Use the fusion of RWA and DeFi to inject programmable genes into Wall Street

From Bitcoin spot ETFs to the tokenization wave, institutional power represented by Wall Street is profoundly affecting and changing the direction of the crypto market, and we believe that this power will become stronger in 2025. OKG Research has launched a series of research on "On-chain Wall Street" to this end, and continues to pay attention to the innovation and practice of traditional institutions in the Web3 field. Let's see how top institutions such as BlackRock and JPMorgan embrace innovation? How will tokenized assets, on-chain payments and decentralized finance shape the future financial landscape?

Text｜Jason Jiang, OKG Research

Lily Liu, chairman of the Solana Foundation, said recently when talking about RWA, "Most RWAs are valuable but have no price because they are not traded." This sentence accurately hits the core issue of the current RWA development: Although RWA itself is an asset with actual value, due to the lack of on-chain usage scenarios and continuous liquidity, the asset value and price are separated, making it more difficult to achieve true free circulation. The significance of RWA has never been to simply "moving" assets to the chain, but also to activate their liquidity by going up the chain, so that the asset value will go from "visible on the chain" to "available on the chain". Among these, the fusion of RWA and DeF is the most critical.

RWA Dilemma: The “island effect” of on-chain assets

When we talk about RWA, we always think of those exaggerated predictions: Manhattan apartments are divided into NFT shares, Tesla stocks are turned into on-chain tokens, and these are now becoming a reality, and more and more real assets are beginning to migrate to the on-chain. According to incomplete statistics from OKG Research, as of March 26, the total market value of the RWA sector (except stablecoins) has reached nearly US$20 billion, an increase of 25.4% year-on-year, and has achieved an increase of 109.27% ​​compared with the same period in 2024, significantly better than 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, it often takes months for financial institutions to complete the issuance of private bonds, and gold delivery on the London Gold Exchange also requires 72 hours of liquidation. But on the chain, we can shorten the time for asset chaining to seconds, and Gas fees only require single digits. This huge gap in efficiency has driven the attention and participation of more and more traditional financial institutions. Larry Fink, CEO of the world's largest asset management company, once pointed out that ETFs are the first step in the technological revolution in the financial market, and the next step is tokenization.

However, although the RWA market is expected to become the next trillion-dollar market, if innovation only stays at the level of "asset chaining", RWA will only put a shell of blockchain technology on traditional financial products, and its potential will not be fully released . Taking traditional bonds as an example, although T+0 settlement can be achieved after tokenization, if there is a lack of liquidity pools, lending agreements or derivatives markets, these tokens are still just "electronic certificates" controlled by centralized institutions. As Reid Simon, head of credit at Securitize, said: "RWA is inadequate in practicality, limiting the on-chain flow of high-quality assets."

More importantly, in the process of promoting assets to be chained, traditional financial institutions usually need to go through cumbersome liquidation, custody and compliance processes. Although these processes ensure the security of assets, they also greatly restrict the popularization and development of tokenized applications. Tokenization platforms led by large institutions such as Goldman Sachs and Morgan Stanley often rebuild financial privileges through strict KYC and entry thresholds. For example, BlackRock's BUIDL fund is only open to million-dollar institutions, and this "democratization" is often just under the slogan of the elite, which makes ordinary investors unable to truly benefit from it.

RWA without DeFi: An Unfinished Revolution of Innovation

Although it has been mentioned many times, at a time when RWA continues to become popular, OKG Research still wants to reiterate: The development of RWA must be integrated with DeFi.

Although traditional financial institutions are compliant and stable in the process of asset tokenization, their geographical limitations, efficiency issues and regulatory obstacles make it difficult for tokenized assets to circulate globally. If you rely entirely on traditional financial institutions, RWA can only flow in closed circles, and global capital cannot participate widely. Without DeFi support, RWA cannot form a truly open and free market system. The transaction efficiency is inefficient and the price discovery mechanism is imperfect, which may eventually evolve into a brand new "asset island" .

However, the openness and decentralization advantages of DeFi have injected new vitality into the tokenization of RWA. Taking real estate as an example, RWA was once the most questionable area in the market. How to get ordinary investors to participate in an office building worth hundreds of millions of dollars? The answer given by DeFi is to connect to liquidity pools such as Aave by packaging the mortgage loan of the office building into NFTs and dividing it into tokens of different risk levels. In this way, ordinary investors can buy "low-risk" tokens for US$50 to share the fixed income of office rentals; while professional investors can use "high-risk" tokens for leverage arbitrage.

This "fragmentation + composability" model allows the value of a single asset to become a multi-dimensional income combination for global investors. Through DeFi's liquidity pool, RWA's tokens can not only provide investors with more diversified choices, but also improve the liquidity of the overall market and promote efficient allocation of capital.

More importantly, the integration of RWA and DeFi will also provide the market with more stable revenue channels. U.S. Treasury yields are currently around 5%, and with lending protocols in DeFi, investors can often get more attractive returns. In this case, RWA can not only provide more practically supported assets for the DeFi ecosystem, but also provide more efficient market-oriented services for DeFi. In this way, DeFi not only provides RWA with a channel for capital flow, but also brings higher returns potential to investors through the transparency and efficiency of the platform. This will attract more investors to enter the tokenized market and further expand the market demand and application scope of RWA.

On the other hand, the development of DeFi is also inseparable from the stable support of RWA. In the past, DeFi's returns mainly relied on activities such as pledge, lending and trading of highly volatile crypto assets, but they often exposed practical problems such as insufficient liquidity and decline in 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 when the market is sluggish. Compared with traditional high volatility assets, this stability is exactly what DeFi platforms urgently need when attracting institutional funds and long-term investors. With the support of RWA's stability and compliance, DeFi's unique high efficiency and openness are expected to be more fully released in the future and usher in the next Summer.

Conclusion

The integration of RWA and DeFi is essentially the programmable gene that injects Wall Street's financial logic into 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 a few people, but will become an open source agreement for global liquidity.

This revolution does not pursue the subverting of the value of gold, but allows everyone to become a "market maker" of their own assets. Just as Satoshi Nakamoto engraved the newspaper title in the Genesis block: "The Chancellor of the Exchequer stands on the brink of the second round of bank bailouts" - Fifteen years later, RWA and DeFi are working together to write the next chapter: " Tokenization is touching the edge of reconstructing traditional finance."