Qiao Wang, AllianceDAO - Current State of Applications for RWAs and Stablecoins

Historically, it was posited that stablecoins and other tokenized Real World Assets (RWAs) held the potential to draw the general public into the realm of cryptocurrency applications. A decade ago, the subject of remittances was extensively debated on bitcointalk.org. Subsequently, with the advent of smart contract chains, there was a burgeoning vision within our industry of Wall Street transitioning to on-chain stock settlements, thereby replacing traditional platforms like the DTCC.

In practice, however, the initial wave of stablecoins and RWAs did not witness widespread adoption among the general populace or those skeptical of cryptocurrencies. Their initial uptake was primarily by crypto natives.

For instance, stablecoins initially found their product-market fit with crypto natives engaged in cross-exchange arbitrage, utilizing them as a shield against the volatility of crypto assets. Post the establishment and rigorous testing of stablecoin infrastructure, applications appealing to those agnostic to cryptocurrency followed suit. These included uses in payments, remittances, and as a hedge against rapidly inflating currencies, exemplified by the Turkish Lira and the Argentine Peso. Although not inherently native to the crypto sphere, these applications have seen rapid growth in the Southern Hemisphere, both on-chain and anecdotally.

Similar trajectories may be observed with other RWAs. For example, U.S. Treasury bonds have become operational on-chain due to the interest of crypto natives seeking stable yields, especially following the Federal Reserve's increase of interest rates from 0% to 5%. A significant portion of these individuals were DAOs, such as MakerDAO, and crypto startups in need of diversifying their treasuries. Currently, crypto-agnostic applications are emerging, with crypto banks providing secure Treasury yields to their clients and supporting nations traditionally holding bonds with savings in USDC/USDT.

This adoption pattern, starting with crypto natives and then extending to those agnostic to the technology, seems clear in hindsight. For any crypto product, initial adoption by those already acquainted with crypto technology and in possession of the necessary infrastructure, like self-custody wallets, is a more natural progression.

The pertinent question now is: where do various types of RWAs currently stand on this two-stage adoption curve? And what are their most significant use cases?

The straightforward answer is:

• Stablecoins are firmly situated in the crypto-agnostic stage, with currency hedging and cross-border payments being their most crucial applications.
• Other RWAs, such as government bonds, stocks, real estate, and luxury watches, are still in the crypto-native stage, primarily serving the purpose of diversification.

Stablecoins: Hedging and Payments

Stablecoins are instrumental in facilitating annual on-chain settlements worth $10 trillion, a figure that eclipses PayPal and rivals the magnitude of Visa and the ACH system. This achievement is particularly remarkable, considering the relatively short development period of just a few years.

Also noteworthy is the total supply of stablecoins, approximately $150 billion, suggesting that each dollar circulates about 60-70 times annually on the blockchain.

Achieving these figures would be unfeasible without a borderless, permissionless ledger. Despite ideological critiques labeling stablecoins (and generally RWAs) as uninspiring due to their non-native crypto status, their practical utility sharply diverges from such ideological perspectives. The market highly values the capability to move traditional assets freely on such a ledger, as empirical judgment has shown.

Some argue that a substantial portion of on-chain transaction volume is driven by speculation rather than 'real-world use' like currency hedging and cross-border payments. While the exact division between speculative and actual use may remain ambiguous, even if only 1% of the $100 trillion annual transaction volume represents real-world usage, the figure is astronomical. Furthermore, our anecdotal evidence aligns with this data.

For years, AllianceDAO have observed the transformative power of online payments, often utilizing USDC for funding startups. Many startups opt to pay salaries or suppliers in USDC/USDT. Our interest in this domain intensified following AllianceDAO's Felipe's account of Colombia's peer-to-peer stablecoin market, where individuals meet in physical malls to trade Pesos for Tron USDT.

Over the ensuing months, AllianceDAO monitored over 100 stablecoin-related startups across Latin America, Africa, Southeast Asia, and Eastern Europe. Notably, most with released products exhibited early signs of Product Market Fit (PMF), defined as monthly growth exceeding 10%, regardless of team visibility.

In contrast, the vast majority of crypto startups outside this niche have yet to realize any significant PMF.

An African payment startup AllianceDAO fund, Accrue, revealed how stablecoins are a staple in the founder's family finances. His sister successfully saved nearly a year's worth of tuition in stablecoins, circumventing the 130% devaluation of the Ghanaian Cedi during that period. She later used a stablecoin-backed debit card to pay for her master's tuition in Sweden. His brother routinely converts GHS to CAD via stablecoins through Accrue and Kraken. Their parents in Ghana regularly utilize Accrue's agent network to send money to relatives in Nigeria.

Another African stablecoin startup AllianceDAO support, GoBankless, recounted a critical situation where a South African hospital denied treatment to a Mozambican patient until payment was settled. Traditional fiat methods were ineffective due to cross-border complexities (Mozambique to South Africa) and constraints outside banking hours. Stablecoins enabled the immediate resolution of the payment dilemma.

In the aforementioned context, Qiao Wang - AllianceDAO (X:@alliancedao) elaborates on the current application of Real World Assets (RWAs) in the overall market. Evidently, the interaction between stablecoins and RWAs is progressively transforming our lives and financial methodologies. AllianceDAO are also endeavoring to assist traditional industries in adapting to this change. The Asteroid X project, as a pioneer in the tokenization of physical assets and the application of stablecoins, represents a significant technological leap in the mining and energy sectors. Our aim with this incubated project is not confined to Western Australia or the mining industry alone; we aspire for it to demonstrate globally how complex physical assets can be transformed into more flexible and accessible digital assets. The core innovation of Asteroid X lies in utilizing blockchain technology to enhance asset liquidity, increase market transparency, and provide a more efficient and secure platform for collaboration between investors and project developers through smart contracts.

For traditional mining and energy projects, fundraising is often a prolonged and intricate process, accompanied by high financing costs. The Asteroid X project, through its innovative digital solutions, not only shortens the fundraising cycle but also reduces financing costs. By offering a broader investor base and enhanced asset liquidity, it breathes new life into early-stage mining projects. This model showcases how modern technology can overcome entrenched financing challenges in traditional industries.

Over the past nine months, despite high acclaim for the ambition and potential of the Asteroid X project both within and outside the industry, it has also faced some criticisms, particularly regarding the feasibility and security of physical asset tokenization. In response, Asteroid X emphasizes its robust technical foundation and compliance. The project team is dedicated to building a platform that meets regulatory requirements, ensuring that all tokenized assets undergo stringent risk assessment and review. Moreover, by collaborating with industry leaders and policymakers, Asteroid X is actively participating in the formation of emerging regulations and standards for digital assets and cryptocurrencies.

Looking forward, the Asteroid project plans to continue addressing core issues in the mining and energy sectors while expanding its technological and market influence. As more investors and project developers recognize the opportunities and advantages it offers, Asteroid X is poised to become a key bridge connecting traditional assets with the digital financial world. Whether in terms of capital efficiency, project transparency, or global accessibility, Asteroid X is paving a new path of innovation and development for the entire mining and energy industry.