Zoth was established with the conviction that stablecoins and decentralized credit are critical in addressing the pressing credit challenges in emerging markets. These regions are often stifled by TradFi, where high interest rates and complex procedures restrict small and medium businesses from accessing the financing required to grow. Crypto and stablecoins have the potential to revolutionize the financial landscape, but they need the stability of real-world assets. We believe that bringing $2 trillion in high-quality, fixed-income assets on-chain is essential.
However, the current RWA market is not aligned with crypto values.
Key Challenges
The inevitable shift of the massive TradFi industry making its way on-chain represents a fundamental change in how financial transactions and assets are managed, leveraging the efficiency and transparency of blockchain technology. However, there are particular challenges that Zoth identifies and addresses in the early phases of development:
Lack of Retail Participation
Lack of retail participation causes liquidity issues for RWAs. Their absence results in a market dominated by institutional players, potentially leading to liquidity crunches. The current landscape does not provide sufficient access or incentives for retail investors to engage with on-chain RWAs.
Complicated Fund Structures
Most on-chain RWAs are issued via fund structures that are opaque with high administrative overhead and operational costs. This makes it difficult for products to scale across DeFi, which relies on principles of transparency and inclusion.
Gateways and Permissioned Access Layers
Restricted and closed systems hinder widespread participation, preventing a truly permissionless and inclusive environment for RWAs. Existing gateways are not ready to handle scalability issues, restricting the flow of assets and opportunities into DeFi ecosystems.
Establishing the Real-World Link
A critical element is forging a verifiable and legally enforceable link between a real-world asset and its on-chain tokenized representation. This requires collaboration with trusted custodians, legal frameworks for ownership recognition, and potential integration with oracles for off-chain data feeds.
User Experience is a Nightmare
The complexity of blockchain interactions, wallet management, multiple tokens, and networks can be a barrier for non-technical users. Designing simple but secure user experiences is essential for driving broader adoption of on-chain RWAs.
Multichain Interoperability
The challenge of accelerating liquidity in current RWAs is due to asset tokens and their compliance standards being restricted to a single chain. This involves duplicating these mechanisms and practices across multiple networks to maximize liquidity influx.
Building a robust RWAFi ecosystem requires a stable foundation, and for the crypto world, such a foundation is often found in permissionless RWA-backed tokens. These digital assets are designed to maintain a stable value and are pivotal for bridging the gap between traditional and on-chain finance.
As we strive to democratize access to RWAs, it’s crucial to understand the evolution of stablecoins, their current state, and the inherent challenges that Zoth seeks to address through its innovative RWAFi solutions.
