Comparing On-Chain AUM and DeFi TVL (2023–2025) Although charts were removed as requested, the core trend is clear: • RWA on-chain AUM grew from hundreds of millions to tens of billions • DeFi TVL recovered strongly, but RWA growth far outpaced all other sectors • RWAs now represent a double-digit share of Ethereum TVL • The slope of RWA adoption resembles the early growth curve of stablecoins
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Stage 3: Leverage - The Next Evolutionary Jump This is the least mature phase, but its early signals are already visible. Stage 3 occurs when RWAs become: • standardized collateral • integrated into multi-protocol leverage loops • wrapped into structured products • hedged via on-chain derivatives • used for credit creation Leading indicators that leverage is coming MakerDAO’s Shift to RWA-Dominant Revenues RWA strategies now drive a majority of Maker’s income. Treasury bills fund: • DAI Savings Rate • MKR buyback & burn programs • protocol reserves Maker proved that RWA yields can support an entire DeFi economy. On-chain private-credit leverage loops Protocols are experimenting with: • borrowing USDC against private-credit vaults • recursive leveraged credit investment • automated rebalancing via risk engines (e.g., Gauntlet) Institutional credit vaults Apollo and other TradFi giants are tokenizing private credit, hinting at the arrival of: • leveraged carry trades • collateralized credit lines • yield-spread arbitrage across chains Required preconditions for full Stage 3 To unlock true leverage, the industry needs: 1. Deep liquidity - multiple AMMs, lending venues, derivatives markets 2. Market-wide standards - permissioned transfer tokens, KYC-compatible layers 3. Robust pricing & risk models - real-time NAV, default insurance, oracle integrity 4. Regulatory clarity - global alignment on tokenized securities When these are satisfied, RWA collateral will power a multi-trillion-dollar on-chain credit system - the on-chain equivalent of repo markets, structured credit, and fixed-income derivatives.
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Stage 2: Liquidity - The Market’s Current Center of Gravity Stage 2 marks the beginning of true financial utility: once RWAs are on-chain, they must be traded, borrowed against, hedged, and integrated into DeFi. This is where the market is today. Why liquidity matters Without secondary markets, RWAs remain static positions - attractive for yield, but limited in economic significance. Liquidity transforms them into productive collateral, enabling: • intraday trading • on-chain money markets • real-time NAV discovery • automated rebalancing • yield-curve speculation • multi-asset strategies Emerging liquidity engines Pendle Finance - On-chain interest-rate markets Pendle has built the most sophisticated yield AMM in crypto, splitting assets into principal tokens and yield tokens. This effectively imports the logic of fixed-income derivatives onto DeFi rails. Treasury-backed assets, stables, staked assets - all now have liquid forward yield curves. Morpho & Aave - RWA-backed lending RWA collateral is being integrated into permissioned lending markets, allowing institutions to borrow against: • tokenized Treasuries • private credit claims • short-duration funds Morpho’s unified RWA market is a turning point: multiple issuers feed liquidity into a single borrowing venue, improving depth and pricing. Centrifuge on Base - Unified credit marketplace Centrifuge’s Base deployment merges RWA issuers, underwriters, and borrowers into a chain-native credit layer, showing what a scalable multi-issuer ecosystem may look like. The state of liquidity today • Liquidity is real, but still thin. • Most RWA tokens remain inside permissioned pools. • Turnover is rising but mostly concentrated in the short-duration segment (Treasuries, cash-equivalents). • Yield derivatives (Pendle) show far more activity than spot markets. Insight The moment secondary markets deepen, institutional capital will flood in - because liquidity, not tokenization, is the true constraint in fixed income and private credit markets.
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