Further reflection reveals that they still face a dilemma: to establish a unified market, there must first be some compatibility in token and contract standards, hindering platforms from aggregating RWA assets on a large scale and across multiple types. Conversely, aggregating different RWA protocols first restricts platforms to the role of “launching platforms” due to technical stack differences, despite providing liquidity for smaller projects, thus perpetuating the issue of fragmented markets for on-chain assets.
Even in the most liquid tokenized US Treasury market, this holds true. While firms like BlackRock and Franklin Templeton have addressed scalability issues for single asset classes, these assets are scattered across different public chains such as Ethereum, Stellar, and Avalanche to offer future potential investors and collaborative projects more options.
This narrative opens a window for cross-chain interoperability protocols that have struggled to gain traction, like Axelar, which has been early in laying the groundwork for RWAs. Last year, collaborations with Centrifuge and Ondo resulted in Centrifuge Everywhere and Ondo Bridge, optimizing protocols for RWA tokenization and enhancing cross-chain interoperability and liquidity. In the current fragmented market environment, cross-chain interoperability appears to be a compensatory solution.
Self-sufficiency at its weakest link
The bottleneck for scaling RWA assets is evident; the lack of automated processes or technologies akin to DeFi’s AMM is a critical factor. For RWA products, tokenization is often just the beginning; ensuring continuous asset updates and transparency after on-chain implementation is crucial for efficiency and cost-effectiveness. This typically includes:
1. Financial Reports: Asset managers need to regularly publish financial and performance reports, such as payment dates and amounts of rental income for real estate managers, or details on debts, arrears, and vacancies, to provide investors with a clearer understanding of the asset’s cash flow dynamics.
2. Debt Management: Products like RWA credits require regular updates on mortgage collateral, repayments, interest rate adjustments, and refinancing activities to gauge their health, which is foundational for maintaining investor trust.
3. Ownership Changes: Timely announcements are necessary if there are changes in ownership of underlying assets or legal entities holding these assets.
4. Market Oversight: Managers also need to report and adjust to changes in the regulatory environments where underlying assets are located to ensure compliance.
Apart from these, complexities such as asset insurance and risk management strategies, asset valuation and inspections, and legal entities issuing assets also require significant attention and effort from asset managers throughout the investment lifecycle. In summary, in the current market environment characterized by “infrastructure redundancy,” bringing assets on-chain is no longer the most challenging aspect of RWA development; rather, it’s the ongoing validation off-chain and legal oversight that slows down asset category and scale growth, diminishing the value of on-chain assets without addressing centralized audit risks.
The scale and growth rate of RWA assets depend entirely on the capabilities of off-chain issuance and management institutions. This is precisely why the US Treasury RWA products saw rapid growth after BlackRock’s entry, while other assets like real estate and commodities struggle due to the lack of enhanced automation in processes. Of course, the depreciation of on-chain assets’ value also represents significant business opportunities. Currently, most of these potential gains flow into the hands of asset issuers and managers such as Securitize.
Is it possible, akin to ChainLink in DeFi, to build a proprietary automated “asset oracle” system for the RWA field? We found some answers with the Jiritsu project.
Jiritsu is an Avalanche L1 specialized in validating off-chain assets, aiming to automate and trustlessly verify off-chain asset registration and validation, thus enhancing economic efficiency and transparency for RWA tokenization while reducing on-chain depreciation and costs. By integrating ZK proofs and MPC multi-party computation, Jiritsu ensures secure and private automated verification of asset details, embedding regulatory compliance and asset integrity into tokenized products. Interestingly, “Jiritsu,” derived from Japanese meaning “self-reliance,” enhances native cryptographic properties and scalability, crucial in the RWA field heavily reliant on centralized human audits.
Jiritsu’s ZK-MPC oracle aggregates data from multiple sources, verifying related computations, and enhances integration depth for various asset types through a versatile data retrieval mechanism. The oracle includes two main mechanisms: “Push,” where data providers (e.g., asset managers) directly send information to the oracle, and “Pull,” allowing the oracle to retrieve data directly from integrated information suppliers’ systems via APIs, such as supply chain software or banking information.
In terms of consensus mechanisms, Jiritsu introduces the concept of Proof of Workflow (PoWF), where nodes in the network run an operating system driven by computing engines and workflow managers to integrate consensus mechanisms directly into its MPC framework using generated ZK proofs. Unlike existing oracles like ChainLink or Pyth, Jiritsu does not require cross-chain bridges for information transmission during aggregation and adds analytical and verification capabilities to simple data feedback.
Once users or asset managers register assets for tokenization along with their details on Jiritsu, ZK-MPC validators analyze this information and confirm the asset’s value and compliance status. The analysis involves two types of validators: one for reviewing business policies and regulatory compliance and another for handling financial data, executing tasks like spot price retrieval and market valuation. Upon completion of analysis and validation, ZK-MPC generates proofs stored on-chain, which users can then claim and embed into their smart contracts, completing the entire process of asset tokenization.
Jiritsu officially demonstrated its product usage with Paxos’ tokenized gold product, PAXG, showcasing the complete process:
Initially, Paxos purchases gold through reliable gold exchanges and deposits it into custody service providers. Subsequently, Jiritsu users can create validators on Jiritsu’s ZK-MPC nodes supported by chains like Avalanche using the Jiritsu dApp. Upon retrieval of Paxos’ gold custody information, ZK-MPC nodes generate relevant ZK proofs through validators.
During the validation process, ZK-MPC nodes conduct off-chain validation computations, and the generated ZK proofs have varying levels of access and confidentiality permissions, where auditors may have full access to all information, whereas asset managers may only see specific information relevant to their roles. This validation process can update information at preset times or on demand, making it more efficient and reliable than Paxos’ current quarterly manual inventory validation method.
Once ZK proofs are uploaded to the Jiritsu network, Paxos can proceed with the tokenization of its custody gold. At this stage, Jiritsu also implements the concept of “chain abstraction,” allowing asset issuers like Paxos to mint corresponding tokens on target chains such as Solana, Avalanche, or BNB Chain.
After token generation, Paxos pays fees to nodes and validators through the Jiritsu dApp, with a portion allocated to the Jiritsu network. PAXG tokens purchased by investors contain underlying gold proof and can access custody status information on the Jiritsu network, allowing Paxos to pass on cost burdens to investors at this stage.
dApps on the Jiritsu network are specifically designed for easy writing of specific data, enabling users to create validators for any business logic, data reader, or smart contract integration. This adaptability ensures Jiritsu can provide customized solutions for a wide range of business needs. Furthermore, Jiritsu Proof under its ZK-MPC cloud service significantly expands the asset categories for information verification beyond traditional financial verification such as bank information and corporate credits to include a range of real-world asset status information, such as equipment, inventory, transaction, and income information for a large-scale Amazon supply chain company valued at over $20 million.
Building on this, Jiritsu measures its impact on bringing real-world assets on-chain through data metrics like “Total Asset Verified” and “Total Asset Secured,” enhancing underlying asset Lego for DeFi protocols. According to official Dune dashboard data, Jiritsu has verified over $18 billion in assets to date, with over $60 million in assets ready for various protocols to use.
Recently, Jiritsu integrated with BlackRock’s RWA ecosystem, providing automated on-chain proofs for its Bitcoin spot ETF and BUIDL Fund’s reserve assets valuation, compliance, KYC platform information, etc., facilitating other protocols’ quicker and easier use of these on-chain assets. On the other hand, despite significant incremental funding for the crypto market and RWA by iBIT and BUIDL, their asset verification still relies on self-reporting and only provides annual audits, whereas Jiritsu offers more transparent and cost-effective solutions for these products.
Jiritsu also integrated with the Republic platform, deeply rooted in the RWA field, allowing any asset manager to directly implement and utilize similar solutions, enhancing compliance and operational efficiency in tokenization, compliance, marketing, and customer service, utilizing Republic’s mature infrastructure. By automating trustless verification and auditing previously conducted by institutions like Moody’s and KPMG on-chain, Jiritsu taps into a market where traditional fee income exceeds $150 billion, even at a conservative 10% calculation, marking a highly imaginative business ceiling.
Good money drives out bad
From DeFi to GameFi to NFTs, past successful cases in the crypto industry have relied on innovative forms of native on-chain assets and interactions to attract new users and funds. However, RWA brings the value of the external world onto the chain. Hence, many native crypto users have always been wary of RWA narratives, viewing bringing real-world assets onto the chain as targeted harvesting of crypto users and squeezing the value growth space of native crypto assets. Moreover, crypto users accustomed to high volatility are uninterested in the “low returns” of real-world assets. RWA has long been tepid largely due to this misalignment between product positioning and user demands.
However, since the second half of last year, the fundamentals of the RWA sector have undergone significant changes. On the one hand, native protocol demands for sustained profitability have begun to emerge, and
