The use of tokenized RWA on the blockchain is not only innovative but is also based on repeated and accumulated structural benefits that are derived from the advantages that blockchain has over existing methods of exchanging value. These advantages are not speculation or theoretical at this point, as we now have greater than $35 billion of tokenized assets on the blockchain. The large amounts of institutional capital that have been invested into the tokenized RWA sector, coupled with their growing use cases, have validated the benefits of using RWA tokens across actual asset types in terms that can be measured by both traditional and crypto-based investors.
By enabling fractional ownership through RWA (real-world asset) tokenization, the traditional investment model can be altered entirely. Investors are now able to purchase thousands of tokens (as opposed to just one) at a much smaller cost compared with what it would have cost previously. For example, institutional investors had to pay $10 million (or more) when buying a piece of commercial property; however, once properties are fractionally owned by way of RWAs, there will now be THOUSANDS of $1 tokens (or fractions of the property's total value) available to buyers by simply dividing up that total value into smaller pieces and then converting those pieces in to RWAs (or tokens).
This system of fractional ownership through RWA tokenization will dramatically change how asset ownership will be owned and operated. As such, many real estate platforms today are providing opportunities for investors to purchase shares in private equity funds, which means that, while investors previously needed at least 6 digits (usually above $1 million) in order to own an asset, now there will be potentially less than $1,000 entry costs. According to Deloitte, by 2035, approximately $1 trillion worth of private real estate will be tokenized, and fractional ownership via RWA tokenization will represent one of the main reasons for that growth (and not only institutional investors / buyers).
The traditional high-value asset classes (commercial real estate, private equity, infrastructure debt and fine art etc.) each have a significant common problem: they are all extremely illiquid assets to sell. This means that it takes months to sell a commercial building or the interest in a private credit fund, requires lawyers, brokers and custodians, and there is no guarantee of finding a fair value buyer. Tokenization solves this problem by allowing these physical assets to be converted into on-chain, transferable assets so that they are able to trade on secondary markets continuously and with no settlement delay or delay from intermediaries associated with traditional asset sales.
The ability to create liquidity through RWA Tokenization has caused a 380% growth over 3 years and is the basis for the utility of this liquidity unlock. There are properties on decentralized market infrastructure that have a measurable higher turnover than properties that have been sold/purchased through peer-to-peer or over-the-counter transactions, and while the magnitude of secondary liquidity for many tokenized assets is still being developed, the directional improvements for private credit, tokenized Treasury and tokenized commodities have already been demonstrated when compared to their legacy alternatives.
Traditional securities markets are limited to the hours they operate within and have their business day end on Saturday, with all transactions going through a clearing process prior to them actually settling or taking place. (Most securities settle in two business days). In contrast, blockchain does not have any of the comingled constraints of the traditional market, so when a tokenized asset is transferred on-chain, it immediately settles on the ledger and is permanently recorded, eliminating the need for back-office reconciliation, waiting for a clearinghouse, etc.
For institutional market participants with large portfolios, this means that they can quickly and efficiently post tokenized assets as collateral when needed, re-balance their portfolios regularly to achieve the desired level of exposure to the various asset classes through the posting of collateral, or liquidate positions whenever necessary. The ability for institutions to use tokenized assets as collateral around the clock is one of the reasons that JPMorgan has been developing its on-chain collateral management infrastructure and it has been noted by other market participants that the ability to use tokenized assets as collateral will be viewed as one of the immediate enhancements in capital efficiency from tokenization.
Integration of RWAs into DeFi changes forever the components of DeFi's underlying weakness – specifically yield reliant solely on the speculative activity of tokens and circular liquidity incentives. Tokenized U.S. Treasuries generating 4-5% government-backed yield, tokenized private credit pools offering yields of 8-12% for lenders, and tokenized commodity positions yielding returns based on the dynamics of the physical marketplace insert yield from the outside world (the global economy) into the on chain ecosystem. Rather than being manufactured through inflation via the release of new tokens, the outside world's yield entering into DeFi will be generated through the cash flows associated to real world assets in the traditional financial system. Also, with greater than $12 billion currently sitting in other DeFi protocols with no yield, the injection of yield bearing RWA collateral into lending markets, illiquidity pools, or structured DeFi products will be the most capital efficient way for the crypto space to make improvements during 2026.
The addition of Real World Assets (RWAs) to the DeFi ecosystem will help eliminate one of its biggest flaws—the fact that there's currently no way to earn interest without owning tokens. Tokenized U.S. Treasuries offer annual yields of about 4–5%. Tokenized private credit pools pay between 8–12%. Furthermore, tokenized commodities provide yield via returns based on how the physical market behaves (for example, if crude oil has a high enough price). These types of RWAs will create real-world sources of on-chain yields—not through token inflation but rather through actual cash flows generated by the RWAs within the traditional financial system. Currently, over $12B worth of customer liquidity sits idle across various DeFi protocols and does not generate real returns to their respective customers; however, by adding yield-producing RWA collateral into traditional lending markets, liquidity pools, and various structured products, we have access to one of the most cost-effective ways to improve the capital efficiency of crypto ecosystems in 2026.
Smart contracts are allowing RWA tokens to incorporate programmable logic that automates the execution of previously manual actions. These included the coupon payments for tokenized bonds, rental income from tokenized real estate and the distribution of interest on tokenized credit pools. They all can be programmed to distribute directly into the wallets of the token holders when the conditions specified in the smart contract are met and therefore eliminate the need for manual processing, bank wires and/or custodian instructions between the two. By automating these processes, there is lower operational cost associated with managing income from distributed assets as well as eliminating counterparty risk based on relying on intermediaries to reliably and timely execute distributions. Several tokenized real estate platforms already distribute rental income to token investors using stablecoins, on either a daily or weekly schedule, a schedule that would not be operationally feasible through traditional property investment structures.
Benefits of RWA Tokenization are interconnected within Crypto Ecosystem - thus enhancing one another. Most of the value associated with "On-Chain" Real-World Asset (RWA) occurs on Ethereum (ETH). Therefore when RWAs are issued as tokens on the Ethereum network, they will create activity in the form of fees, thus generating demand for supporting blockchain infrastructure.
Scheduled DeFi protocols that utilize tokenized Treasury yield or Collateral will drive capital into crypto where there previously was not a path. Token standards such as ERC-3643 also provide the necessary compliance infrastructure to allow institutions to participate on a large scale.
The sum of the individual benefits associated with RWAs: fractional ownership; liquidity; speed of settlement; real yield; transparency; and automation create an overall structural argument that Blockchain does not compete with Traditional Finance from the outside; Rather it has absorbed Traditional Finance from the inside.
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