The Future of Real World Assets (RWAs) on Blockchain: Overcoming Challenges with Pera's dWallets and Zero Trust Protocols (ZTPs)

Representing Real World Assets (RWAs) on the blockchain holds tremendous potential to bring real economic value to Web3 applications. However, the journey to tokenizing RWAs is fraught with challenges, ranging from custody to liquidity. This article explores these challenges and highlights how dWallets and Zero Trust Protocols (ZTPs) can offer solutions.

1. The Custody Problem with Real World Assets (RWAs)

One of the most significant challenges in tokenizing RWAs is custody. While Web3-native users are comfortable managing their assets in a decentralized manner, the broader audience necessary for mass adoption faces substantial barriers. Existing Web3 custody solutions are fragmented across multiple networks and require a high level of technical knowledge, making them inaccessible to most users. On the other hand, centralized custody options are costly, introduce trust assumptions and create a single point of failure, undermining the motivations and reasons for bringing RWAs to the blockchain in the first place.

Solution: Custody ZTPs - A ZTP-based custody solution offers a Zero Trust decentralized alternative where the user has control, utilizing a decentralized network to smooth the user experience. dWallets on Pera facilitate Zero Trust decentralized custody by requiring cryptographic verification from both the user and the Pera network nodes before signing a transaction. The user participation in the signature enforces Zero Trust (no one can sign without the user), and Pera’s participation offers access control capabilities and improved user experience, such as social login or key recovery to overcome the UX barrier of Web3 custody. For instance, Aeon (https://aeon.so/) is developing a next-generation multi-sig custody solution that leverages Pera's dWallets, allowing users to secure all their assets in one place and use them seamlessly across any chain, with advanced features like an integrated dApp store to navigate web3 and a policy engine to secure the users' funds.

2. RWA platforms committing to a single chain

Another significant issue arises because RWA platforms must choose a network to mint the RWAs on, and decide how to bridge them to other chains. The process of minting and burning tokens across different blockchains often creates complications. Bridges typically rely on trusted third parties or a federation of validators to manage cross-chain interactions, which sacrifices Zero Trust principles. This entire setup creates liquidity fragmentation, additional costs, and security vulnerabilities, especially when minting and burning mechanisms introduce complexities around asset custody and control.

Solution: Mint and Burn ZTPs -Pera eliminates the need for traditional bridging solutions by allowing platforms to control assets seamlessly across networks without bridging or wrapping. An RWA platform can operate as a user of a dWallet and control smart contracts on multiple networks from a single ZTP, seamlessly managing minting and burning, and allowing their RWA to exist on multiple chains simultaneously - without requiring bridging and without having to rely on 3rd parties. Using such a solution avoids liquidity fragmentation and bridging risks, creating a more capital efficient environment for RWAs platforms.

3. The Problem of Liquidity Fragmentation

Liquidity fragmentation is a prevalent issue in blockchain ecosystems, where assets are spread across multiple chains, each with varying degrees of accessibility. This problem is compounded by the need to operate natively on multiple chains without bridging, leading to fragmented liquidity pools that harm capital efficiency. The liquidity problem becomes even more pronounced for RWAs, where different token standards across blockchains create barriers to seamless trading and lending.

Solution: DeFi ZTPs - DeFi Zero Trust Protocols (ZTPs) offer a seamless solution to the liquidity fragmentation problem by creating a unified liquidity layer that respects the sovereignty of each blockchain. For example, a lending ZTP allows users to leverage their Real-World Assets (RWAs) as collateral to obtain a loan in any digital asset, such as stablecoins or native tokens, across different blockchains regardless of where that RWA is minted, and without requiring bridges or wrapping. This enables users to manage liquidity and gain access to capital in an efficient and secure way. Another Labs (https://www.another-labs.xyz) is developing a framework called "Meta Assets," which introduces a new Non-Fungible Token (NFT) standard representing an underlying dWallet. This approach abstracts away the complexities of managing the user and network share of the dWallet by a ZTP, making it easier for users to seamlessly transfer accounts or leverage any digital asset, including RWAs, to access liquidity across multiple chains.

4. Regulatory Challenges and Compliance

The regulatory environment around blockchain and RWAs remains complex, with compliance requirements like KYC and AML posing significant challenges. In the decentralized blockchain ecosystem, balancing regulatory compliance with privacy and security is a critical challenge.

Solution: ZTP-based Compliance Platforms - Holonym (https://holonym.id/) provides a Zero Trust solution for regulatory compliance using a few products - its Silk wallet, a programmable and permissionless wallet built as a ZTP to operate securely across dApps without relying on centralized custodians; Zeronym, Zero-Knowledge (ZK) Identity proofs allowing for robust identity management and secure recovery with full compliance and privacy; and Mishti Network, allowing users to access their accounts using Human Keys, based on their identity and biometrics. Platforms like Holonym allow RWA platforms to navigate the often conflating regulatory regimes and blockchain environments to provide a compliant and useful financial product, without compromising user privacy or security.

Conclusion: As we bridge the gap between traditional assets and the decentralized future, dWallets and Zero Trust Protocols (ZTPs) preserve the core Zero Trust principles on which blockchain was designed. By eliminating the need for trusted intermediaries and avoiding the vulnerabilities of Castle-and-Moat models, we are setting the foundation for a more secure, efficient, and truly decentralized Zero Trust Web3 ecosystem for RWAs.