Fragmentation among blockchain networks is currently incurring a measurable economic toll on the tokenized asset market, with inefficiencies resulting in up to $1.3 billion annually lost in value.
In a report provided to Cointelegraph, the real-world asset (RWA) data provider RWA.io asserted that while blockchains have spurred innovation, they have also erected barriers that restrict liquidity and hinder capital flow across networks.
Consequently, tokenized RWAs are increasingly functioning as isolated markets instead of a cohesive financial system. The research indicated that identical or economically comparable assets frequently trade at varying prices across chains, while transferring capital between networks remains expensive and complicated.
Researchers noted that these inefficiencies obstruct the market’s ability to self-correct through arbitrage, an essential mechanism for efficient price discovery.
“This fragmentation is the largest barrier preventing the market from achieving its multi-trillion-dollar potential,” remarked Marko Vidrih, co-founder and chief operating officer at RWA.io.
“In traditional finance, the EU-wide SEPA Instant mandate demonstrates how value can transfer between accounts in seconds. Tokenized assets should be equally seamless,” Vidrih emphasized.
Price inefficiencies and capital friction across chains
The report highlights that a notable effect of fragmentation is the ongoing price divergence for identical assets across various blockchains.
According to the report, economically identical tokenized assets often experience spreads of 1% to 3% across major networks, despite being backed by the same underlying assets. In traditional finance, arbitrage would swiftly close such market gaps.
However, cross-chain arbitrage remains impractical due to technical challenges, fees, delays, and operational risks, the report states. It explains that the costs to move assets typically outweigh the price differences, allowing inefficiencies to linger.
Beyond price discovery, RWA.io estimated that transferring capital between non-interoperable chains results in losses of 2% to 5% per transaction due to exchange fees, slippage, transfer costs, gas fees, and timing risks. Overall, the report estimates an average loss of approximately 3.5% per capital reallocation.
If these patterns of fragmentation continue, RWA.io estimates that the friction costs could drain between $600 million and $1.3 billion from the market on an annual basis.
RWA.io predicts that tokenized real-world assets could evolve into a $16 trillion to $30 trillion market by 2030, cautioning that if current inefficiencies continue, the related value drag will scale accordingly.
Extrapolating today’s fragmentation-related inefficiencies onto a market of that size suggests potential annual losses between $30 billion and $75 billion, converting infrastructure limitations into a significant constraint on long-term growth.
Related: Tokenized stocks may be onchain, but the SEC still wants the keys
Tokenized assets gain traction despite inefficiencies
Despite the claims of inefficiency, tokenized assets are steadily gaining traction across both crypto-focused platforms and traditional financial institutions. Recently, several companies have announced plans to tokenize equities.
On Tuesday, the RWA-centric company Securitize disclosed its intentions to launch compliant, on-chain stock trading.
On Thursday, the cryptocurrency exchange Coinbase introduced a stock trading feature, enabling users to invest directly in stocks through its application.
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