Trump elected and Bitcoin hits new highs

On November 6, 2024, the United States welcomes a new president. Donald Trump defeated his opponents and was successfully elected as the 47th president of the United States. During the campaign, Trump repeatedly expressed his support for Bitcoin and cryptocurrencies. He promised to establish a U.S. Bitcoin strategic reserve and proposed the creation of a dedicated cryptocurrency policy task force. Trump emphasized the protection of Americans' freedom to control their crypto assets, believing that this aligns with America's core values, and plans to support cryptocurrencies in policy form to keep the U.S. at the forefront of the global Bitcoin and blockchain technology fields.

With Trump's victory, the crypto market has ushered in a strong rise. The price of Bitcoin has continuously refreshed its historical highs, breaking through $93,000 on the evening of November 13, setting a new record. In the following days, Bitcoin continued its assault on the $100,000 barrier.

However, compared to the strong performance of Bitcoin, the performance of most other cryptocurrencies has been relatively lukewarm. Bitcoin has absorbed the vast majority of the funds flowing into the crypto asset space, while other coins have not significantly improved their liquidity. This phenomenon reflects that the financial correlation of other coins with Bitcoin is weakening.

Trump's ascension to power is expected to further attract more financial institutions to purchase Bitcoin through ETFs, pushing Bitcoin to new heights. However, these financial institutions seem to have little interest in projects that lack practical applications and only have economic tokens. Without a continuous inflow of off-market funds, the speculative interest that supports other cryptocurrencies on the market is also difficult to sustain. These coins may still need to wait for a long development season.

Current Status and Future Prospects of Web3 Development

Web3, as the widespread application of blockchain technology in the internet field, still faces challenges in its development. Currently, the biggest criticism of Web3 lies in the lack of a practical application ecosystem, with most projects having only economic tokens and no substantial applications.

Looking back at 2021, Web3 and AI were both hot topics in the tech circle, with high hopes for disruptive changes. At that time, blockchain Layer1 and DeFi projects were emerging one after another, and cryptocurrencies and NFTs became popular investment targets. However, this prosperity quickly faded in 2022. In contrast, the AI field welcomed a major breakthrough in November 2022, with the emergence of ChatGPT, a representative product of general AI, which was considered a disruptive technological change.

In 2023, AI continues to make significant progress in various fields, including outstanding performance in the Nobel Prize selection. In contrast, Web3 still seems to be searching for a breakthrough.

Although the underlying technology of Web3 - blockchain is indeed a disruptive technological revolution that reshapes trust models, its development faces unique challenges. First, blockchain inherently possesses tokenization potential, which easily involves highly regulated financial sectors. Second, as a backend infrastructure technology, blockchain lacks direct applications for ordinary users.

From a technological development perspective, the protocol layer has always been one of the most important directions in blockchain. However, as various technical solutions mature, the application layer has failed to keep pace with innovation. Without widespread application and user adoption, Web3 is unlikely to experience a true breakthrough moment.

According to the latest data, the total market value of the entire cryptocurrency market is approximately $3.4 trillion, with the protocol layer accounting for $2.9 trillion (Bitcoin accounts for $2 trillion), while the application layer has a market value of only about $200 billion. In contrast, the market value of AI chip giant Nvidia reaches $3.5 trillion. This distribution of funds reflects the lag in the development of Web3 application layer.

RWA: New Opportunities in Web3

RWA (Real World Assets) refers to the representation and trading of real-world assets in a tokenized manner within the blockchain or Web3 ecosystem. These assets can encompass tangible assets (such as real estate, commodities, and artworks) and intangible assets (such as financial assets, AI computing power, and carbon credits).

RWA is regarded as an important opportunity for Web3 mainly based on the following reasons:

1. Huge potential scale: RWA can meet the needs of billions of users, with a market value that can reach trillions of dollars, which is difficult for other applications in the Web3 space to achieve.

2. Attracting mainstream participation: RWA is an important entry point for governments, mainstream institutions, and traditional financial giants to explore the Web3 application layer.

3. Real Cases: Multiple financial giants have begun exploring tokenized funds, government bonds, and other projects. The Hong Kong SAR government has also issued government-backed green bonds on the blockchain.

4. Financial Innovation: RWA signifies a major shift in the financial industry, indicating that blockchain technology is being increasingly adopted to enhance the efficiency and accessibility of capital markets.

Major public chains are also actively laying out the RWA field. Ethereum has launched a new RWA token standard ERC-3643; Solana has introduced RWA through PayFi; AO has launched FusionFi to break the boundaries between the real and crypto world financial services; Avalanche has launched the Vista fund targeting RWA, etc.

The main challenge of RWA lies in the lack of a unified classification standard globally, as well as the regulatory differences regarding digital assets across jurisdictions. For standardized financial products, how to enter the "regulated DeFi" is the biggest obstacle facing the scaling of RWA.

RWA involves asset tokenization and the sale of financial products, which must comply with real-world financial regulations. This requires regulated financial institutions to custody the assets, KYC/AML through digital identity, and governance by professional organizations and individuals.

Although this model may be questioned by supporters of decentralization, the appropriate introduction of "centralized" elements can achieve broader financial inclusion and improve efficiency. The key lies in enhancing regulatory transparency, reducing the risk of human intervention through smart contracts, and ensuring the transparency, security, and verifiability of RWA transactions.

Conclusion

2024 is a key year for RWA to move from concept to practice. More and more government agencies, mainstream institutions, and traditional financial giants are beginning to formulate relevant regulatory frameworks and explore RWA projects. Major public chains are also actively introducing RWA and institutional finance.

Although RWA may not bring retail investors the high returns like native on-chain assets, it has attracted traditional financial giants into the DeFi space and provided credit enhancement and compliance support for corporate financing, allowing small and medium-sized enterprises to benefit.

Although RWA requires stricter compliance, which may seem to conflict with the concept of "decentralization", it marks the true application era of Web3 and is an important step towards the maturity and popularization of blockchain technology.