Asset Tokenization and Changes in Trading Paradigms

On-Chain Mapping of Real World Assets (RWA)

Tokenizing real world assets (RWA) is not simply about digitizing assets, but rather about combining legal, technological, and financial structures to map ownership, income rights, or cash flows of real-world assets into verifiable and tradable on-chain certificates.

This process typically involves multiple layers: legal confirmation of real-world asset ownership, off-chain custody and valuation mechanisms, and the issuance and management of on-chain tokens or contracts. Common types of RWA include government bonds, real estate income rights, accounts receivable, and commodities. Through tokenization, these assets gain greater liquidity and composability and can more easily access global markets.

However, it is important to emphasize that the credibility of RWA does not come solely from blockchain itself; it still relies on the robustness of off-chain legal systems and custody structures.

Differences Between On-Chain and Traditional Trading Mechanisms

Compared to traditional financial transactions, on-chain trading demonstrates clear differences in both process and logic. Traditional transactions usually depend on centralized matching, clearing, and settlement systems, while on-chain trading completes value transfer and state updates within a single system.

From the perspective of trading experience and mechanisms, on-chain transactions have the following characteristics:

• Transactions are completed almost in real time, with highly synchronized clearing and settlement
• Rules are predefined by smart contracts, with execution requiring no manual intervention
• Transaction records are publicly accessible and results can be verified by anyone

These differences not only improve efficiency but also change the behavior of market participants, making arbitrage, market making, and risk management more programmable.

Compliance, Risk Control, and Asset Credibility Challenges

Once assets are tokenized, risks do not automatically disappear; new challenges may actually emerge. Especially when dealing with real world assets, compliance and risk control become key factors determining whether large-scale adoption is possible.

In practical implementation, major challenges include:

• Whether the mapping between on-chain assets and off-chain legal rights is clear
• How KYC, AML, and other compliance requirements can be integrated with decentralized structures
• Whether asset valuation, settlement, and default handling mechanisms are reliable

Without effective risk control and regulatory coordination, asset tokenization may remain a mere formality rather than truly gaining the trust of institutions and mainstream capital.

Boundaries Between TradFi and DeFi Integration

As asset tokenization scales up, the boundary between traditional finance (TradFi) and decentralized finance (DeFi) is gradually blurring. More institutions are attempting to issue assets on-chain, settle transactions, or participate in liquidity markets, while DeFi protocols are actively incorporating compliant assets and institutional participants.

However, this integration is not without limits. TradFi places greater emphasis on compliance, stability, and risk isolation, while DeFi pursues openness, transparency, and composability. The future financial system is unlikely to be dominated by a single model; instead, it will likely form a hybrid structure at different levels: adopting blockchain efficiency at the infrastructure layer while retaining regulatory and legal frameworks at the institutional level.