From Bitcoin Spot ETFs to the Tokenization Wave, the institutional power represented by Wall Street is profoundly influencing and changing the direction of the crypto market, and we believe this power will become even stronger by 2025. OKG Research has launched the "On-chain Wall Street" series of studies to continuously focus on the innovations and practices of traditional institutions in the Web3 space. How are top institutions like BlackRock and JPMorgan embracing innovation? How will tokenized assets, on-chain payments, and decentralized finance shape the future financial landscape?

Written by Jason Jiang, OKG Research

Lily Liu, Chair of the Solana Foundation, recently mentioned RWA, stating, "Most RWAs have value but no price because they are not traded." This statement precisely hits the core issue of the current RWA development: although RWAs are assets with real value, the lack of on-chain use cases and continuous liquidity leads to a disconnection between asset value and price, making true free circulation even more difficult. The significance of RWA has never been about simply "moving" assets on-chain; it is about activating their liquidity through on-chain integration, allowing asset value to transition from "visible on-chain" to "usable on-chain." In this process, the integration of RWA and DeFi is crucial.

The RWA Dilemma: The "Island Effect" of On-chain Assets

When we talk about RWA, we often think of exaggerated predictions: Manhattan apartments divided into NFT shares, Tesla stocks tokenized as on-chain tokens. These are becoming a reality, and more real assets are beginning to migrate on-chain. According to incomplete statistics from OKG Research, as of March 26, the total market capitalization of the RWA sector (excluding stablecoins) has approached $20 billion, growing 25.4% year-to-date, and achieving a remarkable 109.27% increase compared to the same period in 2024, significantly outperforming other crypto asset sectors.

Behind these impressive numbers is the market's recognition and acceptance of the RWA concept. We see that in the traditional financial system, financial institutions often take months to complete private bond issuances, and the London Bullion Market Association's gold delivery requires 72 hours of settlement. However, on-chain, we can reduce the time to put assets on-chain to seconds, with Gas fees only in single digits. This significant efficiency gap has attracted the attention and participation of more traditional financial institutions. Larry Fink, CEO of the world's largest asset management company, pointed out that ETFs are the first step in the technological revolution of financial markets, and the next step is tokenization.

However, despite the RWA market's potential to become the next trillion-dollar market, if innovation only stays at the level of "asset on-chain," RWA will merely be a blockchain technology shell over traditional financial products, and its potential will not be fully realized. Taking traditional bonds as an example, although tokenization can achieve T+0 settlement, without liquidity pools, lending protocols, or derivatives markets, these tokens remain akin to "electronic certificates" controlled by centralized institutions. As Reid Simon, Head of Credit at Securitize, stated: "The lack of practicality of RWA limits the on-chain liquidity of quality assets."

More critically, in the process of pushing assets on-chain, traditional financial institutions often need to go through cumbersome clearing, custody, and compliance processes. While these processes ensure the security of assets, they also greatly restrict the popularization and development of tokenization applications. Tokenization platforms led by large institutions like Goldman Sachs and Morgan Stanley often reconstruct financial privileges through strict KYC and access thresholds. For instance, BlackRock's BUIDL fund is only open to institutions with a million-dollar level, and this "democratization" often only serves as a slogan for the elite, preventing ordinary investors from truly benefiting.

RWA Without DeFi: An Unfinished Innovation Revolution

Although it has been mentioned many times, in the current context of RWA's continued popularity, OKG Research still wants to reiterate: The development of RWA must integrate with DeFi.

While traditional financial institutions are compliant and stable in the asset tokenization process, their geographical limitations, efficiency issues, and regulatory barriers make it difficult for tokenized assets to circulate globally. If we rely entirely on traditional financial institutions, RWA can only circulate within a closed circle, and global capital cannot participate widely. Moreover, without the support of DeFi, RWA cannot form a truly open and free market system, leading to low trading efficiency and an imperfect price discovery mechanism, which may ultimately evolve into new "asset islands."

However, the openness and decentralization advantages of DeFi inject new vitality into the tokenization of RWA. Taking real estate as an example, RWA has been one of the most questioned areas in the market. How can ordinary investors participate in a building worth hundreds of millions of dollars? DeFi provides the answer by packaging the mortgage of that building into NFTs and splitting them into tokens of different risk levels, connecting to liquidity pools like Aave. In this way, ordinary investors can purchase "low-risk level" tokens for $50, sharing fixed income from the building's rent, while professional investors can leverage "high-risk level" tokens for arbitrage.

This "fragmentation + composability" model allows the value of a single asset to split into a multidimensional income portfolio for global investors. Through DeFi's liquidity pools, RWA tokens can not only provide investors with more diversified choices but also enhance overall market liquidity, promoting efficient capital allocation.

More importantly, the integration of RWA and DeFi will also provide the market with more stable income channels. The current yield on U.S. Treasuries is about 5%, while through lending protocols in DeFi, investors can often achieve more attractive returns. In this scenario, RWA can not only provide more reality-backed assets for the DeFi ecosystem but also benefit from DeFi's efficient matching and clearing mechanisms, offering more efficient market services for RWA. Thus, DeFi not only provides a channel for the flow of funds for RWA but also brings higher yield potential for investors through the platform's transparency and efficiency. This will attract more investors into the tokenization market, further expanding the market demand and application scope of RWA.

Conversely, the development of DeFi also relies on the robust support of RWA. In the past, DeFi's yields primarily depended on the staking, lending, and trading of highly volatile crypto assets, often exposing issues like insufficient liquidity and declining yields. The introduction of RWA assets can not only bring more stable assets with real value support to the DeFi ecosystem but also provide users with stable, risk-free returns during market downturns. Compared to traditional high-volatility assets, this stability is precisely what DeFi platforms urgently need to attract institutional funds and long-term investors. With the stability and compliance of RWA, the unique efficiency and openness of DeFi are expected to be more fully realized in the future, ushering in the next Summer.

Conclusion

The integration of RWA and DeFi essentially injects Wall Street's financial logic into the programmable genes of blockchain. When a tokenized office building can automatically convert rental income into tokenized deposit interest, and when a digital artwork can be fragmented into collateral for hundreds of DeFi lending pools, finance will no longer be a game for the few but will become an open-source protocol for global liquidity.

This revolution does not seek to subvert the value of gold but aims to enable everyone to become their own asset "market maker." As Satoshi Nakamoto inscribed in the genesis block's newspaper headline: "Chancellor on brink of second bailout for banks"—fifteen years later, RWA and DeFi are joining forces to write the next chapter: "Tokenization is touching the edge of reconstructing traditional finance."

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