Blockchain Fragmentation Could Cost Tokenized Asset Market Billions: RWAio
Fragmentation throughout blockchain networks is costing the tokenized real-world asset (RWA) market tons of of hundreds of thousands of {dollars} a yr, in line with new analysis from information analytics platform RWAio.
The report, created with enter from 17 firms together with Coinbase, Franklin Templeton, and Polygon, estimates that fragmentation throughout blockchains is inflicting between $600 million and $1.3 billion in misplaced worth annually. At the moment, the whole worth of tokenized real-world belongings in circulation, together with non-public credit score, U.S. Treasury debt, and commodities, has reached over $36 billion.
RWAio discovered that the identical belongings typically commerce at totally different costs on totally different blockchains, with worth gaps of 1-3%. In the meantime, shifting belongings between chains can value traders 2-5% per transaction because of charges and slippage. Ethereum presently holds 52% of all tokenized RWA worth, whereas Polygon accounts for 62% of tokenized bonds.
“This fragmentation is the only best obstacle to the market realizing its multi-trillion-dollar potential. In conventional finance, the EU-wide SEPA On the spot mandate reveals how worth can transfer throughout accounts in seconds,” mentioned Marko Vidrih, co-founder and COO at RWAio.
“Tokenized belongings must be simply as frictionless. Attaining that requires each bottom-up protocol standardisation and top-down coordination from establishments and regulators. With out true interoperability, the business can not scale.”
The report warns that the issue will develop because the market expands, particularly if comparable inefficiencies proceed. In line with their projections, if the tokenized asset market reaches $16-$30 trillion by 2030, annual losses might attain $30-$75 billion.
In October, the biggest tokenized RWA fund, Blackrock’s BUIDL, noticed its allocation on the Ethereum community drop by about 60%, whereas its market share on a number of different supported blockchains grew. Nearly all of BUIDL is now tokenized on BNB Chain, adopted by Ethereum, per information from RWAxyz.
Interop Protocols
Past this, the report notes that fragmentation additionally limits innovation. Property on one blockchain typically can not work together with apps on one other, making it more durable to construct extra superior monetary merchandise. Safety dangers are additionally rising, with the report noting losses from bridge hacks, sensible contract bugs, and key administration failure – all which have develop into main considerations for institutional traders.
To deal with these points, the findings counsel using an interoperability stack that hyperlinks cross-chain protocols, citing Chainlink’s Cross-Chain Interoperability Protocol (CCIP) and Cosmos’ Inter-Blockchain Communication protocol (IBC).
The RWA market has grown shortly lately, with on-chain worth rising by greater than 2,000% since 2020. Greater than 500,000 customers additionally now maintain tokenized conventional belongings. Non-public credit score leads the sector at $19.1 billion, adopted by tokenized securities at $9 billion, per the report.
Yesterday, international monetary infrastructure big The Depository Belief & Clearing Company (DTCC) revealed that it has chosen the Canton Community for a pilot to tokenize a subset of the U.S. Treasury securities it holds.
