RedStone, a decentralized oracle provider, has launched a new settlement layer for decentralized finance, aiming to make tokenized real-world assets (RWAs) usable as collateral in credit protocols.
The system, called RedStone Settle, is designed to address a long-standing structural problem in DeFi. While lending platforms like Aave rely on near-instant liquidations to manage risk, RWAs, including tokenized funds and bonds, typically have redemption periods ranging from 60 to 180 days. This mismatch has largely prevented risk-weighted assets from being used as collateral.
According to RedStone, the new layer introduces an onchain auction mechanism that is triggered during liquidation events. Liquidity providers can step in to buy positions immediately, providing protocols with liquidity while assuming the delayed redemption risk associated with the underlying assets.
The Baar, Switzerland-based company said the approach could help unlock more than $30 billion in tokenized RWAs currently dormant in DeFi, while allowing users to borrow against yield-generating positions more efficiently.
That figure is largely in line with estimates of the current RWA market. Excluding stablecoins, tokenized real-world assets are valued at more than $30 billion, led by products such as U.S. Treasury exposure and private credit, according to RWA.xyz.
Tokenized RWA market. Source: RWA.xyz
Related: Flow Capital plans to tokenize a $150 million private credit fund via DigiFT: report
Tokenization alone will not solve liquidity problems
RedStone’s product launch comes amid a growing debate over whether tokenization meaningfully improves liquidity.
As previously reported by Cointelegraph, industry participants at this month’s Paris Blockchain Week said that onchaining assets does not automatically make them tradable or usable in financial markets.
Real-world tokenized assets continue to face structural limitations, especially in terms of liquidity and settlement speed.
“I think there is still this idea that tokenizing something that is illiquid will somehow magically make it a liquid asset, which is just not true,” Oya Celikkenmur of Ondo Finance said during a panel hosted by Cointelegraph.
Paris Blockchain Week panel on RWA liquidity. Source: Cointelegraph
At the same time, DeFi lending has expanded alongside growing institutional interest and the gradual adoption of risk-weighted assets as collateral. According to Binance Research, the sector grew 72% year-over-year through September, driven in part by institutional use of stablecoins and tokenized assets.
Related: Stablecoin transfer volume drops 19% while supply continues to rise: RWA.xyz
Credit : cryptonews.net
