RedStone, a decentralized oracle supplier, has launched a brand new settlement layer for decentralized finance, aiming to make tokenized real-world belongings (RWAs) usable as collateral in lending protocols.
The system, referred to as RedStone Settle, is designed to deal with a long-standing structural concern in DeFi. Whereas lending platforms similar to Aave depend on near-instant liquidations to handle threat, RWAs, together with tokenized funds and bonds, usually have redemption intervals starting from 60 to 180 days. This mismatch has largely prevented RWAs from getting used as collateral.
Based on RedStone, the brand new layer introduces an onchain public sale mechanism that’s triggered throughout liquidation occasions. Liquidity suppliers can step in to buy positions instantly, supplying protocols with liquidity whereas assuming the delayed redemption threat tied to the underlying belongings.
The Baar, Switzerland-based firm stated the strategy might assist unlock greater than $30 billion in tokenized RWAs presently sitting idle in DeFi, whereas permitting customers to borrow in opposition to yield-generating positions extra effectively.
That determine broadly aligns with estimates of the present RWA market. Excluding stablecoins, tokenized real-world belongings are valued at over $30 billion, led by merchandise similar to US Treasury publicity and personal credit score, in line with RWA.xyz.
Tokenized RWA market. Supply: RWA.xyz
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Tokenization alone doesn’t remedy liquidity constraints
RedStone’s product launch comes amid rising debate over whether or not tokenization meaningfully improves liquidity.
As beforehand reported by Cointelegraph, business contributors at this month’s Paris Blockchain Week stated placing belongings onchain doesn’t mechanically make them tradable or usable in monetary markets.
Tokenized real-world belongings proceed to face structural limitations, significantly in liquidity and settlement pace.
“I believe there’s nonetheless this concept that tokenizing one thing illiquid will someway magically make it a liquid asset, which is simply not true,” stated Oya Celiktemur of Ondo Finance throughout a panel hosted by Cointelegraph.
Paris Blockchain Week panel on RWA liquidity. Supply: Cointelegraph
On the identical time, DeFi lending has expanded alongside rising institutional curiosity and the gradual adoption of RWAs as collateral. Based on Binance Analysis, the sector grew 72% year-over-year by way of September, pushed partially by institutional use of stablecoins and tokenized belongings.
Associated: Stablecoin switch quantity drops 19% whilst provide retains rising: RWA.xyz