Lao Bai, Partner at ABCDE Investment Research, Discusses Application Scenarios and Recent Developments in the Real World Assets (RWA) Sector

Author: ABCDE Capital Investment Research Partner and Amber Group Advisor Lao Bai

In the previous article, we discussed the perspectives of the East and West on the market. Today, with the announcement from YZi Labs about their investment in Plume Network, an RWA platform, I would like to share the recent changes I have observed in the RWA sector.

This topic can be divided into four parts:

1. Does RWA really have application scenarios, or in other words, PMF?
2. Which RWA assets are suitable for blockchain, and which are not?
3. What were the previous solutions, and what are the current solutions?
4. Have you sensed the recent trends in the RWA space over the past few months?

1. Does RWA really have application scenarios, or in other words, PMF?

(Here, we will first exclude the stablecoin track for US Treasuries on-chain, such as Usual, MKR, which has already found its PMF.)

Taking the example of US stocks on-chain, this is one of the most debated topics on Twitter. Many believe that US stocks on-chain are redundant, as those who want to trade US stocks already have their own channels, and any on-chain asset is more volatile than US stocks, making it unnecessary to trade stocks on the blockchain.

However, I have a different opinion. Personally, I think US stocks on-chain have their significance.

• From a channel perspective, indeed, most big players above A8 or A9 use brokerage platforms like Futu and FirstTrade for diversified investments in crypto, stocks, gold, etc. But I believe most retail investors in the crypto space do not have US stock accounts. Trading US stocks on-chain can at least open up purchase channels for them without any barriers.
• From an application scenario perspective, imagine this case: as a P-level trader, you recently made a profit of 100,000 USDT from Mubarak, and you know that Tesla has recently halved, making it a good time to buy the dip. You then want to convert your 100,000 USDT into Tesla stock.

Even if you have a US stock account, you must first convert the USDT into fiat through OTC, then transfer the fiat to your brokerage account via the bank, and then buy the stocks, which would take about 3 to 5 business days. If one day the price of Tesla rises and you want to sell it and convert it into BTC or USDT, this whole process has to be repeated… Now, imagine if US stocks were on-chain, you could instantly convert the USDT into Tesla stock with minimal friction. The reduction in friction would enhance the user experience by a factor of ten or even a hundred.

2. Which RWA assets are suitable for blockchain?

Similarly, T-Bills, which have already proven their worth, are not part of the discussion here. For other RWA assets, it actually depends on the specific target audience.

For the To C (consumer) side, stocks are undoubtedly the most suitable. Most retail investors have probably never been involved with primary private equity. Even if you tokenize the equity of a private company, few will be able to understand, purchase, or hold it long-term. Additionally, private loan collateral such as bridge loans in the real estate market or corporate receivables, like those on Centrifuge, are also not suitable for To C. The vast majority of C-side users are only familiar with stocks. For To C, the scenario should focus on unlocking access to assets that users previously had no access to, through blockchain—a process of going from 0 to 1.

On the To B (business) side, many more assets can be tokenized, but unlike the To C scenario, which focuses on going from 0 to 1, To B should focus more on reducing friction, going from 1 to 100. For example, primary private equity already circulates among institutions and high-net-worth individuals. A bridge loan on Centrifuge could likely be financed by a bank, but this process is relatively complicated and high friction. By putting it on the blockchain, like Payfi compared to SWIFT, it significantly improves user experience and transaction speed.

I recall discussing an RWA project last year, where the parent company was a prominent US asset management firm. They planned to tokenize the primary equity of their clients’ assets, such as Elon Musk’s SpaceX, and issue it on their own platform. This way, the tokens could easily circulate and be traded, and when SpaceX goes public, it would settle in one go. So, for To B, aside from being limited to institutional and enterprise users, the issuer is also relatively restricted. For example, unless you already manage a large stake in SpaceX, it’s difficult to attract SpaceX equity holders to issue tokens representing their equity on your platform, as this involves resource cooperation and legal issues, which adds friction.

There are also some intermediate cases, such as IP tokenization via Story Protocol or the royalties from a book, box office revenue from a film, or sales from a game, which are still in the early stages of exploration. These require testing and validation. For example, the tokenization of influence by FT failed, while Kaito succeeded. The tokenization of celebrity time, as seen with Time.Fun, became popular for a brief period and then disappeared. These things need to be approached gradually.

3. What were the previous solutions, and what are the current solutions?

Taking US stocks as an example, the previous solutions were mainly based on synthetic assets, such as SNX, Terra’s Mirror, and GNS. These approaches have mostly been debunked, and these platforms have taken down their synthetic US stock assets. There are two main reasons: first, people are not very interested in synthetic “fake assets” created by stablecoins or native coins (such as SNX); second, the SEC often investigates these platforms, and although synthetic assets are fake, the SEC doesn’t need a reason to investigate, so many platforms removed these synthetic US stocks to avoid trouble.

Now, with Trump back in office and a change at the SEC, regulation in this space has clearly improved over the past two years. We now see two new solutions for US stocks on-chain.

• One is the traditional compliant Broker Dealer route. When users buy tokenized stocks on-chain, it triggers the corresponding actions of an off-chain compliant broker on the US stock market. Essentially, it’s similar to how Robinhood operates, where Citadel executes stock orders. The advantage is that the stocks you buy are “real” stocks, or at least 1:1 backed by the broker, similar to how WBTC is backed by BTC. The disadvantage is that trading hours follow the stock market, unlike crypto which operates 24/7, and you need to trust this broker or platform. Additionally, selling may trigger a taxation event, which can be a hassle for US citizens who may need to submit tax forms, or for non-US citizens who may at least have to complete KYC.
• The second solution is Ondo Global Market’s approach. Initially, they wanted to take the Broker Dealer route, but later switched to a model similar to stablecoins, where authorized issuers can directly issue tokenized stocks (similar to how Tether issues USDT or Circle issues USDC). The advantage is flexibility, potentially eliminating the trading time restriction of US stocks. The disadvantage is that this may only be available to non-US users, and there may be compatibility issues between tokenized versions of the same stock issued by different issuers (similar to how different bridges for USDC can be incompatible). The details are not fully clear, as the product is set to launch next year.

Finally, platforms like Plume, which focus on RWAs, feel more like frameworks, offering services like KYC/AML, data storage/execution, consensus, and ZKTLS verification. These platforms can theoretically allow partner organizations to issue various tokenized RWA assets. This ties back to the earlier point about which assets are suitable for blockchain, which I won’t elaborate further on.

4. Have you sensed the recent trends in the RWA space over the past few months?

If you’ve been paying attention, the momentum in RWA has been quite strong in the past couple of months. Here are a few “news” pieces I’ve observed:

• Ondo plans to launch Ondo Global Market by the end of this year or next year, a blockchain-based stock market, and they have been closely collaborating with Trump’s WLFI.
• Sui has also been closely working with WLFI recently.
• Frax has been actively embracing Cedefi and recently launched frxUSD in collaboration with BlackRock + Superstate.
• Ethena released their new product, Converge, today, which focuses on what they consider the two most important blockchain scenarios—storage and settlement for stablecoins and tokenized assets.
• AAVE plans to issue a new coin, Horizen, which has caused a stir in the community. Stani personally clarified: “Horizen is designed to fill the current gap in Aave’s RWA business, with the plan to surpass Aave’s current revenue line in 5 years.”
• The South Korean Financial Services Commission issued a release in February 2025, planning to allow corporate entities to trade virtual assets in stages. From what I’ve heard, South Korea may restart its STO (the previous name for RWA in a past cycle) project. This would not be for speculative trading, but rather for tokenizing real financial assets into “virtual assets” to facilitate inter-company circulation.
• YZi Labs officially announced its investment in the rapidly growing Plume Network RWA platform.

The momentum created by these developments cannot be ignored, so my personal view on the next major track is PayFI + RWA + Web2.5-like consumer apps. As for AI + Crypto, it shows promise but remains in the exploration and observation stage. After completing the next article on “Noteworthy Developments on ETH and Solana,” I’ll write a separate piece on my recent thoughts on AI + Crypto, which will conclude this comprehensive series.

Original Link: Lao Bai’s X

Series Part 1: ABCDE Capital Investment Research Partner: The Market and Thoughts from the East and West VC Perspectives