PontoonDAO /by AMPnet: Real-World Asset Index Funds on NEAR Blockchain
Real-World Assets — RWAs
Blockchain technology has historically been used to trade and use so-called “Digital Assets”. This includes Utility Tokens, NFTs, LP Tokens, Staking Tokens and all other DeFi goodies we’ve come to expect in this day and age.
But there is another class of assets that blockchain is set to transform in the same way it transformed digital assets — there are so-called Real-World Assets or RWAs, for short.
Real-World Assets include all other types of asset classes outside of purely digital ones. This can include bonds, mortgage backed securities, a various slew of Wall Street derivatives and any other asset class — legally recognised by an off-chain institution.
But when we use the term RWAs — we mostly think of three categories:
- Real-Estate
- Renewable Energy
- Stocks/Company Equity
Each and every one of those classes is special in its own right and has a definite purpose to play in the growth of the blockchain ecosystem.
Benefits of RWAs
Exposure to productive, dividend-generating equity
Most value in digital assets comes from speculative supply/demand mechanics. A lot of RWAs, on the other hand — earn income and pay dividends to their holders. This makes them a great asset class for diversification of DeFi portfolios.
Hedge against crypto bears
Most crypto markets go up and down in tandem with BTC. This makes crypto bear and bull markets a fact of life for all DeFi investors — no matter what crypto they’re invested in. RWAs, however, are generally decoupled from BTC and follow their own bull/bear cycles. This makes them a great hedge against crypto bear markets and a source of security through diversification in crypto bull markets.
Problems with RWAs
Lack of liquidity
Most platforms which deal with secondary markets for real-world assets have very low trading volumes and limited liquidity. For some assets such as real-estate or renewables — the fact that they have predictable returns means that the incentive is for investors to buy and hold these assets — not actively trade them.
For other types of assets, such as smaller companies (“penny stocks”) — there is not enough retail interest to trade them.
This makes RWAs more-or-less illiquid — which scares a lot of investors away out of fear of getting “stuck” with the investment.
Information overload
Investors who want to invest into RWAs need to read and understand complex financial information, often hidden in layers of obscure accounting jargon. For people not used to investing in such asset classes — this can be a daunting challenge and might turn them away from investing into these asset classes all together.
Determining the quality, returns and viability of RWAs is a full-time job and, for now, up to individual investors. This principle, beyond not being scalable, is another “barrier” to entry for small and medium size retail investors.
The PontoonDAO Solution
PontoonDAO aims to tackle the already-mentioned problems with RWAs — Lack of Liquidity and Information Overload.
Creating (Swapping) Liquidity
PontoonDAO creates liquidity for RWAs by having tradable index tokens (e.g. Real-Estate Index, Renewable Energy Index, NASDAQ Index, etc…).
Every index is democratically governed and managed by the elected body of either a single index manager or a dedicated index council. They are in charge of selecting the projects and approving them as swap collateral for PontoonDAO (more on this later).
Each index is traded on an exchange and aggregates the liquidity of all of its underlying assets. For example — the Commercial Real-Estate Index can hold hundreds or thousands of independent real-estate RWAs.
All investors use the Index to enter or exit their real-estate positions. This creates a healthy dose of liquidity for all underlying assets and greatly reduces the chances of investors being stuck with illiquid investments.
PontoonDAO achieves this through the usage of the Index Swap Engine. This enables any holder of an approved RWA token to lock their RWA tokens and mint Index tokens in return. If they’d like to get exposed back into the RWA — they simply burn their Index tokens and get the RWA tokens in return.
The Swap Engine uses a predefined valuation of RWA tokens to define the swap rate — which is the ratio at which the RWA tokens are swapped for Index tokens.
Delegated/Passive Investing
If an investor would just like to get a passive allocation to the Index, they have several options:
- Buy Index tokens directly on the market
- Mint Index tokens by delegating stablecoins to the Index Manager or Index Council
Buying Tokens
As the goal of Index tokens is to provide liquidity to the underlying RWAs, the index tokens will be listen on all relevant DEXs. Thus, the investors can just buy the Index tokens on the open market and participate in the dividend gains offered by the PontoonDAO Index token.
Minting Tokens
If investors want to get exposure into the index on the valuations provided by the Index manager and not the market price of the token — they can do so by delegating their funds and having them invested into new Index projects. Once the investments are completed — the investors delegating tokens will be minted new PontoonDAO tokens.
Initial Projects
PontoonDAO is launching with the following indexes:
CEE Commercial Real-Estate Index
The CEE Commercial Real-Estate Index will be following a range of investments into Commercial Real-Estate in Central and Eastern Europe. We are proud to announce the first project for the CEE Commercial Real-Estate Index — The Green Gold Centre Parking in Zagreb, Croatia — valued at $13M and raising the same amount in multiple rounds.
More details on the Green Gold project, the funding and the role of PontoonDAO will be announced soon.
REIT Index
The REIT Index will follow a select group of tokenized REITs or Real-Estate Investment Trusts — powered by the AMPnet TraderX, a Stock tokenisation platform being developed. REITs are tradable stocks on regulated markets which track wide portfolios of real-estate investments. More info on the mechanism behind TraderX Stock Tokenizer will be provided in a separate announcement.
Providing Liquidity
PontoonDAO and AMPnet are working with partners to provide incentives for maintaining liquidity of PontoonDAO Index tokens on the NEAR blockchain. The announcements for this will come in the following weeks.
Launch
PontoonDAO, associated liquidity mining, TraderX and other initiatives will launch during Q1/2022.
