RWAs as Loan Collateral

GMI Capital
3 min readOct 12, 2023

--

Even as the digital NFT market has faced challenges over the past few years, 2023 stands out as a hallmark year for NFT Finance adoption. Our team has been working closely with dedicated developers who are ushering in the next phase of the industry: the integration of Real World Assets (RWAs).

An RWA is the colloquial term for an NFT that symbolizes a tangible asset, in contrast to one that’s purely digital. Currently, the most prominent RWA minting service is operated by the 4K Platform, accessible at 4k.com. The process works as follows:

Upon receiving an asset, the 4K team initiates their “minting service.” This comprises a meticulous inspection and authentication of the asset, followed by secure storage in one of the company’s vaults. Subsequently, the RWA is minted. Once issued, the RWA can be incorporated into any of the existing composable finance tools within the NFT landscape, including lending.

Two Patek Philippe watches, vaulted with 4K

By leveraging the technology developed by Arcade.xyz (a popular NFT lending platform) and 4K, we successfully underwrote a loan using a collection of Patek Philippe watches as collateral. When the 45-day loan term concludes, we will either be receive our principal amount plus interest or we will become the owners of the watches.

Innovation Requires Experimentation

Remember the “Bitcoin Pizza?”

This event is widely acknowledged as the inaugural use of bitcoin in a commercial transaction. Back in May 2010, one stranger sent another stranger 10,000 BTC in exchange for two pizzas.

Laszlo Hanyecz pictured with the two pizzas he purchased for 10,000 BTC (current val: $267 Million)

In those early days, establishing a consensus on the price of bitcoin was a difficult challenge. The “bitcoin pizza” exchange gave the entire community a reference point on which they could anchor future trades.

Bitcoin and cryptocurrency as an industry couldn’t have developed the way it has without those two strangers daring to try something new.

Bitcoin and the broader cryptocurrency industry couldn’t have developed into what it is today without the audacity of those two individuals willing to experiment. We view these early RWA loans as “bitcoin pizza” moments for this tech. Markets don’t evolve unless innovators step forward with the courage to try novel things. We’re proud to act as those pioneers today and we look forward to experimenting with even newer forms of collateral.

If you would like to learn more about GMI Capital, follow us here or reach out to to the team at invest@gmi.xyz

--

--

GMI Capital
0 Followers

GMI Capital is a multi-strategy crypto asset fund that helps investors navigate the rapidly evolving landscape of crypto assets safely and successfully.