The RWA track is hot, is NEST the prototype of RWAFi+DeFi?

Written by ChandlerZ, Foresight News

Since the beginning of this year, the real world asset (RWA) space has maintained a high level of activity, and the total on-chain market capitalization has exceeded $23.9 billion (excluding stablecoins). At RWA. In the INVEST section of the XYZ data platform, in addition to the well-known investment portfolios such as BUIDL AND PAXOS GOLD, Nest, as one of the representative RWA investment strategies in the Plume ecosystem, has gradually attracted market attention.

By building a diversified RWA Vault, Nest provides users with a way to deposit stablecoins into the Vault and obtain corresponding yield tokens. These Vault underlying assets cover multiple asset classes such as Treasuries, private credit, energy, and more. Vault's minted nTOKENs can be used in combination with stablecoins and other assets on-chain, and together with the PLUME token incentive mechanism, an innovative model that attempts to bridge traditional RWA and DeFi has formed.

What is NEST?

Nest is an RWA protocol product launched by Plume, which belongs to a type of "on-chain yield strategy" that packages real-world assets into an on-chain vault and sells tokens to the public. In terms of overall architecture, Nest is more like a modular fund system built around real assets, Nest itself does not hold user funds, and all funds are directly locked in the on-chain smart contract to ensure the safety and transparency of funds.

Each vault corresponds to a set of real assets issued by financial institutions, including U.S. Treasuries, private credit, ETFs, structured debt, and more. These assets are provided by regulated entities and held through custodians, the asset issuance and management process is subject to compliance audits, and the on-chain data is publicly available. Compared with some traditional RWA projects that still rely on manual operations or middle and back-office liquidation, Nest implements automatic execution on the whole chain, and asset flow rules and income distribution are written into smart contracts to minimize human intervention.

In terms of compliance processing, Nest leverages Plume's underlying AML and threat screening mechanisms to eliminate the traditional KYC process and achieve compliance access. Users only need to hold a wallet address to participate, which has a lower threshold and a wider range of applications.

The use of funds is straightforward and transparent. Users deposit the stablecoin pUSD into the Vault, and the system instantly mints nTOKENS (such as nALPHA, nETF, etc.) representing their positions, which will automatically appreciate as the assets in the Vault generate income, and can be circulated and used in Plume's DEX or lending protocol, building a closed-loop ecology of on-chain asset flow and appreciation.

In short, Nest presents a fixed income strategy that was originally only participated by institutions in an on-chain manner, and ordinary users can obtain on-chain income rights of corresponding assets through stablecoins. The process does not require account opening or manual approval, the funds do not go through any platform account, and the whole process is executed by smart contracts, which is compliant, secure and composable, opening a more transparent and accessible entrance for RWA investment.

Nest's Vault Yield Mechanism

Vault, a core component of the Nest protocol, is essentially an on-chain pool of smart contracts for configuring real-world assets and automatically distributing yields. After users deposit pUSD, Vault mints nTOKENs (such as nALPHA, nTBILL, nETF, etc.) that represent their positions, and their value continues to rise with the cash flow generated by the underlying assets.

Each vault corresponds to a clear set of asset allocation strategies, with different risk and return expectations:

• Nest Alpha Vault (nALPHA): Target APY of 11.50%, mainly composed of private credit, commodity funds, and structured credit, suitable for investors looking for high yield.

• Nest Treasuries Vault (nTBILL): Target APY of 5.50%, assets are dominated by short-term U.S. Treasuries, emphasizing soundness and liquidity.

• Nest Basis Vault (nBASIS): Target APY of 8.00%, using a crypto-Treasury hedging structure, designed as a price-neutral strategy.

• Nest ETF Vault (nETF): Target APY of 8.80%, allocation to institutional ETFs such as BUCK, Blackstone SRLN, etc., focusing on stable income dividends.

• Nest PayFi Vault (nPAYFI): Target APY of 14.00%, the source of assets is accounts receivable, invoice installment and other fintech claims, with high risk and return.

Earnings calculations are performed in real-time on-chain. When an asset generates interest or cash inflows, Vault automatically credits the proceeds into the total assets, pushing up the redemption value of each nTOKEN, allowing users to enjoy the rewards without having to claim them manually. nTOKEN is a standard ERC-20 token, which can be borrowed, traded, and redeemed within the Plume ecosystem, and the redemption needs to meet the corresponding liquidity cycle.

The annualized rate of return displayed for each vault is an Estimated APY, which is based on the past performance of the portfolio and market data. The actual return will be affected by market fluctuations, asset allocation dynamics and other factors, and the Nest page also displays the current APY of the past 7 days for users' reference.

RWA Vault's liquidity and risk considerations

Unlike traditional DeFi products for instant redemption, there is a time delay in the withdrawal of Nest Vault funds. Some vaults support same-day redemptions, but most require 7 to 10 days to wait, depending on the liquidity of the underlying asset. This feature is not friendly to users with frequent rebalancing or short-term arbitrage.

Due to limited liquidity, investors need to bear a certain amount of capital lock-in risk. Nest compensates for this risk by issuing PLUME token incentives. The participation incentive mechanism also requires simultaneous lock-up of Royco tokens, which is highly rewarding, but limited in liquidity and flexibility.

From the perspective of revenue structure, Vault's revenue comes from real-world stable cash flow, rather than relying on new funds or token price increases, which is highly sustainable. For investors who are willing to accept the lock-up cycle and understand the rhythm of RWA operation, Nest provides an on-chain allocation path with a clear risk-return structure and a well-established incentive mechanism.

brief summary

As an attempt to combine RWA with DeFi, Nest is exploring a viable path for on-chain real-world asset investment. It provides a more compliant and liquid solution for the on-chain of traditional assets, but how to find a balance between asset security, liquidity and income stability is still the core problem that the track needs to continue to overcome in the future. The performance of Nest may provide useful inspiration for the deep integration of RWAfi and DeFi, but its maturity and wide application still need to be tested by the market.