In-depth analysis of Jiritsu: Former BlackRock Asset Management Manager joins, encryption-native RWA solution

Author: 0xFacai, BlockBeats

From the data of Dune Analytics, RWA has become the only narrative that has pumped encryption in the past 3 months, except for MEME. In the overall stagnant market environment, this performance has caught our attention. In fact, the discussion about RWA has been ongoing since June last year, and this narrative was completely ignited after BlackRock launched the BUIDL on-chain fund.

In the face of the trend, everyone’s sense of smell is not bad, but few can really ‘step on the point’. In the past six months, countless teams have transformed into RWA, but there are few successful projects that have seized the opportunity and shown initial results. Whether it is transformation or entry, recognizing opportunities is the key to the team getting tickets. Among the many competitors, a project called Jiritsu has attracted our attention.

Fragmentation of Liquidity in RWA

The biggest benefit of tokenization of real-world assets is the ability to provide faster and more efficient trading and settlement processes for these assets, which is undoubtedly the main reason why all institutions are interested in RWA. Although this idea is logically sound, there are many technical difficulties in practical implementation, and the fragmentation problem of Liquidity after asset on-chain is one of them.

When the on-chain and transaction of RWA are full of complexity, the fragmented market exacerbates this problem. Digital Asset Research emphasized in its report in July last year that more than 60% of current RWA institutions are trading through their own tokenization asset markets, which means that after the assets have been ‘suffered’ and completed on-chain, they can only attract a small portion of fixed customers.

According to The Block’s data, the total financing scale of the RWA track has also reversed the downward trend this year, rising to 3 billion US dollars. The trend of current RWA’s recovery has brought new ‘narrative opportunities’ to many entrepreneurs, and the concept projects of RWA in the market are also increasing at a visible speed. However, most of the funded projects tend to focus on very small vertical fields, such as natural resources, specific commodities, and art, while RWA projects in the real estate sector are particularly prominent in this respect.

To what extent can this kind of suspension be subdivided? For example, platforms like Balcony and Mnzl provide tokenization processes for regional real estate resources. The buyers and sellers of on-chain assets often include local institutions or government departments, making it essentially a semi-closed asset market.

The specialization and regionalization of RWA projects can be understood, as many real-world assets have strong regional characteristics and often require specialized personnel to provide targeted solutions. However, due to different regulatory restrictions in different regions, almost every RWA project is building its own on-chain process and trading platform from scratch, and there are also different choices when selecting underlying public chains and Smart Contract development tools. This poses significant challenges to interoperability between different RWAs.

Many entrepreneurs have seen the fragmentation of this Liquidity, so in the same period, platforms such as Midas and Plume, which aggregate RWA assets or launch RWA, have also emerged in the market. However, upon further consideration, you will find that they still face a dilemma: if they want to establish a unified market, they must first have a certain compatibility in Token and contract standards, which hinders the large-scale and diversified aggregation of RWA assets on the platform. And if they aggregate different RWA protocols first, they will be limited to the role of “launch platform” due to the technical stack differences between protocols, although it brings some Liquidity to small projects, it still faces the problem of market fragmentation for on-chain assets.

Even in the best liquidity tokenization US bond market, you will find that, although the problem of large-scale single-category has been solved under the impetus of institutions such as BlackRock and Franklin Templeton, these assets are still scattered across different public chains such as Ethereum, Stellar, Avalanche, etc. in order to provide more long-term choices for future potential investors and cooperative projects.

This also brings a narrative window to the Cross-Chain Interaction interoperable protocol, which has been sluggish in terms of volume. For example, Axelar, which started laying out RWA early, collaborated with Centrifuge and Ondo last year to launch Centrifuge Everywhere and Ondo Bridge, optimizing protocols and cross-chain interaction and liquidity for RWA tokenization products. In the current fragmented market environment, Cross-Chain Interaction interoperability may be a remedial solution.

Jiritsu ZK - MPC: Trustless, automated off-chain asset validation

Actually, it is not difficult to see the bottleneck of breaking through the scalability of RWA, which is the lack of automated processes or technologies like AMM in the Decentralized Finance field. For RWA products, tokenization is often just the beginning. The key to testing efficiency and cost is to ensure continuous asset updates and transparency after the product is put on the chain. Generally speaking, it includes the following aspects:

1. Financial Reports: Asset managers need to regularly release financial and performance reports for assets, such as real estate managers needing to regularly provide details on rental income payment dates and amounts, or details on arrears and vacancy situations, to give investors a clearer understanding of the cash flow dynamics of the real estate.

2. Debt management: Like RWA credit and other products, it is necessary to regularly update details such as mortgage, repayment, Interest Rate adjustment, and refinancing activities to allow investors to understand their health status. This is the basis for maintaining investor confidence in such products.

3. Change of Ownership: If the underlying asset or the basic ownership of the legal entity owning the asset has changed, an announcement needs to be made promptly.

4. Market Regulation: When the market supervision environment where the underlying assets are located changes, the manager also needs to report and make corresponding adjustments to ensure the compliance of the product.

Of course, in addition, there are complex details such as asset insurance and Risk Management strategies, asset valuation and inspection, legal entities for issuance, and other details. A real-world asset requires asset managers to invest a lot of effort in various details throughout the investment lifecycle, from tokenization to information updates and maintenance. In summary, in the current ‘infrastructure redundancy’ market environment, asset on-chain is no longer the most difficult part of RWA development. The continuous verification and legal regulation of off-chain are the main reasons for slowing the rise and depreciation of asset on-chain value. All of this can only be discussed on the premise of setting aside the risk of centralized audit in the off-chain entity.

The scale and growth of RWA assets depend entirely on the off-chain issuance and the strength of the management institution, which is also the key reason why the RWA products of US Treasury have risen rapidly after BlackRock’s entry. In contrast, other assets such as real estate and commodities have difficulty achieving economies of scale due to a lack of process automation. Of course, the value erosion of on-chain assets also means huge business opportunities, and at present, most of this potential income has flowed into the hands of asset issuers and managers similar to Securitize.

Is it possible to build our own automated ‘Asset Oracle Machine’ system in the RWA field, similar to what ChainLink did for Decentralized Finance? We found some answers in the Jiritsu project.

Jiritsu is an Avalanche subnet specifically designed for off-chain asset validation, aiming to achieve the automation and trustless registration and validation of off-chain assets, while increasing the economic efficiency and transparency of RWA tokenization, and reducing the wear and cost of on-chain operations. By integrating ZK proofs and MPC longer calculations, Jiritsu can ensure the secure and private automated verification of asset details, while embedding regulatory compliance and asset integrity into tokenization products. Interestingly, the name “Jiritsu” comes from the Japanese word “じりつ”, meaning independence. In the RWA field, which currently heavily relies on centralized human resources, this is exactly what enhances the native attributes of encryption and achieves the most needed economies of scale.

Jiritsu ZK - MPC Oracle Machine aggregates data from long sources and verifies related calculations, and uses long functional data retrieval mechanisms to enhance the integration Depth of different types of assets. The Oracle Machine includes two main mechanisms: ‘Push’ and ‘Pull’. The former allows data providers (such as asset managers) to send information directly to the Oracle Machine, while the latter allows the Oracle Machine to retrieve data through APIs from integrated information suppliers such as Supply Chain software, banking information systems, etc.

In terms of Consensus Mechanism, Jiritsu introduces the concept of Proof of Workflow (PoWF), where Nodes in the network are driven by a computational engine and a workflow manager-operated operating system, using generated ZK proof to ensure verifiable computation and smart contract execution Consensus Mechanism, to directly integrate Consensus Mechanism into its MPC framework. Compared to existing Oracle Machines such as ChainLink or Pyth, Jiritsu does not need to use cross-chain bridges for information transmission when aggregating information, and also adds analysis and verification functions to information outside of simple data feedback.

After users or asset managers register the assets and their detailed information they want to tokenize in Jiritsu, the ZK-MPC validator will analyze this information and confirm the value and Compliance status of the assets. The analysis process involves two types of validators, one for reviewing business policies and regulatory Compliance, and the other for handling financial data, performing Spot price retrieval, and market price evaluation tasks. After the information is analyzed and verified, ZK-MPC will generate ZK proof and store it on the chain. Then users can claim these proofs and embed them into their own Smart Contract, thus completing the entire process of tokenizing the assets.

Jiritsu official demonstrated the complete process of their product usage with Paxos’ tokenization gold product PAXG as an example:

First, Paxos purchases gold through a reliable gold exchange and deposits it into a custody service. Then, Jiritsu users can use the Jiritsu dApp on supported public chains to create validators on the ZK-MPC Node of the Jiritsu network. Once the ZK-MPC Node retrieves information about Paxos’ gold custody, the validator generates the corresponding ZK proof.

During the verification process, the ZK-MPC Node is responsible for off-chain verification calculation, and the generated ZK proof also has different levels of access and confidentiality permissions. For example, auditors can have full access to all information, while asset managers can only see specific information related to their roles. This verification process can update information at a preset time or on demand, which is much more efficient and reliable than the current quarterly manual verification of inventory by Paxos.

After the ZK proof is uploaded to the Jiritsu network, Paxos can proceed with the tokenization process of its custodied gold. At this stage, Jiritsu also realizes the concept of ‘chain abstraction’, allowing asset issuance parties like Paxos to mint corresponding tokens on ideal target chains such as Solana, Avalanche, or BNB Chain.

After the Token is generated, Paxos pays fees to Nodes and validators through the Jiritsu dApp, part of which will be allocated to the Jiritsu network. The PAXG Token purchased by investors will include a claim to underlying gold and can be used to access the status of gold custody on the Jiritsu network, allowing Paxos to pass on the cost to investors at this point.

Jiritsu networks’ dApps are specifically designed for ease of writing specific data, allowing users to create validators for any business logic, data reader, and Smart Contract integration, ensuring Jiritsu’s ability to provide customized solutions for a wide range of business needs. In addition, its ZK - MPC cloud service under Jiritsu Proof significantly expands the asset categories for information verification. In addition to traditional financial verifications such as bank information and corporate credit, it can also verify the status information of a range of real-world assets, such as company factory equipment, inventory, and transaction and income information. Recently, Jiritsu provided inventory proof for an Amazon Supply Chain company with over 100,000 SKUs, with a total value of approximately 20 million USD.

Based on this, Jiritsu also measures its impact on the on-chainization of real-world assets through two data indicators: Total Asset Verified and Total Asset Secured, and uses these data indicators to provide a more compatible and interoperable underlying asset Lego for the Decentralized Finance protocol. According to the official Dune dashboard data, as of now, Jiritsu has verified over 18 billion USD worth of assets and has over 60 million USD worth of assets waiting to be used by various protocols at any time.

Not long ago, Jiritsu integrated with BlackRock’s RWA ecosystem to provide automated on-chain proof for the valuation, verification, compliance, and KYC platform information of its BTCSpot ETF and BUIDL fund reserve assets, making it easier for other protocols to use these already on-chain assets more conveniently and quickly. On the other hand, although iBIT and BUIDL bring significant incremental funding to the encryption market and RWA, their asset verification still relies on self-reporting and only provides annual audits, while Jiritsu brings more transparency and cost-effective solutions to these products.

Jiritsu has also integrated with the Republic platform, which deeply cultivates the RWA field, enabling any asset manager to directly implement and use similar solutions, while providing long tokenization products to improve compliance and operational efficiency. Asset managers can use Republic’s mature infrastructure for tokenization, compliance, marketing, and customer service. By automating and Trustless verification and audit, Jiritsu moves the work previously done by institutions such as Moody’s and KPMG on-chain, and this part of the traditional market’s fee income exceeds 150 billion U.S. dollars. Even if calculated at 10%, this is an imaginative business ceiling.

Team Background

Both Jacob Guedalia and David Guedalia, the two co-founders of Jiritsu Network, are highly respected in the academic field. The former holds a Bachelor’s degree in Physics and Philosophy from New York University, as well as a graduate degree in Applied Physics from the Weizmann Institute of Science in Israel. The latter holds a Master’s degree in Computational Geography from Bar-Ilan University and a Ph.D. in Neural Computation from the Hebrew University of Jerusalem. In addition, Jacob is a successful serial entrepreneur, having founded and exited four companies. Together, they hold a total of 100 long US patents.

Jiritsu raised a total of $10.2 million in the last two rounds of financing, with gumi Cryptos Capital leading the investment, Susquehanna Private Equity Investments, LLLP, Republic Capital, and other investors participating, and former BlackRock asset management manager Michael Lustig also announced joining the Jiritsu team. The company plans to use the new funds to “accelerate the development and adoption of the UVC platform and Tomei RWA”. Jiritsu, founded in 2020, has developed technologies such as Unlimited Verifiable Computation (UVC), aiming to provide a programmable approach applicable to any workflow and generate workflow proofs.