What happens when Web3 and real-world assets meet? Decentralized finance, smart contract and crypto are evolving. As a result, more products that reflect products in traditional finance but take advantage of blockchain functionality, are being built on-chain. Kelly Chambers, from KellytheWriter, explains the evolution real-world asset-private on-chain credit.

In Ask an Expert, Bryan Courchesne and Daim explain what on-chain Deaf is and why it’s important.

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An Introduction to Real-World Asset-On-Chain Private Finance

You may not have heard about this corner of crypto. It’s worth knowing, as it could offer opportunities for mainstream investment.

Have you ever heard of RWA on-chain private credits? What’s the difference?

In traditional finance private credits is a type of non-bank financing whereby non-banking institutions provide funding to small- and medium-sized business.

RWA On-Chain Private Credit is a new concept in the world of digital asset. It allows lending and borrowing based on real-world assets. These on-chain loans can be secured by real-world assets such as a company’s inventory, receivables or real estate.

A few DeFi protocols offer RWA private credit on the chain. These protocols provide businesses from all over the world with access to debt capital provided by non-bank lenders. Most lenders who interact with RWA private credit on-chain are required to perform KYC/AML checks, accreditation checks, and other requirements.

Private credit on-chain offers reduced transaction costs, and greater transparency when compared with the traditional financial system. Borrower default risks and the unknowables of an emerging crypto industry are among the dangers.

RWA private credit players

According to the analytics firm , rwa.xyz, the three largest private credit companies based on active loans are:

  1. Centrifuge : Credit marketplace that allows borrowers to access DeFi capital and finance real assets without the need for banks or intermediaries. Centrifuge Prime allows large, decentralized organizations to take advantage of the real returns from economic activity.
  2. Maple A marketplace on-chain focused on providing institutional and accredited investors with lending options that are tailored to their needs in terms of liquidity, risk and return. Maple offers a variety of secured lending, including U.S. Treasury Bills, Investment-Grade Debt, and loans with digital assets as collateral.
  3. Goldfinch Goldfinch, founded by Warbler Labs is a decentralized lending protocol which allows crypto loans without crypto collateral. Instead, the loans are fully collateralized on-chain. Warbler Labs’ founders have also launched Heron Finance, a private credit RIA on-chain.

Credix and Clearpool, two smaller companies, have also continued to build in this space until 2023.

  • In 2023 CoinDesk featured Credix, explaining how lenders can earn nearly 11% annually by investing in private loans to Colombian farmers that are backed by receivables and insured.
  • Clearpool Prime, a private credit marketplace with institutional grade KYC & AML compliance, will be launched in December 2023.

The largest private credit companies on the blockchain today may not remain the biggest tomorrow. In the graph, rwa.xyz shows that market shares have fluctuated amongst firms. All firms are struggling to survive 2022’s crypto-crash. On-chain private credit companies have made a slow comeback throughout 2023.

On-chain private credit is becoming mainstream.

In the past, on-chain credit was driven by a small group of native crypto users . A trend worth monitoring is the possibility of making blockchain-based RWA credit more accessible to non-crypto native consumers.

Maple Finance’s CEO is on record saying, “We are trying to abstract as much complexity as we can from crypto.” My vision is that we can pitch a family-office and say, “We have a lending and credit product with lower fees than the average Ares or Apollo Credit Fund.”

There are efforts underway to make on-chain credit mainstream and to reach a larger audience. Private credit is largely used by institutions, but there are some who believe accredited investors can use their capital more effectively.

Heron Finance is an offshoot of the Goldfinch Protocol. It has recently launched a blockchain RIA that’s registered with the SEC and designed for US accredited investors who do not have any crypto-native expertise.

Financial advisors who serve high-net worth clients seeking additional yields but are not willing to use multiple wallets and cryptocurrencies may have new investment opportunities. It’s a sector to keep an eye on for financial advisors who are forward-thinking.


Q. Q. What is DeFi on the chain?

A On Chain DeFi refers directly to the decentralized finance protocols and applications (DeFi), which operate on a blockchain. Self-executing smart contract technology is used to achieve this.


Q. Q. Why is it important to you?

A DeFi on-chain is important, because smart contracts allow for a system to operate without intermediaries. Self-executing agreements are written directly into code and stored on a blockchain that is immutable. Participants can then use services like lending, borrowing and trading in a transparent, verifiable and seamless way.

For a simplified example, let’s take a look at trading. A decentralized exchange settles trades on the chain, whereas a central exchange uses an internal centralized system. It is important to note that if, for example you use a DEX for a swap of Solana (SOL), for Helium, (HNT), the HNT you receive in your wallet can be verified on a transparent ledger. Compare that with people who traded Solana on FTX in 2022. They received tokens that were stored in a centralized ledger and could only be verified (or not) by FTX. When FTX collapsed, it was revealed that these tokens didn’t exist. It is difficult to know whom to trust. On-chain smart contracts play a crucial role in this. The best way to reduce bad actors is by creating a self-enforcing and self-governing system.

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Bradley Keoun is the editor.