engagement with digital alternatives.
RWA Startups
Decentralized Structures:
Embracing decentralized models, fostering open and inclusive accessibility.
Open and Inclusive:
Assets are on-chain, accessible to everyone, and tradable with other on-chain assets.
Digital Currency Pricing:
Pricing assets exclusively in digital currencies and stablecoins.
Token as the Asset:
Token-centric assets with no paper shares, issued exclusively through tokens.
Innovative Products on Public Blockchains:
Development of innovative products on public blockchains and protocols.
DeFi Focus:
Alignment with decentralized finance (DeFi) principles, leveraging blockchain innovations.
Agility and Innovation:
Rapid innovation, fostering positive market inertia, and adapting to new technologies.
Motivated Teams:
Teams driven by digital native mindsets, focusing on meaningful value increase.
Public Blockchain Advocacy:
Exclusively building on public blockchains, rejecting private database solutions.
Passion-Driven Initiatives:
Founding teams propelled by a passion to impact the world, prioritizing meaningful change over financial incentives.
Bridging the Gap
Private Market Potential:
Private markets, unexplored by TradFi, present significant opportunities.
Startup Advantages:
Startups possess the agility to innovate without the burden of legacy infrastructure.
Project Diamond's Promise:
Coinbase Asset Management's Project Diamond stands out as a dedicated, forward-looking platform for tokenized RWAs.
Blockchain's Impact:
Blockchain startups, operating on transparent and instant settlement models, showcase superiority over traditional systems.
Industry Evolution:
Convergence of TradFi and Startups:
TradFi institutions distribute RWAs in response to user demands, converging with startup-led initiatives.
Blockchain Funding Dynamics:
Blockchain startups rely on utility and platform token sales, reducing dependence on traditional financing.
The Opportunity
The RWA industry remains a vast blue ocean, offering trillions in potential, with much untapped potential yet to be explored. In navigating this evolving landscape, the synergy of innovative startups and established institutions is crucial for the sustained growth and transformation of the RWA industry. As the sector continues to unfold, the trajectory favors those embracing change and driving innovation.