thedefiant.io
Fragmentation across blockchain networks is costing the tokenized real-world asset (RWA) market hundreds of millions of dollars a year, according to new research from data analytics platform RWAio.
The report, created with input from 17 companies including Coinbase, Franklin Templeton, and Polygon, estimates that fragmentation across blockchains is causing between $600 million and $1.3 billion in lost value each year. Currently, the total value of tokenized real-world assets in circulation, including private credit, U.S. Treasury debt, and commodities, has reached over $36 billion.
RWAio found that the same assets often trade at different prices on different blockchains, with price gaps of 1-3%. Meanwhile, moving assets between chains can cost investors 2-5% per transaction due to fees and slippage. Ethereum currently holds 52% of all tokenized RWA value, while Polygon accounts for 62% of tokenized bonds.
"This fragmentation is the single greatest impediment to the market realizing its multi-trillion-dollar potential. In traditional finance, the EU-wide SEPA Instant mandate shows how value can move across accounts in seconds,” said Marko Vidrih, co-founder and COO at RWAio.
“Tokenized assets should be just as frictionless. Achieving that requires both bottom-up protocol standardisation and top-down coordination from institutions and regulators. Without true interoperability, the industry cannot scale.”
The report warns that the problem will grow as the market expands, especially if similar inefficiencies continue. According to their projections, if the tokenized asset market reaches $16-$30 trillion by 2030, annual losses could reach $30-$75 billion.
In October, the largest tokenized RWA fund, Blackrock’s BUIDL, saw its allocation on the Ethereum network drop by about 60%, while its market share on several other supported blockchains grew. The majority of BUIDL is now tokenized on BNB Chain, followed by Ethereum, per data from RWAxyz.
Interop Protocols
Beyond this, the report notes that fragmentation also limits innovation. Assets on one blockchain often cannot interact with apps on another, making it harder to build more advanced financial products. Security risks are also rising, with the report noting losses from bridge hacks, smart contract bugs, and key management failure – all which have become major concerns for institutional investors.
To tackle these issues, the findings suggest employing an interoperability stack that links 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 years, with on-chain value increasing by more than 2,000% since 2020. More than 500,000 users also now hold tokenized traditional assets. Private credit leads the sector at $19.1 billion, followed by tokenized securities at $9 billion, per the report.
Yesterday, global financial infrastructure giant The Depository Trust & Clearing Corporation (DTCC) revealed that it has selected the Canton Network for a pilot to tokenize a subset of the U.S. Treasury securities it holds.