Crypto will touch grass in 2026 thanks to real world assets

[Music] If you follow Blockchain's topics, you probably heard this quote from Larry Fink, the CEO of BlackRock this week. He was speaking on a panel at the World Economic Forum, and I think this quote from the leader of the world's largest investment management platform really grounds the conversation that I want to have today, so I'm going to start with Larry Fink. I think the movement towards tokenization, decimization is necessary. I think we need to move very rapidly to doing that. We would be reducing fees. We would do more democratization by reducing more fees if we had all investments on a tokenized platform that you can move from a tokenized money market fund to equities and bonds and back and forth. We have one common blockchain that we could reduce corruption. So I would argue that the activities are probably processed more secure than ever before. So topic today is real world assets. Why are people in crypto so excited about talking about these things? In my mind, having covered the space for what seven, eight years now, I feel like there's two kinds of crypto people. There's the money types, the investment types, the business crowd, and it's the folks who want to make a profit. Then there's folks like me who are more the culture types who came here for the vitality and the narrative. What has vitality folks? What has narrative? What is a sort of technology that makes people feel alive, that makes people feel like it's really living? Dogecoin. Dogecoin has vitality. Say what you will about Dogecoin. It seems to be this thing that is like living out there and every now and then like resurrects itself like a zombie. I mean, from a grave. But if crypto is never anything but dogecoin and variance on that idea, well, there's a ceiling on this whole thing. The big insight of the money types, the business types is that whenever anything can save money at scale, even if it's just hinnies per deal, as long as there are thousands or millions of deals, that's a real business. That's potential and that's growth that will win. So that's our topic for today is real stuff, not the dogecoins. Real stuff coming on chain. The term of art for that these days is real world assets. We're talking about real world assets today on Diamond Rhino. So hello and welcome to this our sixth episode of Diamond Rhino. My name is Brady Dale and I'm the host of this show. Diamond Rhino is also a part of the substack newsletter front stage exit. If you stumbled on this podcast on some other podcast player, you saw it on Reddit or Twitter or something. Welcome. Glad to have your here. If you if you like what you hear, go to frontstage exit.com and sign up for the newsletter. And then if nothing else, you'll get reminders in your email and box every time a new episode of this podcast comes out, but you'll also get other content. I do an essay every Tuesday on some big topic, sort of like this podcast does. And then on Thursdays, I do this column called Backstage Pass, which is a a rye and sardonic look at the news if the week in cryptocurrency. So thanks for being here. One thing that would really help if folks are liking the content so far, I know most of you found me via substack, but if you have decided you're going to keep listening to these, it would be great if you went to your podcast player of choice and subscribe to the podcast there, whether that's Apple podcast or Spotify or overcast or whatever. It reaches all of them. I'll include several links to the specific places you can get the podcast on those different platforms, but it reaches them all and it would it would really help to have you sort of making that direct relationship through your pod player. Thanks a ton. This episode for me really captures what I'm trying to do with Diamond Rino, because we're diving into a complicated topic that can get pretty technical. And so this is our chance to like go through I went through a bunch of the content that's out there and I plucked out the parts that allowed me to assemble some kind of a narrative here so that you can get all of this more quickly without having to wade through 14 other conversations like I did. And that's the point of Diamond Rino is to get the crucial nuggets about these different topics out and to explore them for you. If you've been a trader or a mean point type who's been waiting to get up the speed on this on this hot topic, this definite trend of 2025 and 2026 real world assets, this one is for you. And I'm going to be honest, this is one of those topics that I also have neglected somewhat up to this point because it just seemed like a little too buttoned up back when I was still at Axios. And I was writing the Axios crypto newsletter with Crystal Kim, who's now at Investopedia. She could check out her work there, but I would always encourage Crystal to take these topics because she was the more business news minded over the two of us. But obviously we've got to get here for it to be real. I mean, this is if crypto is the future of finance, it needs to deal with like actual finance. So I just, I've been putting it off because there were crypto punks that I could still write about and that was still a worthwhile story. But now we're here and I'm caught up and you can be too. So we're doing this today because it's important and this is like the, I think this will probably be like the crucial trend of 2026 or at least a crucial trend. And real world assets fit into a larger thesis that I've been kicking around for a while. And I'm going to preview that thesis for you here at the end of the show. So stick around for the end because we're going to go 50,000 feet here in a way that might be useful for you over time or at least to be interesting and somewhat thought provoking. Now let's dive in on the state of play for real world assets here as we begin 2026 with more of an Bitcoin, a semi-disappointing crypto president, market structure legislation looking doomed. But real crypto regulations on the horizon. So we started with Larry Finkett, BlackRock. Let's close the opening here with a great quote from a legend of decentralized finance, Robert Leschner. He was on the bankless podcast in March of 2024 talking about this topic. He's the founder of Compound, which is one of the original money markets in in Ethereum. But these days he's the leading leader and co-founder of Superstate, which just landed an $82 million series B financing and led by Bing Capital and distributed global. And Superstate is at the forefront to the vanguard of this exact topic of bringing real world assets on chain. So far they've mainly brought on US treasuries, but they have a vision to go much bigger than that. So here's Roberts talking about the state of play for this sector. There's no question that in 30 years, blockchains are used for natively issuing the equity of a company. Why not? Like what? It's obvious that it's just a better record-keeping system. And like, of course, you're going to use it instead of what I will tell you is a horrible back-office mess that things currently work on. So obviously like individual stocks and bonds are going to be tokenized or issued for the first time on blockchains. From there, obviously every fund is going to have the ability 30 years from now to be running with an on-chain component. We're not limited just to T-Bell funds, equity funds like an S&P 500 fund or NASDAQ fund or a real estate, you know, REIT fund or commodity funds or any type of fund can and will be issued on chain. So real world assets, what does it mean? Let's start off with the term. Some people hate this term. One of the conversations I heard, they said it sounded infantilizing like the stuff that exists on blockchains now isn't real somehow. But I understand the point that people are making. I mean, there's a degree to which it's not real. It's like purely digital. It's purely on blockchains. Real world assets are, of course, our assets that are backing or are invested in things that exist in actual atoms in the world, you know, that home loans or car loans or other sorts of lending along those lines. They could be cash flows. Money market funds, a lot of those are based on cash flows of different businesses. Leshner couched this pretty well on that bankless podcast. A lot of work has occurred over probably, I would say, the past six years to bring off chain assets, which in my opinion are just assets that are originally recorded, not on the blockchains. They're assets that are recorded in some other type of ledger, whether it's a spreadsheet or legal contracts or pieces of paper. And the goal is to bring them on chain where they are in superior function over the way they used to reside. When assets are on chain, they're more useful. You can move them around pretty much instantly. You can see a huge level of transparency into who owns an asset, what they're doing with it, how it works, what the rules of the asset are, and they're programmable so people can build new things with those assets. And this began to capture people's attention, in my opinion, probably going back to about 2017 or so. We started to see lots of experiments going all the way back. Many different teams were trying to either tokenize securities or tokenize real estate or tokenize commodities. None of them really came to fruition. The one asset that got tokenized incredibly successfully were dollars. Really starting in about 2018, we started to see the rise of stablecoins. Stablecoins are the first assets where there was an asset held off chain and through a process, the value of the asset was moved on chain. Just to zoom out a little bit here, we saw the same narrative take place with the internet and people would complain about it being infantilizing. But I just think it's silly to do that. It's just some things are purely online and some things aren't. The internet really became indispensable after around 2007 when people started to be able to do things like order a car to their actual location, Uber, or they started to be able to get meals delivered to their house. We call that the transition of the bits to atoms, the era of the internet. And that's what we're seeing here with crypto too. For a long time, everything in crypto was purely crypto assets, like stuff that just existed on chain, which it has real value, but it's just not the same as a house or business. So anyway, at the end of this last year, a 16z crypto, which is obviously a part of Andrew St. Horowitz, this gigantic venture capital fund in one that has taken a lot of bets on crypto. They had a discussion where they talked about how far the sector has come in 2025 with they say it's $30 billion in assets under management, not counting stablecoins, RWA to XYZ puts a slightly smaller number on it. Either way, it has grown a lot over the last year. So Robert Hackett from the content team used to be at Fortune. He covered a lot of crypto stuff there and then he came over on their state of 2025 episode. He brings up the issue and sort of frames it. And then Darren Massooka from the investing team sort of lends the importance of the topic on the podcast. And then we're talking about these other types of assets, everything from stocks to commodities to debt of all different flavors. There's about $30 billion worth of that on chain today. And it's growing very rapidly. You know, 2020, there was almost nothing to now, 30 billion. So what's going on there? What's driving the growth? Tell us about this trend. So first of all, I think real world assets. I think they're the key to the long term success of DeFi because this is the bridge to traditional finance, which as we know is many trillions of dollars of size in opportunity. And so I think we have to, if we want DeFi to really reach the levels and scale that I think we think it can, I do think we need to bring these real world assets on chain. And then a little bit later in the conversation Eddie Lousyren comes in and he gives what I think is a useful thought for us in this conversation about what's unpredictable and interesting about real world assets is how they're going to lead to second order effects that we can't foresee. Tokenizing a company and putting it on chain is maybe only incremental improvement. But I still think it's exciting. And so far as it creates an exciting second order consequences like stablecoins, right? Like stablecoin is just dollar on chain. It's not a new asset. It's the old asset, but on a new medium. And that has profound consequences because of all the profound ways that dollars are used, right? They're used for payments. They're used as collateral. They're used for settlement. They're used for all these things. I think for stocks, it could be similar. It's like if people hold a lot of their assets on chain, well, now they're on chain. And that means now they're inroparable with a lot of other things. So hold that thought from Lousyren. I like Lousyren, by the way, I think he has a lot of smart takes. He's very tech forward. So I like how he thinks through a lot of these things often. So hold on to that thought because it's going to be crucial when we get to that thesis. I promise to you then. But the other thing is just in just a sort of expand on what Lousyren said here is what's so exciting about technology is this notion of emergent phenomena. And emergent phenomena is especially powerful when you are networking lots of people and getting lots of people involved in stuff, but have together that leads to unpredictable things. But it's impossible to predict emergent phenomenon like no one knew in the greater the internet that cat videos are going to be such a giant thing. And so we can't anticipate with the emergent phenomenon in the crypto enhanced with real world assets world will be. But the one thing we can feel fairly confident about when we look at the fact that at the start of 2025, there was much less than $10 billion worth of real world assets on chain. Not counting stable coins again. And how that has gone up to 20 to 30 billion by the end of the year. Things are moving quickly and that trajectory really strongly suggests looks a lot like the only early days of defying that we are super early in this space. And that's something that Robert Leschner also spoke to on the bankless podcast. When you asked why hasn't it worked yet, well, the world hasn't really been ready for it yet. What a very early point of like infrastructure existing on chain for assets were at a very early point of investors wanting an upgraded file format for their assets were at a very early point of support for these assets, whether it comes from custodians or intermediaries. And I think it hasn't happened yet because really this is the beginning of what I see is the next chapter for digital assets. Why does anyone care about this topic? Like why does real world assets matter? So the big idea in tokenizing real world assets comes down to an age old way that the internet has always won again and again, the thing that has always made a lot of money online. And that is automating things that have largely been done manually or close enough to manually in a large scale so it makes them work better and be cheaper and it has made unicorns. So what you'll hear in the following section of this is folks talking about different ways in which real world asset tokenization does that for a number of existing industries which have a lot of money under management. So first of all, let's kick off with Lucas Vuggel saying of centrifuge spoke about some of the ways in which that manual element of finance as we know it can be automated away and made less expensive when he appeared on the defiant podcast with Cammy Russo in October of 2023. A lot of this finance world, like short happens online to some extent, but it hasn't properly been digitized. So like when you think of invoice financing, like factoring, like oftentimes you have like between half a percent or two percent in annual fees, but like 10 different service providers charge that are all kind of disconnected. So we have someone that values individual invoice, someone that does risk management on like maybe the borrowers. You have a company that just does auditing and reporting to the investors. You have the lawyers that make sure that all the paperwork is in order. Right? And they all basically they send around spreadsheets. That's like, I'm as is wrong by spreadsheets today in most cases. To borrow money if you're in one of these asset classes, it's much more expensive because as an investor, it's so much harder to trade and sell and kind of price these assets. And that's what's called the liquidity premium. And now why am I talking about this? Because well, like one thing that's magical about DeFi is that by being 24/7 fully automated and smart contract governed, actually a lot of these transactions are so cheap that you will start to see liquidity for assets that are very small. Like on Uniswap, a token that has a $100,000 market cap, like you can still have active trading. It can like you can have $20,000 in Uniswap liquidity and it works, right? In the track fight, you need to have like a $10 billion asset class and like people trading at all the time for like, they're really to be a liquid market. AMM has completely changed this. DeFi actually has this opportunity to kind of like make more of these assets tradable, like easily price from a liquid and that's generally good for everyone involved, right? By the way, just you know, and I do this sometimes and I'll always call it out, that quote from Fogel saying was actually a few different quotes all spliced together that he gave throughout the episode. But just so you know, we'll say that here on the podcast, I'm not going to always point it out, but I do clip things together or cut out bits in the middle sometimes just if it seems like it's more efficient and when people talk, they wonder off in all these different areas. So it's all getting to his core point, but just so you have transparency into that kind of thing. So another way in which real world assets is beneficial for for users for markets for market participants is like particularly let's like use the example of tokenized equity. So tokenized equity has been something that has been talked about for years, putting stocks like Tesla and Apple and Coca-Cola or whatever on chain and letting people own them as on chain assets. Gabriel Aata of Denari, one of the leading firms in this space, talked about sort of the simple advantage you get when you get stocks and equities like actually tokenized for real and you put them on chain. I think over archingly, the goal for us has always been how do we bring capital markets on chain in a sustainable and legal and compliant way. It is the biggest asset class stocks, right? And simple things you can imagine like swapping an Apple share for a Google share directly. You cannot do that off chain today. tokenized stock by the way is worth noting that it's had a hard time coming together. It's been sort of a weird topic. It's something that's been talked about since the very beginning. A lot of companies have said they have done it in different ways. There's been everything. from synthetic stocks, which we saw on platforms like synthetics, which is an early de-flight platform. There was mirror, there was a part of the Terra ecosystem, Terra, the blockchain with the stablecoin that completely blew up. So those were synthetics. There's also things that people do where they'll just buy a bunch of stocks and they'll sell tokens that are meant to trade as if they're the stock, but all they are is a derivative of the stock. And the theory is that they should follow the price of the stock, but they don't really because it's just not the same thing. It's not actually the stock. And so obviously it's going to have a lower price. And then there's just weirdness of how it's structured and is it redeemable and all that kind of stuff, which is also going to lower the price. So it's been a problem. Nari, what they said on this podcast that he was on is that they've actually figured out a way that you can have a token and have it just actually be a stock with all the rights that you would expect. But he also notes that being able to do that like at real scale for lots of stocks, that's just going to be a long time for it gets there. It's like, this is very much a gradual process going at a company by company way. Then there's companies like Ando, which take a different approach where they grant that they don't really give you a stock. They have a bunch of the stocks, but what you get is still more of a derivative, but they've been careful to engineer it in a way where you get the main thing that most people want with having a stock. People don't really care about participating in governance. What they care about is that the stock will have the value that they expect it to have. So if it goes up in value, if they have this token, the tokens should go up in value or fall in value. So they're actually matches that price and they can participate in those games. It's like the most important things. Ian DeVode, Ando's chief strategy officer broke down what they sell. So are tokens are issued as wrappers, meaning that what you hold on chain is the economic exposure to the underlying. Our model, there's different models out there, right? Some people tokenize stocks and when you look at the fine prints, they're not backed once or once. So what you're really then buying is a derivative product. We don't really go for that model. We believe it is much better to always back something once or once and even on top of that have a collateral buffer so that a user can always rest assured that the token they're holding is fully backed and then so. So yeah, the other funny thing that tokenize equity does is it just allows things to trade with a lot more capital efficiency. So this is something that Aata explains. If you have equity now, if you're a holder of stocks, it takes time to be able to trade them. On the user side, you know, simple things that we take for granted on the crypto side will now be enabled for stocks. Most people, when they're wanting to buy a stock, they're usually not putting new money into their broker jargons, oftentimes they're actually coming out of another position and going into another position. And that can be instantaneous now. In a way that hasn't been before. I mean, honestly, like people should try it. Like if they want to take $10,000 worth of Apple shares and sell it at Schwab, just wait to see how long that money actually lands in your account for it too. 'Cause it has to go through these hops, right? It has to go back. It has got a couple days. I mean, T+2 or T+1 is like a death sentence in today's news cycle. The simplest justification though, for why real world assets are important and why they're valuable, particularly for folks in crypto, is it just very simply allows there to be more kinds of reliable trustworthy collateral on chain. And if there's more collateral on chain, that means more lending can be done on chain. So DeFi, I mean, the core of DeFi has always been making loans against collateral. We have better collateral. If there's more collateral, more loans can be made. And of course, those loans can also be tokenized and it just sort of opens up the world much more broadly. And that opening up of collateral is something Ian DeBode has talked about in September 2025 with Cammy Russo on the DeFi and podcast. - Fundamentally, at ONDO, we believe that tokenization makes sense to do two things. Number one is you wanna enable access to a global audience by putting the asset on crypto rails. And number two is you wanna enable these assets as some form of collateral on chain. But those are the big two reasons why you would put an asset on chain. In the first place, when you look at both of those, having the right pricing transparency is actually very important for both. And if the value of the thing is not entirely clear, no serious DeFi protocol is gonna allow you to use it as actual collateral. - So as long as we're talking about lending and collateral, let's talk about private credit. So we're in the middle of a giant mill down in the crypto and policy world right now over bank lending or stablecoins and stablecoins getting yield going to wreck the bank credit market. But it turns out if you are following this conversation, as you also zoom out and sort of look at the world of bank lending that a lot of lending is getting done anymore by folks who just want to see yield of their money and are turning that yield over to companies that can find good borrowers, whether those are people or small businesses or whatever. And that's private credit. And private credit has got something like two trillion dollars in assets under management. So obviously getting any piece of that market on chain could be huge. And so while everyone's talking about the banks and whether or not they're all doing stablecoins, there is this whole other market out there, which would be, if not easy, at least straight forward to get on chain and it would be super transformative. Remember what Larry thinks said, he thinks all the traditional assets out there should eventually be tokenized and it should all go on one blockchain. So just think of how epic that would be for coin that represented any given blockchain that happened to win that a hands up. Any of them, they get a meaningful piece of that two trillion dollar market. And again, that's just one category of potential real world assets that could go on chain. That starts to look very, very big. In fact, like I didn't ever think I would say this, but as I was looking at this topic and I was like looking at those numbers, it actually started to make me think that there is a possibility where you could imagine a chain that could actually flip Bitcoin in market cap. Nobody clipped this quote and show it to the Bitcoin Maxis. And I honestly, he had showed it to me like four months ago. I would have thought I was crazy, but now that I start to think about this, it's just, yeah, it looks pretty big. And so we're talking about borrowing, what I'm a private credit, DeFi started with borrowing. That was the beginning of decentralized finance and a Mary Gunerate, she's a co-founder of this real world assets company called LoopScale. She gave a pretty good history of crypto lending on the Lightspeed podcast this last August. - I think, yeah, there were the three milestones in innovation depri-lending in the spaces, like relatively new stuff. That seems like a fine piece of innovation, but you started with a pool-based model, which I think was the best for the time given all the constraints between Ethereum. The fact that you, the main goal was to bootstrapped liquidity. No one knew if there was borrowed a manned, then you had more folk come in with, okay, we have proven borrowed a manned, we need to be able to allocate capital more efficiently and give people more control over risk. And so I think that was the next innovation. And then I think, yeah, the next iteration is like, okay, we've isolated markets now, which are like hyper-customizable, and we have pools which are like hyper-liquid. I'm like, what is the third evolution that lets you preserve both liquidity and scalability? And I think that's where you get something that looks kind of, like really this hybrid order book model where you can deposit this pool-like structure, but the underlying liquidity layer is all order book-based. - But things she said that I really liked in which like really opened up this whole conversation for me to a certain degree. She said this in the Talking Token's podcast with Jacqueline Melanick earlier this month, and she describes sort of the power of transparency that comes with putting real world assets on chain. - But the true step function improvement, especially from a risk perspective that crypto brings to this space, should be that you have the visibility of all cash flows down the line, and you're not just looking at a spreadsheet to explain what you're, and I think that's what caused great financial crisis, and that's why ledgering in that visibility and that downstream is so important. The way it's headed and to kind of be convergence with private credit and publicly issued is you'll have these different lenders that are making loans to the end borrowers, and they will be reaching end users in the same way that you use like a credit card today. And those loans will be packaged up into a basket of assets, and all of that will be visible, and you will know who the end bar or that is generating every cent of yield on a multi-billion dollar fund all on chain. - And what I love about this clip is it captures what's honestly a real potential here, is just like dramatically increasing the transparency into a bunch of lending products. I was in the midst of the financial crisis in 2008. I was back in my do-getter days. I was working on bank reform in the state of Pennsylvania. We were complaining about all the predatory lending that was happening, all the lending to people who really shouldn't be getting home loans that was going down, that all of that led to the subprime financial crisis of 2008. And after that all started to unwind, one of the things we began to learn about were all these structured lending products where like thousands of home would be into a pool together, people would buy cash flow rights off of those loans. Where like the people with the junior tranches would get a higher yield, but they would be the first to lose money. If some of the loans turned bad and the people with the senior tranches got lower yields, but they got the lion's share of the money. And all of this, like lots of these, it was a bit of financial shakainery to make it. look like parts of these packages of loans were really like high quality, actually with all garbage. But it was a way of like splitting them all up and off-use skating and one of the points that Gunarate makes here is, is a part of the story that we saw if you were following that closely back in 2008, 2009 and 2010, is that a lot of these packages, it got hard to even see what was in there, it got hard to have transparency about what the loans were, like what kind of quality work was done to like verify those loans. And it just all got to be very confusing even for the people who were deeply in this. And so this idea that putting everything on chain and having that stuff all follow the actual asset around because it all could be connected digitally on chain, this is really powerful idea. I mean, who knows how well it will actually work out. But one can see that this could bring a lot of transparency to this market. The thing I remember from that era, I used to be a big fan of the Planet Money Podcast on NPR. You know, Rose out of the financial crisis, they would do these shows where they explained different pieces of it. And one of the funny things they did is they bought a toxic asset, the group pooled their funds and they spent $1,000 to buy $1,000 worth of one of these packages of mortgage loans that I talked about and they did a bunch of stories about it. I would have included some quotes from that here, but it's now all behind the Planet Money Paywall. And so I can't get to those old stories. But they're out there. I'll link to the show notes and see a teaser about it. This bit of the story made me remember Toxie and their little Toxic asset they bought and I don't know, I think it was 2010, but that's it. The new DeFi, I guess you call it DeFi. The new tokenized real world asset company that kind of blows my mind is figure. Figure is a company that is opening up more home equity lines of credit for people around the country. You've got a home, you've paid off a fair amount of it or maybe it's got up in value with a certain amount. And so you've got some wealth in that home. So you are home rich, but maybe you're cash poor and a lot of people borrow money against their homes and they're able to like unlock that capital a lot of times to like improve their home. So to improve the underlying asset, maybe for other things as well too, maybe for emergencies. This is a very lucrative part of the banking world, but as the thing that drew my attention to figure was that this they have this kind of stable coin figure, he lock, which is which is backed by a bunch of these these home equity line of credit loans. It's the 11th largest token on coin get going yet you hardly ever see it talked about like it's just behind dogecoin. Dogecoin is worth $20 billion figure, he lock is worth $15 billion and it's just ahead of Cardano, I would just 13 billion dollars. But this is a real world asset token that is pushing the top 10 and when it expects it'll be there and yeah, looking up at the rest of these other than the two stable coins that are in there, we don't have any real world assets in the top 10. I mean, stable coins are real world assets for sure, but they're kind of a category of themselves. And so this idea of providing home equity lines of credit through DeFi rails, it was pretty compelling and Mike Kagney, the founder of Figure, explained on the bits and bits podcast how blockchain technology enabled them to streamline what was used to be a much to hands on process. So it actually was worthwhile to make these loans to people whose houses weren't of the value that typically used to have access to this product. So it's like it's it's just it costs you much for banks to for banks to do the due diligence to make it justifiable to do these home equity lines of credits for a lot of the smaller homes like that two or three hundred thousand dollar homes. But because they were able to use blockchain technology, Kagney explained they were able to like make it a lot more simplified and streamlined and that got the cost down so they were able to open up a whole new category of home equity lines of credit that other people weren't serving and he talks about that on the podcast. The way the industry is evolved to do a fanime or a Freddie Mac eligible mortgage costs about thirteen thousand dollars. And so if it's a two hundred thousand dollar mortgage, thirteen thousand dollars is six and a half points. There isn't a market you can sell the loan in for six and a half points because of the efficiencies we captured through blockchain and the capital markets that we built out through blockchain costs us less than a thousand dollars to reduce that mortgage. So we have over two hundred fifty partners now that use our technology to originate loans including ten of the top twenty mortgage companies. So this company went public in September. So we had another crypto company up on the boards again. Nobody really talks about it a ton, but I think it's a really big story. I think it's really interesting and Kagney talks about how DeFi has been one of the crucial difference makers for his company. This is a really bullish indicator for these sorts of assets coming on chain and for the possibility that doesn't like a theoretical thing. This company is really doing it and is making nice returns off of doing it. Like they're making like actual money enough money. The public markets were like, sure, let's help you go even bigger. And then going back to Gunerate of Luke scale, she talks about how lending to DeFi has been a little bit stuck on one model over time, which is the pool model that was innovated by Aave and compound. So go back to my Aave episode for that. Find it on the Diamond Rhino page. But Luke scale is also tokenizing loans between two people, which allows for things like fixed rate lending, which is something that we haven't really seen in DeFi so far. See, most lending in DeFi is you take out a loan at whatever rate it's at, but the markets determine what the rates are. It could go wildly up the next few weeks and you've got no control over that. And you really don't have a ton, there's not a ton of options for fixed rate lending is out there. But if you're doing deals between two people, then it is a lot more feasible for those loans to have one rate over time. She talked about this on the 11 AM podcast back in September. One of the biggest differences between us and pool lending protocols is the base primitive is a loan between two people and you can parameterize that loan in the same way, kind of a trad five printed product works. And what that actually unlocks on like a user basis is one capital efficiency. There's a ton of like idle liquidity requirements with the pool based model to, and this is kind of what I think is the most important aspect is your bottlenecking growth when you have these kind of huge startup requirements for a credit market and you can't launch an asset with a credit market off the bat. So yeah, if I'm understanding it right, what she's doing is a borrower, a lender comes along who has a certain amount of money to lend, they find a borrower, they give a loan to that person and then that loan gets tokenized. And once it's tokenized, the lender can then sell that loan off to other people who are ready to buy it on chain. So they get that revenue flow from the loan, the lender now has their capital back, maybe they may be a little profit off of the sale, and then they can make more loans. So you have the person who is good at originating, sort of focusing on originating and other people who like that idea of getting that capital flow from loans can also get it on that as well and they can trade and it can, but those tokens can go into other protocols. So there's just a lot of possibilities that that unlocks. And to the point that Gunerate makes about why this kind of lending lowers the startup effort required is when you're doing the pool model, you've got to get a bunch of people to put a bunch of money into the pool to have enough money there that there's liquidity for people to borrow from. But with the approach of the one to one tokenized lending, you can get started with as little as one lender who has some money that they're ready to lend. And the thing that Gunerate points out is this kind of model of providing private credit in different sorts of contexts is something that has worked pretty well on the internet things like the buy now pay later, sort of lending. That's the kind of thing where people are finding market participants in places where they might not have considered that credit was a possibility and putting that option in front of them. And so that's sort of the business that loop scales in is sort of like helping people see that the moment they need to see that. And she explained that in the Lightspeed podcast last year. Like a lot of people, especially traders don't necessarily have like an immediate contextual use for borrowed capital. It's like, why would I even borrow? What do I need to borrow money for? And so you need to kind of do that step for borrowers of like show them that there is money available when at a point when they think they might actually need money. And a lot of that, the ability to build that out hinges on kind of composability and permissionlessness of that composability. And so for us, I think the kind of next phase is making it super easy for anyone to tap in. So Gunnarata's company loop scale is doing well so far. I mean, it's small for a defi protocol, but it's coming along quickly. They've got about $100 million in assets under management right now according to numbers on defiLama with $60 million borrowed from those assets as of this recording. So you know, real money is moving. So a big picture we're looking at here is real world assets is connecting blockchains to stuff like cars and homes and businesses and invoices and cash flows like this is this is just the stuff that makes the world turn that like literally moves goods around the planet. And like, so let's take a look. Let's go to our rwa.xyz. It's a website that's devoted to real world assets and just like take a look at the numbers there. They're saying that real world assets right now are around $23 billion of the stuff that is tokenized on chain so far. We got about 9.5 billion in US treasuries. We got about $4 billion in gold. So yeah, that's a real world asset that's been working for a long time. Both Paxos and Tether have tokenized gold products and those are, you know, people bye. those. In fact, on that A16Z episode, I talked about it before Eddie Lazerin talks about how he had a feeling goals and a do okay and he decided it made sense to just buy some gold on chain. So he has some of Pax Gold and it's done. You know, everyone knows the gold is done awesome. So private credit on chains, we just talked about that's about 2.4 billion dollars and institutional alt funds are at like 2.2 billion dollars. The leading block chains of for real world assets are right now out there according to rw a.x.yz, the canton network is by far the leader. This blockchain called Providence is number 2. And then the third is Ethereum. Ethereum is the biggest place for real world assets. Again, not including stable coins though obviously Ethereum is also the biggest one for stable coins as well. The front sage exit editorial view is that open public block chains are the best for the world and we hope though win. So we would like to see obviously Ethereum dominate this space so far it's being crushed by canton notably but there is still a ton of use out there for Ethereum and the veck ramen of a theorize sort of the business development company for the whole Ethereum project argued at the real world assets on it last year that he believes it's this is a theory is game to win. I think we'll be winner take most I think there's use cases for a lot of different block chains but ultimately for real world assets for institutional settlement and social trading does not be the fastest but it has to be the most secure ecosystem where Wall Street is comfortable with the next trillions of assets. We think the L1 as the base layer Ethereum and then L2 model is the right one. It's pretty expensive to bootstrap a new L1 from scratch. It's a lot easier and a lot cheaper and honestly it's a lot higher margin to build an L2. Obviously as a fan of public chains you know we hope he's right Ethereum or Salon or something like that but there's a very real chance that the point I want to make here though is Ethereum is the number two blockchain like by far right now. Like I said figure is number 11. Obviously we have two stable coins are in the top 10 of biggest cryptocurrencies in the world right now but there's a very real chance with if things keep going like they are that there will be some shakeups in the top 10 next year and that we will see some tokens or coins that are related to real world assets like move into that space and move some of these more purely crypto plays down in value relative to some of these projects. I mean who knows anything can happen but it just when you look at these numbers that starts to seem like more and more feasible. A lot of times in crypto we talk about things that could happen how things could work like a business that could be successful but this really is happening now. Like I said we've gone from like $6 billion to start of 2025 to like $24.25 maybe $30 billion now that is like very real growth those are industries that can pay a lot of people's market. So with all the talk right now the focus in the crypto world is on this market structure legislation in the Senate which if you've been following me on front stage exit I don't think it's going to pass I think this legislation is already doomed but it kind of doesn't matter when you start thinking about I mean it matters it matters a lot but it also doesn't matter for the health of the overall crypto industry when she start thinking about things like real world assets because this is the kind of things that existing regulators know how to wrap their heads around this is like a thing that they can understand and manage this isn't really complicated for them they know what to do with this kind of stuff like figuring out what to do with a governance token that earns some money from an automated market maker like sushi like that's a tricky and weird question that it's going to like have a bunch of lawyers like scratching their heads and deciding pros and cons about like what to do with for a while like is it a security is it a not I don't know but what to do about just like for example private credit moving to a new substrate yeah regulators can swing that like no problem this is why God invented regulatory sandboxes and with a friendly administration who is open to experimentation this area my bet is that real world assets are going to chug right along this year and of course this stuff is also different because it's so clearly a security and so that has to be handled under no existing legal restrictions if there's one thing that Paul Atkins and others in the SEC have been clear about is like taking a thing that everyone knows is the security and putting on a blockchain changes nothing it's still a security still subject to all kinds of lies such as bank secrecy laws but fortunately founders in this space are well aware of that Gabriel Ata of the Denari project spoke about that on bank lesson a completely sane way we call it defiant rails that's a way to bring all of the defiant features to our end users with our tokenized stocks but not violating security's laws that's that's important to us so it is an exciting time for boring things it is an exciting time for boring things going on chain so how big is all this going to get is everything gonna be tokenized Sergan Azeroth the leader of the Oracle network chain link obviously wants to see it all get bigger and bigger and he talks about that on the wolf of all streets podcast but what you want is you want the base asset that backs the rest of the financial system whether that's tokenized funds tokenized real estate whatever category you want that asset generated in your financial system because you want that asset to then be bought externally right so the first step in getting your financial system to gain the benefit of external consumption is that your financial system is the one where the asset is generated and our view is that the asset will become what we call a unified golden record where the asset is now a form of ownership there will be kind of a data container attached to the asset to the token itself and that data container will be dynamically updated near real time as someone who's been around the space for a long time I liked the note of caution that we got from Jenson Haji who has been around basically roughly as long as I have she was a part of the maker down world a true OG of the defy space she now works for the Oracle network Chronicle and she was on stage in the real world asset summit last year and she talked about sort of how she feels would you hear folks start to say that they want to tokenize everything and remind me of like the different phases throughout crypto that I've been a part of since 2017 where it was like everybody should have a Dow everybody should have a blockchain and it's like absolutely none of that like yeah we learned those last time maybe not everything should be tokenized but I think we're figuring out like what sticks what doesn't so there is certainly value in having that open mind check and in fact as exciting as all of this might be and as more importantly like as bullish as all of this might be for crypto assets and for defy in particular the biggest even the biggest proponents of this evolution want to see it happen in a gradual way one of the things that Aata of Tnari was really good about is understanding that the US capital markets for equity is like the biggest ocean of money in the world and is really powerful so he wants this transition to happen and he thinks is inevitable what's going to happen it needs to happen in an orderly way and for it to not move too quickly I appreciate the freedom that the degencer calling for just as much as the next guy right however I think most people including a lot of those degenz don't want the capital markets to completely destabilize the question really is how do we transition to capital markets on chain in a way that doesn't immediately destroy the old world when the promises fulfilled is when the regulations allow for a slow transition from the off chain capital markets to bring everything on chain but my Cagney came out from another direction he directly spoke to one of the issues that is so hot in the conversations around stable coins and yield right now and says based on where he's sitting he very much believes like DeFi is ultimately gobbling up everything and that specifically means that banks are going to lose a lot of deposits as folks start to figure out that they're better off putting that money on chain I think you're going to get a migration out of bank deposits on some genius act because of the stablecoin legislation I think that money gets reapplied into DeFi and I think what you're going to see is assets move from the basics my abilities move from the bank balance sheet onto a DeFi part which brings me to my final thoughts and my promised big prediction about the final boom and bust that's going to come for the crypto world so this is it real world assets are going to drive the true final boom the final real cycle for crypto I don't actually think that the all-time highs that we got in the last year were a true cycle I think they were just sort of a rediscovery of the existing value of the stuff that we always had they were a correction to the over correction of the San Bankman-Freeze FTX collapse era I think we just sort of like got back to the baseline of what these products are really worth as long as they are largely purely divorced from the real world the value of crypto right now largely a world of bits not atoms this is driven by Ethereum and Bitcoin primarily and everything else is kind of an also ran to that and it's all this sort of theoretical future in these use cases which which I believe are deeply important. but are not widely used yet in sort of this like payments rail system that hasn't quite fully evolved. But once we start getting real assets on chain, that is going to be a moment that is going to lead to enormous irrational expectation and is going to bring true speculative frenzy back to crypto. And in the mix of that speculative frenzy will be institutions in much bigger money than we've ever seen before. What I suspect is the early days of true adoption of real world assets is going to lead to something like the.com boom and bust that we saw in 1999 when it all came to an end. And the thing that people sort of forget, lots of these companies, lots of these early startups, they went public really fast to a degree that doesn't happen today. And so all these people started betting on this tech economy and a lot of these companies, all these new players coming in, all this retail money coming in so fast and sloshing around so quickly led to a lot of people between day trading and people betting way too much their money, people more good in houses and throwing it into the stock market. And it was a wild and zany era. It was so wild that it was like a big topic and the dunes very comic back in the days of the newspaper. The part of that I'll never forget is after the.com bust, Mike Dunesbury and his daughter opened up this company called myVulture.com. And what they did was they just bought the remains of different startups and sold them for parts later. It got very dark. I think the early days of true adoption of real world assets are going to work out to something like that in the crypto world. We have a way of getting very, very excited about change. And this will be very exciting because it won't be hard people to make the case that these are real businesses that are really believable. And this is real money that's coming out and chain with real tangible cash flows. And while I think that is 100% true and will lead definitely to better capital formation, real value for the world, globalized markets, much more liquidity, all good stuff, much more real pricing for stuff that has been harder to price over time. All of that will be fantastic. It just people are going to we know how this works in the early days people are going to get too excited. So what do I think is going to happen? Well, again, not not financial advice. I never do financial advice. And this is too vague to even be called financial advice. But I'm looking ahead to something that I'm calling the damage trade and I plan to write about this more on front stage exit soon. But the damage trade is just the idea of making bets in crypto now or soon that anticipate this enormous damage that's going to come from the over enthusiasm about real world assets, which seems inevitable to me. So what smart people will do my guess the people who make the most money off of it is they will get in early and they will also get out early. It's going to feel like they missed a lot of gains at the point that they got out. But they will miss the rapid unraveling and the over correction to follow when this space gets way more valuable than it actually should way too fast. The reason I call it the damage trade is because with real world assets, the crypto economy is connected to the actual world now. So things go up and go down super fast. It's not just your abstract coins and a portfolio that are suddenly losing value. But it's the collateral for loans that were made to pay for people's cars and houses or to cover their business operations. It's going to have much more grassroots consequences. This is something that I have been expecting for a long time. I've been seeing this in as an inevitable future for at least two years now like everything it's happened slower than I thought it would, but it's coming. Here's the important point. The big thing here is the economy doesn't even need to do well for me to be right about this. It doesn't even need to get better for this to be true just for crypto. All it takes is for more of the economy as we know it to shift on chain. That's all it takes. And that's already happened. It's already quadrupled in the last year. So watch for that. Watch for the damage trade. Bet on things that will blow everything up. That's the move here. Real world assets are going to lead to real world damage in the short term. In the long term, this is just the future of finance. It will all be normal and born eventually. This is very obviously a recipe for irrational interference in the near term. Let's be realistic about how people in crypto can get pretty unrealistic. You start to hear people saying this time is different. It's time to ask yourself if he's already made enough. Don't get yourself in positions where you can't afford for prices. So, big picture, real world assets, going to be an even hotter topic in 2016. I think that it will be 25. It's an exciting time for boring things. So, before we leave, just want to remind everyone to be great. If you subscribe and have a podcast or Spotify or overcast or whatever. Yeah, thanks a ton for being here. Just remember, it's a beautiful world now. But be critical friends. [Music]