Research Summary
This report delves into the recent trend of using Real World Assets (RWAs) as collateral in the crypto world, with a focus on Maker and Frax. It explores the implications of this trend for the future of Decentralized Finance (DeFi) and the sustainability of these businesses.
Key Takeaways
Exploration of RWAs as Collateral
- Maker and Frax’s Adoption: Both Maker and Frax have started using RWAs in the form of cash-equivalent assets as collateral for their respective stablecoins, DAI and FRAX.
- Volume of RWA Collateral: Maker has already amassed approximately $3.5 billion in RWA collateral, indicating the significant scale of this trend.
- Frax’s Recent Entry: Frax has recently joined this trend with the establishment of FinresPBC and the introduction of sFRAX.
Implications of RWA-backed Collateral
- Growth Trend: The move to RWA-backed collateral is becoming increasingly popular among stablecoin protocols, suggesting a significant shift in the DeFi landscape.
- Benefits: This trend aims to offer a more diversified, less volatile asset base and channel yield from yield-bearing assets like U.S. Treasury bills back to end-users.
- Strategic Move: The report questions whether this is a forward-thinking move towards DeFi’s future or a tactical maneuver to solidify their foothold in a fiercely competitive landscape.
Impact on Maker and Frax
- Sustainability: The report explores whether the use of RWAs as collateral could make Maker and Frax more sustainable businesses moving forward.
- Future Analysis: The report promises to delve deeper into Maker and Frax’s strategies and their implications for the future of these businesses and the DeFi sector as a whole.
Actionable Insights
- Investigate the Potential of RWAs: Given the growing trend of using RWAs as collateral, it may be beneficial to explore the potential of these assets in the DeFi sector.
- Monitor Maker and Frax’s Strategies: As Maker and Frax are at the forefront of this trend, monitoring their strategies could provide valuable insights into the future of DeFi.
- Assess the Impact on DeFi: It is crucial to assess the potential impact of this trend on the DeFi landscape, including its implications for asset volatility and yield generation.
