RedStone launched a settlement layer to solve the RWA liquidity gap in DeFi lending
RedStone, a decentralized oracle provider of decentralized finance, has launched a new settlement layer that uses tokenized real-world assets (RWAs) as collateral in lending protocols.
The system, called RedStone Settle, is designed to solve a long-standing structural problem in DeFi. While lending platforms like Aave rely on quick liquidity to manage risk, RWAs, tokenized funds and bonds, typically have a redemption period of 60 to 180 days. This imbalance has prevented RWAs from being used as collateral.
According to Redstone, the new layer introduces an onchain auction mechanism that is triggered during liquidity events. Liquidity providers can buy positions immediately by providing liquidity to protocols, taking into account the delayed redemption risk associated with the underlying assets.
The Baar, Switzerland-based company says its approach will help unlock the more than $30 billion in token RWAs currently sitting idle in DeFi, allowing users to borrow more efficiently in product-oriented spaces.
That figure is broadly in line with current RWA market estimates. Excluding stablecoins, real-world registered assets are worth more than $30 billion, led by products such as US Treasury exposures and personal loans, RWA.xyz reports.
Tokenized RWA market. Source: RWA.xyz
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Token alone does not solve liquidity constraints.
RedStone's product launch comes amid growing debate over whether the token will meaningfully improve liquidity.
As previously reported by Cointelegraph , industry participants at this month's Paris Blockchain Week noted that putting assets on the chain does not immediately make them tradable or usable in financial markets.
Real-world assets continue to face structural limitations, particularly in terms of liquidity and settlement speed.
“I think there's still this idea that making something illiquid magically makes it a liquid asset,” Ondo Finance's Oya Seliktemur said at a panel hosted by Cointelegraph.
Paris Blockchain Week on RWA Liquidity. Source: Cointelegraph
At the same time, DeFi lending has expanded alongside growing institutional demand and acceptance of RWAs as collateral. According to Binance Research, the sector grew 72 percent year-to-date through September, driven in part by institutional use of stablecoins and tokenized assets.
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