Ecosystem Tailwinds

So far, we've discussed the challenges that builders of Real World Asset (RWA) projects face, which might seem demotivating. However, it's also important to highlight several factors working in favor of RWA project builders.

Availability of Open Source Code

A developer in the Ethereum ecosystem can combine existing codebases to create projects that include token issuance, trading strategies, market making, and the lending and borrowing of assets. All of this functionality can be developed within a week by combining open source code bases. Additionally, there are many other open source resources that enable the creation of derived leveraged products, setting different permissions for different holders, and enabling distributed decision-making.

In comparison, traditional finance has mostly developed as closed source code. There is no near comparison between the technological composability of blockchain code and that of traditional finance. Here, blockchain, along with its code, can be compared to a cloud environment with all its services, whereas traditional finance is more like traditional server racks. Private servers for infrastructure are typically 100 times less efficient in most cases. This enables RWA builders to provide these features at free or marginal cost, whereas in traditional finance, investors pay 1-2% for each of these functions/systems.

Layer 2s as Cheaper Options

Ethereum has proven its ability to hold, trade, and instantly settle billions of dollars. One main blocking factor for using Ethereum is the high gas fees, which can range from $2-$15 for simple transactions. These fees have deterred many projects. Layer 2 solutions have emerged as safe and scalable options where gas fees for most transactions are below 1 cent. While moving assets between chains still needs improvement, once your assets are on one of the Layer 2 chains, they provide the same user experience. Developers can also use the same codebases with little to no modification for applications to be used on Layer 2.

Custom EVM Chains/Layer 3

Several projects allow builders to create their own chains with restrictions specific to their project or ecosystem. Many "Rollup-as-a-Service" providers make it very easy to deploy or upgrade custom chains. This allows builders to create gasless chains, chains with their own tokens, or chains where users can undergo KYC/AML processes. The infrastructure costs of running your own chains are expected to decrease over time.

Ethereum as a Leader for Financial Applications

In 2024, many chains became Layer 2s on top of Ethereum, resulting in considerable consolidation, and Ethereum emerged as the biggest leader, holding the most assets and offering the deepest liquidity. This provides builders with unparalleled liquidity. Nowhere else in traditional finance does such a neutral layer exist where developers can deploy a simple feature that can attract and handle billions in assets.

Funding of Infrastructure Projects In 2024, the majority of funded projects in crypto were related to Web3/Blockchain infrastructure. Investments were made in identity, scalability, cross-chain communication, privacy, etc. This situation has led to a lot of competition and a wealth of choices of tools for app builders. It allows RWA builders to minimize effort on basic or advanced infrastructure features and focus on finding quality assets, addressing regulatory issues, and bridging quality assets on-chain.

Smart Wallets A core need in Ethereum has been the ability to pay for user's gas, restore accounts, and utilize external identity providers. There is now support for all of this at the base Ethereum level. Builders now have many wallet options that enable social logins and account recovery. Advancements like Layer 3/Custom chains and smart contracts now enable developers to create applications that offer the same user experience as a Web2 application but use blockchain technologies behind the scenes. This experience is expected to be further refined in the near future.