Blockchain Fragmentation Could Cost Tokenized Asset Market Billions: RWAio

Based on new analysis from knowledge analytics platform RWAio, the fragmentation of blockchain networks is costing the tokenized real-world asset (RWA) market tons of of tens of millions of {dollars} per 12 months.

The report, ready with enter from 17 firms together with Coinbase, Franklin Templeton and Polygon, estimates that fragmentation throughout blockchains causes between $600 million and $1.3 billion in misplaced worth annually. Presently, the overall worth of tokenized real-world property in circulation, together with non-public credit score, US authorities bonds and commodities, has reached greater than $36 billion.

RWAio discovered that the identical property usually commerce at totally different costs on totally different blockchains, with worth variations of 1-3%. In the meantime, transferring property between chains can value buyers 2 to five% per transaction attributable to charges and slippage. Ethereum at the moment owns 52% of all tokenized RWA worth, whereas Polygon accounts for 62% of tokenized bonds.

“This fragmentation is the most important barrier to the market realizing its multi-trillion greenback potential. Within the conventional monetary sector, 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 property have to be simply as frictionless. Reaching that requires each bottom-up protocol standardization and top-down coordination from establishments and regulators. With out true interoperability, the business can’t scale.”

The report warns that the issue will improve because the market grows, particularly if related inefficiencies proceed. Based on their projections, if the marketplace for tokenized property reaches $16-$30 trillion by 2030, annual losses may attain $30-$75 billion.

In October, the most important tokenized RWA fund, Blackrock’s BUIDL, noticed its allocation to the Ethereum community drop by round 60%, whereas its market share on a number of different supported blockchains grew. Most of BUIDL is now tokenized on BNB Chain, adopted by Ethereum, in keeping with knowledge from RWAxyz.

Interop protocols

As well as, the report notes that fragmentation additionally limits innovation. Property on one blockchain usually can’t talk with apps on one other, making it tougher to construct extra superior monetary merchandise. Safety dangers are additionally rising, with the report citing losses from bridge hacks, sensible contract bugs and key administration failures – all of which have grow to be main issues for institutional buyers.

To deal with these points, the findings recommend the usage of an interoperability stack that connects cross-chain protocols, citing Chainlink’s Cross-Chain Interoperability Protocol (CCIP) and Cosmos’ Inter-Blockchain Communication protocol (IBC).

The RWA market has grown quickly in recent times, with on-chain worth rising by greater than 2,000% since 2020. Greater than 500,000 customers now additionally personal tokenized conventional property. Based on the report, non-public credit score leads the sector with $19.1 billion, adopted by tokenized securities with $9 billion.

Yesterday, world monetary infrastructure large The Depository Belief & Clearing Company (DTCC) revealed that it has chosen the Canton Community for a pilot to tokenize a subset of the US Treasury bonds it holds.