Welcome to Slow Burn! Each week, our newsletter will dive into the topics we believe are most important to the crypto ecosystem. We are thrilled and grateful to have you join us.

Many of you already know that Slow Ventures wants to put real world assets on chain. For those who don’t: welcome to the conversation we love to keep having.

DeFi has revolutionized our ability to conduct financial transactions in a frictionless, borderless, and inexpensive way. As infrastructure for a digital financial system, its potential is enormous. However, it has been incubated and employed in a relative silo, fundamentally separate from real-world liquidity and traditional financial institutions. As recent events have demonstrated, its self-referential nature is more than limiting—at a large scale, it can also be dangerous.

While not a solution in full, instantiating long-tail, real world assets (RWAs) on chain is an attractive avenue for exploration. RWAs can be defined as any non-crypto-native asset (e.g., IP, real estate, T-bills). They represent real cash flows and collateral that can diversify on-chain yield and thereby bolster the ecosystem’s safety and utility. Further, long-tail RWAs and their buyers / sellers are not well-served by traditional private markets. They suffer opaque transactions, a dearth of secondary markets (rendering the re-sale process onerous), and an illiquidity discount. Crypto rails introduce a meaningful solution to these pain points that transcends the temporary discomfort of onboarding.

Crypto enables facile capital formation and organization—allowing RWAs to be efficiently purchased and governed by multiple parties—and offers an ideal forum for trade. Because crypto is inherently composable, users across many (though not necessarily all) jurisdictions and protocols can access the same assets, resulting in robust primary and secondary marketplaces. In permitting users infinite optionality to exit their positions, crypto provides an environment that can re-introduce the liquidity premium afforded to public equities.

RWAs can also benefit from crypto’s transparency; it supplies not only insight into the transaction history of a specific asset, but also aggregate data that can facilitate a better understanding of entire asset classes. Moreover, it incentivizes good actor behavior amongst market participants and enhances risk monitoring.

Ultimately, the symbiotic relationship between DeFi and RWAs is easy to delineate in theory, but difficult to generate in practice from both a technical and legal perspective. We believe the next generation of crypto native builders will play an integral role in this convergence. Existing tools are an important foundation—available to anyone with a wallet and a wi-fi connection—that they can employ and iterate on to access assets and financial products that would otherwise be unobtainable to them. In short, they are both technically savvy and deeply incentivized to put RWAs on chain.

As early innovators spawn the adoption curve, we will continue working to support this emerging ecosystem. With this in mind, we submit the sDAO —a legally compliant, open source structure for putting RWAs on chain. Our hope is that it will represent a seminal framework for builders in the space and help to advance on-chain RWAs into the mainstream.

Thanks to Charlie, Adam, Greg, Ryan, Mike, Jack, Jordan and Teej for your feedback.