Overview
The current state of RWAs is broken.
TL;DR
Currency pegging, rooted in systems like the Gold Standard, has long ensured trade stability and minimized exchange rate volatility in global finance.
Today, pegging remains central to economic policy, with the USD and EUR dominating as the most pegged currencies, and over 65% of global trade settled in USD.
Stablecoins have shifted from traditional fiat-backed models to decentralized and flexible alternatives, reducing reliance on centralized reserves.
The stablecoin market reached $203.15 billion in late 2024, led by Tether (USDT) and Circle (USDC). However, leading models face hurdles in embracing decentralization and permissionless access, critical for scaling in RWAFi.
Despite their growth and adoption, the leading stablecoin models, often not designed with the core values of crypto, such as decentralization and permissionless access, face several significant challenges that must be addressed for true scalability and adoption in the RWAFi space. These include:
Centralization of Reserves
Most widely used stablecoins are centralized, meaning they rely on a single entity to manage reserves. This centralization poses risks related to transparency and trust, as users must rely on the issuer's integrity regarding asset backing.
Unreliable Backing
Many successful stablecoins struggle with reliable backing. This is due to reliance on volatile native tokens in the case of certain algorithmic stablecoins, lack of periodic audits on the reserves, or having highly volatile assets as collateral.
Yield / Revenue Distribution
Stablecoin companies like Tether generate substantial profits from the interest earned on their collateral reserves. While Web3's core philosophy emphasizes sharing revenue with users and the community, most stablecoin protocols have not adopted this approach.
Fragmented Liquidity and Interoperability
As multiple stablecoins proliferate, the lack of interoperability between different blockchain networks can hinder their usability across platforms, limiting their potential applications in the broader economy.
While the need for traditional assets within crypto is clear, existing RWA solutions often restrict access through long verification requirements, whitelisted tokens, fragmented liquidity, and a lack of DeFi integrations. These restrictions primarily exclude retail investors who are pivotal to any ecosystem's growth.
Built for the community, Zoth is designed to solve this by providing permissionless access to a wide ecosystem of RWAFi, unlocking the full potential of RWAs within DeFi.
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