The Current Bottlenecks of RWA Tokenization

Over the past few years, a growing volume of real-world assets (RWAs) has been brought on-chain and tokenized. Despite this progress, RWA tokenization continues to face persistent structural bottlenecks. In many cases, assets stop at the point of issuance—successfully minted on-chain, but fail to fully utilize what blockchains are designed to enable.

When tokenized assets remain idle in wallets after issuance, DeFi’s most fundamental feature—composability—never truly comes into play. In such cases, tokenization changes the asset’s form, but not its financial function. Value may be represented digitally, but it does not circulate, interact, or compound within the on-chain financial system.

At a deeper level, the limitations of current RWA tokenization can be distilled into three main issues.

• Insufficient liquidity: Many RWA tokens trade in shallow markets, with limited secondary liquidity and little support from derivatives or structured trading instruments. As a result, although assets technically exist on-chain, they remain difficult to circulate, inefficient to trade, and costly to use as collateral. Capital efficiency remains low. In traditional markets, stocks and bonds are supported by a wide range of tools — options, futures, leverage — that actively generate liquidity. Most on-chain RWAs still lack comparable liquidity structures, leaving assets effectively “stuck” despite being tokenized.

• Lack of structured risk layering: Most RWA tokens today are issued as single, all-in-one exposures. Risk and return are bundled together, offering investors no clear way to choose how much risk they want to take. A single token that simultaneously carries principal risk, credit risk, and yield uncertainty is rarely suitable for either conservative or aggressive capital. Without separating these risk components into layers, markets also struggle to price time value and credit risk independently. This weakens price discovery and prevents capital from entering at appropriate risk-adjusted levels.

• Weak composability and limited standardization: Many RWA tokenization projects operate in isolation, each with its own asset formats and custom designs. This makes it difficult for RWA tokens to integrate into DeFi as reusable building blocks — whether for lending, trading, or yield strategies. Without standardized financial “lego pieces,” RWAs cannot be reused the way assets like ETH or stablecoins are. As a result, RWA tokens may hold value, but see limited financial activity. They exist on-chain, but are rarely put to work.

Taken together, these constraints point to a clear conclusion: tokenization alone is not enough. As many industry observers have noted, moving assets such as real estate or equities on-chain without rethinking their financial structure does not turn them into productive components of on-chain finance. The deeper bottleneck is not the asset itself, but the absence of structures that allow assets to move, interact, and compound value on-chain. Building a structured layer for RWAs — analogous to what exists in traditional finance — has therefore become the next critical step. 

The Evolution of Structured Finance

To understand how this bottleneck may be resolved, it is useful to look at the historical evolution of structured finance in traditional markets. At its core, structured finance focuses on pooling assets and dividing them into layers, transforming illiquid assets into tradable securities with distinct risk and return profiles to match different investor preferences.

Modern structured finance can be traced back to the late 1960s, when U.S. government-backed institutions issued the first mortgage-backed securities (MBS). In 1968, Ginnie Mae guaranteed the first MBS issuance, pioneering the pooling and sale of residential mortgages to investors. Throughout the 1970s and 1980s, the mortgage securities market expanded rapidly.

By the mid-1980s, structuring techniques extended beyond mortgages with the emergence of asset-backed securities (ABS), initially backed by auto loans and credit card receivables. From that point on, a wide range of underlying assets — from student loans to royalty revenues — were packaged into ABS structures, forming a highly diverse and rapidly growing market.

In the late 1980s and 1990s, Wall Street introduced even more complex structures such as collateralized debt obligations (CDOs). In 1987, Drexel Burnham Lambert structured one of the first CDOs by bundling high-yield bonds into a single pool. The key innovation of CDOs lay in tranching: cash flows and risks were divided into senior, mezzanine, and junior layers.

Senior tranches offered lower risk and lower returns, while junior tranches absorbed losses first in exchange for higher expected yields. Through this structure, a single asset pool could attract both conservative and risk-seeking capital, expanding financing capacity and market liquidity.

At its core, structured finance relies on legally isolated special purpose vehicles (SPVs) to securitize asset pools and allocate priority and subordinated claims. Over time, this framework delivered several lasting innovations:

• Risk pricing and risk sharing: Cash flows are distributed in a defined order, granting senior investors priority repayment while junior investors absorb first losses in exchange for higher potential returns.

• Liquidity creation: Previously illiquid loans and receivables gain market pricing and tradability through standardized securities.

• Lower financing costs: Senior tranching introduces high-credit instruments that reduce the weighted average cost of capital for the asset pool.

• Specialization and scale: A mature ecosystem of originators, servicers, and investors emerged, supporting multi-trillion-dollar credit markets spanning housing, consumer finance, and corporate lending.

In this sense, traditional structured finance can be seen as a precursor to today’s RWA tokenization. By transforming fragmented assets into standardized, tradable products, it extended the reach of capital markets. The same evolutionary lesson applies to RWAs today: bringing the core principles of structuring on-chain may be key to overcoming current limitations in liquidity and integration. 

On-Chain Structuring in Practice: From Centrifuge to Maple and Beyond

In reality, a number of projects have already emerged within the DeFi ecosystem that are exploring how traditional structured finance logic can be combined with blockchain systems. These projects introduce mechanisms for layering and splitting risk across RWAs and crypto-native assets. The following cases are representative examples.

• Centrifuge (and the Tinlake Platform): Centrifuge is one of the earliest projects to bring real-world assets into DeFi. It adopts a structure similar to a “two-layer security” to finance asset pools on-chain. Each Tinlake pool issues two tokens: DROP tokens, which function as senior claims with lower risk and fixed returns, and TIN tokens, which act as junior claims that absorb first losses while capturing residual upside. This design directly mirrors the senior/subordinate tranching used in traditional structured finance. DROP holders receive stable returns, while TIN holders take on additional risk in exchange for higher expected yields. The dual-token structure gives asset originators greater flexibility and allows investors with different risk profiles to participate in the same asset pool, thereby improving overall liquidity. As analysts have observed, senior tranches such as DROP provide low-risk, stable income suitable for conservative capital, while junior tranches like TIN absorb more risk in return for higher potential returns. These layers enable structured credit markets to operate fully on-chain, supported by automated waterfall payment mechanisms and real-time net asset value updates. In this way, Centrifuge achieves a form of integration between DeFi and traditional securitization, while eliminating many intermediate layers. Notably, Centrifuge has also promoted the trading of its RWA yield tokens on decentralized exchanges, further improving liquidity. For example, the AAA-rated JAAA token — an on-chain CLO-style fund launched by Centrifuge — is tradable through DeFi platforms. This allows loan-based assets that are traditionally illiquid to benefit from continuous on-chain pricing and liquidity.

• Maple Finance: Maple is an on-chain institutional lending platform focused on unsecured or lightly collateralized loans. While Maple primarily serves institutional borrowers, its approach to risk mitigation draws directly from structured finance concepts. Maple lending pools introduce a Pool Cover mechanism, where subordinated capital provided by pool delegates and other stakers serves as a first-loss buffer in the event of default. Specifically, each Maple pool consists of two types of capital providers:
 senior lenders, who receive priority repayment, and Cover providers (including the pool delegate), who contribute junior capital and absorb losses first if a borrower defaults. As described in Maple’s documentation, lenders effectively function as senior tranches — impacted only at the final stage of liquidation — while Cover providers act as junior tranches that bear the earliest losses. This structure ensures that pool delegates have strong incentives to manage credit risk carefully, while providing senior lenders with a stronger safety buffer. Maple’s use of proactively subordinated risk capital closely resembles traditional forms of credit enhancement in structured finance, making on-chain unsecured lending more attractive to conservative capital.

• Goldfinch: Goldfinch is a DeFi lending protocol focused on emerging market credit and also adopts a two-layer capital structure. Its design separates capital into a Senior Pool and individual borrower pools. Within each borrower pool, community backers provide first-loss capital, functioning as the junior tranche. These backers assess borrower quality and invest their own funds as subordinated capital. The protocol then allocates a larger share of senior capital from the Senior Pool into the borrower pool based on a predefined leverage model. Under this structure, backers absorb losses first, while Senior Pool capital enjoys priority repayment. The model resembles a form of “crowdsourced due diligence combined with community-provided subordination and pooled senior capital.” Liquidity providers in the Senior Pool effectively act as senior creditors across all borrower pools. Their participation is represented by the FIDU token, which earns a stable yield sourced from aggregated loan interest. According to Goldfinch, Backers supply the true junior tranche capital that protects the Senior Pool, ensuring that senior liquidity is consistently shielded by more risk-bearing participants. To compensate backers for risk-taking and due diligence, 20% of the nominal interest generated by the Senior Pool is allocated to them. Through this mechanism, Goldfinch enables unsecured lending without traditional collateral, while distributing credit risk in a decentralized manner. To date, it has funded dozens of loans globally while maintaining a record of zero defaults.

• Ondo Finance: Ondo initially became known for its fixed and floating yield split products on-chain, aiming to provide DeFi investors with more stable, traditional-style return profiles. Its early vault products divide a capital pool into two segments: one group of users deposits funds to receive fixed returns, while the other absorbs market volatility in pursuit of amplified upside. This structure allows conservative investors to lock in predictable income, while more aggressive participants effectively take leveraged exposure to yield fluctuations. In essence, Ondo’s early products were decentralized structured products that layered DeFi yield streams. More recently, Ondo has expanded into the RWA space through partnerships offering tokenized U.S. Treasury exposure, such as OUSG. These products deliver low-risk returns backed by U.S. government bonds. According to analyses, Ondo is applying traditional financial strengths — stable yield and trusted assets — to blockchain systems through structured products. This allows users to earn Treasury yields without leaving DeFi, while insulating them from crypto market volatility. For example, OUSG enables investors to hold short-term U.S. Treasuries while retaining on-chain liquidity, allowing the token to be traded freely or used as collateral — a level of flexibility not available in traditional treasury investing.

• Pendle Finance: Pendle provides a more generalized mechanism for yield tokenization. It allows users to separate the future yield of any yield-bearing asset — such as staked ETH or interest-bearing stablecoins — from its principal value. Each yield-generating asset is split into two independently tradable tokens: PT (Principal Token), representing the principal portion and redeemable at face value at maturity, and YT (Yield Token), representing the future interest stream. This separation allows interest rates themselves to become tradable instruments. Investors can purchase YT to speculate on rising yields or hold PT to lock in principal safety. Pendle’s design closely resembles traditional strategies that separate zero-coupon bonds from coupon payments, introducing interest rate derivatives into DeFi. This expands the available strategy space for hedging, speculation, and fixed-rate positioning, while also improving liquidity and price discovery for the underlying assets.

Taken together, these projects demonstrate that the concept of structuring has already begun to take root on-chain. Whether through Centrifuge’s securitization of RWAs via dual tokens, Maple and Goldfinch’s layered credit designs, or Ondo and Pendle’s decomposition of yield streams, they all move in the same direction: translating mature structured finance mechanisms into programmable, decentralized financial building blocks. However, most of these explorations remain localized practices designed for specific assets or narrowly defined use cases. They have not yet converged into a unified paradigm. Each protocol maintains its own token formats and structural logic, with limited cross-protocol standardization. As a result, composability remains constrained. This naturally raises the next question: why might a comprehensive, standardized structuring paradigm become the key breakthrough for RWA adoption on-chain?

Why Structuring Is the Next Paradigm for RWAs

The cases above show that introducing structured finance concepts on-chain has already begun to improve liquidity, risk pricing, and composability. The reason structuring is likely to become the next paradigm shift for RWA tokenization lies in its ability to directly address the core limitations facing RWAs today, while elevating on-chain finance to a more advanced level.

• Precise risk pricing over one-size-fits-all exposure: Through structuring, different components of risk and return can be separated and priced independently by the market. For example, when a debt instrument is split into principal and interest components, markets can separately price pure time value (interest rates) and credit risk premiums. This enables more granular and transparent pricing. As described in AquaFlux documentation, separating principal, coupon, and risk allows each slice of risk and return to be mapped precisely to investors best suited to bear it. Investors only assume the risks they are willing to take, while overall financing costs decline due to broader capital participation.

• Improved on-chain liquidity and capital efficiency: Structured assets attract a wider range of capital and deepen market participation. In Centrifuge’s case, senior tranches allow conservative capital to enter RWA pools that would otherwise be inaccessible, providing stable liquidity. More importantly, once assets are structured into tradable components, they can be listed on decentralized exchanges, used as collateral, or supplied to liquidity pools. Yield-bearing RWA tokens can be traded, used for market-making, or borrowed against, transforming assets from static holdings into actively deployed capital. Continuous settlement, 24/7 trading, and programmability further enhance liquidity relative to traditional markets.

• Stronger DeFi composability: Structuring turns assets into standardized financial building blocks. When RWA tokens can be decomposed into simple and consistent modules, DeFi developers gain new primitives for building strategies. With structured P, C, and S tokens, users can construct combinations such as fixed-income positions (P + C), capital-protected yield strategies (P + S), or enhanced yield structures (C + S). These combinations can themselves be tokenized, traded, or integrated into lending and liquidity protocols — enabling forms of financial engineering that are difficult or impossible in traditional markets.

• Enabling derivatives and risk management ecosystems: Standardized structured assets serve as a foundation for derivatives markets. Once assets are decomposed and standardized, it becomes easier to build futures, options, swaps, indices, and ETF-like products around them. This creates a positive feedback loop: active derivatives markets deepen spot liquidity, which in turn attracts more participants and institutions. Just as equity markets are heavily driven by derivatives activity, RWAs must evolve beyond spot tokens toward a full-stack financial ecosystem in order to unlock similar growth dynamics.

• Building a familiar bridge for traditional capital: Structuring also speaks the language of traditional finance. On-chain implementations of senior/subordinate tranching and credit enhancement are easier for institutions to evaluate and adopt. Some on-chain structured products have already achieved AAA ratings — such as Centrifuge’s JAAA fund — while offering competitive risk-adjusted returns. Combined with blockchain transparency and automation, institutions gain the ability to monitor assets continuously and adjust exposure in real time. Once credibility and liquidity reach sufficient depth, institutional participation can scale significantly.

Taken together, structuring emerges as a critical key to resolving today’s RWA bottlenecks. It does not merely address liquidity and pricing issues but reshapes the broader architecture of on-chain finance. Moving from simple tokenization to standardized structured finance marks the transition from RWA 1.0 to RWA 2.0. In the former, assets are merely brought on-chain; in the latter, they become fully integrated, productive components of DeFi. As one industry commentary has observed, an open and unified RWAFi stack can transform static RWAs into dynamic, composable modules that are “derivatives-ready” from day one. If the DeFi Summer of 2020 was built on “money legos” like ETH and WBTC, the next wave may well emerge from “asset legos” anchored in real-world value — made possible by mature structuring frameworks.

AquaFlux: Reshaping On-Chain Structuring Through the Tri-Token Model

As one of the pioneers in on-chain structured finance exploration, AquaFlux proposes a unique Tri-Token model, setting a precedent for RWA on-chain structuring. AquaFlux re-maps traditional bond-like RWA products into three types of tokens: P, C, and S tokens, representing Principal, Coupon, and Shield (risk cushion) elements, respectively. This design aims to create a standardized, composable, and derivative-ready asset language to solve the structural problems of the current RWA market and grant on-chain assets unprecedented flexibility. 

• P-Token (Principal Token): P represents the principal component of the bond and is designed following zero-coupon bond logic. In AquaFlux, a P-Token can be redeemed 1:1 for a stable asset such as USD at maturity, effectively functioning as a bond that repays principal without periodic interest. As a result, P-Token holders receive capital protection—assuming no default—while foregoing interim yield during the holding period. This profile makes P-Tokens particularly suitable for risk-averse participants, such as DAO treasuries or institutional treasury teams, that prioritize principal preservation over yield. In essence, P resembles an on-chain short-term Treasury bill or time deposit.

• C-Token (Coupon Token): C represents the coupon, or interest-income, component of the bond and is structured as a fixed-rate cash-flow stream. Holding a C-Token grants the right to receive all scheduled interest payments from issuance until maturity. Conceptually, C-Tokens are similar to traditional strip bonds or annuity-style assets, offering a clean and predictable yield profile for investors seeking stable income without exposure to principal repayment risk.

• S-Token (Shield / Risk Buffer Token): S represents the residual, risk-bearing layer of the structure and functions as the junior, or equity, tranche. S-Token holders absorb losses first if the underlying asset defaults or underperforms, thereby protecting P- and C-Token holders. In return for assuming this higher level of risk, S-Token holders are entitled to residual upside, including surplus yield, protocol fees, and incentive distributions. When performance is strong, S offers leveraged upside; when defaults occur, it may be fully impaired. In traditional structured finance, S is analogous to the equity tranche.

Through the P/C/S model, AquaFlux achieves a full deconstruction of a single RWA bond by separating rights to principal repayment, interest income, and credit risk allocation—elements that are traditionally bundled together. As AquaFlux articulates, decoupling principal, coupon, and risk allows each specific slice of return and exposure to be mapped precisely to the most appropriate investor. This removes the need for participants to absorb a mixed bundle of risks they may not want, significantly improving market-level capital allocation efficiency and transparency.

Importantly, AquaFlux does not stop at proposing the Tri-Token concept in theory. Instead, it is designed as a composable set of fundamental primitives. The official documentation describes P, C, and S as financial “LEGO blocks” that can be freely assembled into a wide range of structured products. Several representative combinations include:

• P + C, which reconstructs complete bond exposure combining fixed coupon payments with principal repayment at maturity, suitable for conservative capital seeking predictable returns.

• C + S, which form a higher-yield coupon structure where fixed interest income (C) is augmented by subordinate risk exposure (S), increasing potential returns while introducing default risk. This configuration closely resembles mezzanine products in traditional structured finance and appeals to yield-seeking capital.

• A long C / short P position, which creates an on-chain carry-style strategy. In this setup, low-cost funding obtained through short P positions is used to capture fixed coupon income via C, allowing participants to express interest-rate views or construct leveraged yield strategies natively on-chain.

All of these configurations are enabled by AquaFlux’s standardized Tri-Token interface. Moreover, each composite strategy can itself be packaged into a new token or strategy contract and deployed across DeFi for trading, liquidity provision, or collateral use. In this sense, AquaFlux is laying the foundation for a new on-chain structured finance ecosystem: simple primitives, recombined in multiple ways, can give rise to a broad spectrum of financial products whose scope rivals decades of traditional derivatives and structured credit innovation. Crucially, these structures are executed entirely by smart contracts, reducing intermediary costs while enhancing transparency and composability.

Early market response points to strong interest in this modular approach. Following its launch on the Pharos testnet, AquaFlux reportedly recorded over 95 million interactions and participation from more than one million unique addresses within a short time frame. This traction suggests that both DeFi-native users and institutionally aligned participants are actively exploring standardized, composable RWA structuring mechanisms. AquaFlux also clearly positions itself as an infrastructure layer for the RWA ecosystem, aiming to serve as the foundational standard and coordination hub for on-chain structured products.

Simply put, AquaFlux is turning structured finance into an on-chain native language. The Tri-Token model provides the alphabet and grammar through which complex financial structures can be expressed using a small set of standardized components—P, C, and S. Once such a language gains broad adoption, interoperability between protocols naturally improves. Lending platforms could accept P-Tokens as collateral, yield aggregators could algorithmically split and recombine P/C/S to capture inefficiencies, and risk management protocols could build default-hedging tools around S-Tokens.

Just as ERC-20 standardized fungible tokens and catalyzed the emergence of DeFi, a widely adopted Tri-Token standard for RWAs could form the foundation of the next wave of on-chain financial innovation.

Conclusion: Structuring Is Not Just a Solution — It Is the New Language of On-Chain Finance 

Looking back at the evolution of financial markets, major paradigm shifts have almost always been driven by the emergence of new tools or new languages. Interest rate swaps made modern risk hedging possible. ETFs democratized diversified investment. Smart contracts transformed trust into executable code. Today, as crypto systems and traditional finance continue to converge, structured finance is poised to become the next foundational language of on-chain finance.

For RWA tokenization, structuring does far more than solve immediate issues around liquidity and pricing. It opens a much broader design space in which real-world assets can actively participate in DeFi. Structuring allows RWAs to communicate clearly—with investors about risk and return, with protocols about composability, and with regulators and institutions about enforceable financial logic. It enables on-chain finance to describe risk with far greater precision, turning coarse, monolithic assets into fine-grained, programmable units of value.

Looking ahead, it is not difficult to imagine a world in which corporate bond issuances are natively split into P, C, and S tokens from day one, allowing global investors to subscribe directly to different tranches without intermediaries. Real estate projects could decompose rental income and capital appreciation into separate on-chain instruments, each attracting different forms of capital. Portfolio managers could construct highly customized on-chain portfolios by combining structured tokens across assets and risk profiles, adjusting hedges and exposures in real time.

In such an environment, “structuring” would no longer be a niche term reserved for financial engineers. It would become a new primitive for DeFi. As several industry analyses have noted, when RWAs cease to be merely assets that happen to reside on-chain and instead become the foundational substrate of on-chain finance, a new DeFi expansion cycle may emerge.

— AquaFlux Research

The Current Bottlenecks of RWA Tokenization

Over the past few years, a growing volume of real-world assets (RWAs) has been brought on-chain and tokenized. Despite this progress, RWA tokenization continues to face persistent structural bottlenecks. In many cases, assets stop at the point of issuance—successfully minted on-chain, but fail to fully utilize what blockchains are designed to enable.

When tokenized assets remain idle in wallets after issuance, DeFi’s most fundamental feature—composability—never truly comes into play. In such cases, tokenization changes the asset’s form, but not its financial function. Value may be represented digitally, but it does not circulate, interact, or compound within the on-chain financial system.

At a deeper level, the limitations of current RWA tokenization can be distilled into three main issues.

• Insufficient liquidity: Many RWA tokens trade in shallow markets, with limited secondary liquidity and little support from derivatives or structured trading instruments. As a result, although assets technically exist on-chain, they remain difficult to circulate, inefficient to trade, and costly to use as collateral. Capital efficiency remains low. In traditional markets, stocks and bonds are supported by a wide range of tools — options, futures, leverage — that actively generate liquidity. Most on-chain RWAs still lack comparable liquidity structures, leaving assets effectively “stuck” despite being tokenized.

• Lack of structured risk layering: Most RWA tokens today are issued as single, all-in-one exposures. Risk and return are bundled together, offering investors no clear way to choose how much risk they want to take. A single token that simultaneously carries principal risk, credit risk, and yield uncertainty is rarely suitable for either conservative or aggressive capital. Without separating these risk components into layers, markets also struggle to price time value and credit risk independently. This weakens price discovery and prevents capital from entering at appropriate risk-adjusted levels.

• Weak composability and limited standardization: Many RWA tokenization projects operate in isolation, each with its own asset formats and custom designs. This makes it difficult for RWA tokens to integrate into DeFi as reusable building blocks — whether for lending, trading, or yield strategies. Without standardized financial “lego pieces,” RWAs cannot be reused the way assets like ETH or stablecoins are. As a result, RWA tokens may hold value, but see limited financial activity. They exist on-chain, but are rarely put to work.

Taken together, these constraints point to a clear conclusion: tokenization alone is not enough. As many industry observers have noted, moving assets such as real estate or equities on-chain without rethinking their financial structure does not turn them into productive components of on-chain finance. The deeper bottleneck is not the asset itself, but the absence of structures that allow assets to move, interact, and compound value on-chain. Building a structured layer for RWAs — analogous to what exists in traditional finance — has therefore become the next critical step. 

The Evolution of Structured Finance

To understand how this bottleneck may be resolved, it is useful to look at the historical evolution of structured finance in traditional markets. At its core, structured finance focuses on pooling assets and dividing them into layers, transforming illiquid assets into tradable securities with distinct risk and return profiles to match different investor preferences.

Modern structured finance can be traced back to the late 1960s, when U.S. government-backed institutions issued the first mortgage-backed securities (MBS). In 1968, Ginnie Mae guaranteed the first MBS issuance, pioneering the pooling and sale of residential mortgages to investors. Throughout the 1970s and 1980s, the mortgage securities market expanded rapidly.

By the mid-1980s, structuring techniques extended beyond mortgages with the emergence of asset-backed securities (ABS), initially backed by auto loans and credit card receivables. From that point on, a wide range of underlying assets — from student loans to royalty revenues — were packaged into ABS structures, forming a highly diverse and rapidly growing market.

In the late 1980s and 1990s, Wall Street introduced even more complex structures such as collateralized debt obligations (CDOs). In 1987, Drexel Burnham Lambert structured one of the first CDOs by bundling high-yield bonds into a single pool. The key innovation of CDOs lay in tranching: cash flows and risks were divided into senior, mezzanine, and junior layers.

Senior tranches offered lower risk and lower returns, while junior tranches absorbed losses first in exchange for higher expected yields. Through this structure, a single asset pool could attract both conservative and risk-seeking capital, expanding financing capacity and market liquidity.

At its core, structured finance relies on legally isolated special purpose vehicles (SPVs) to securitize asset pools and allocate priority and subordinated claims. Over time, this framework delivered several lasting innovations:

• Risk pricing and risk sharing: Cash flows are distributed in a defined order, granting senior investors priority repayment while junior investors absorb first losses in exchange for higher potential returns.

• Liquidity creation: Previously illiquid loans and receivables gain market pricing and tradability through standardized securities.

• Lower financing costs: Senior tranching introduces high-credit instruments that reduce the weighted average cost of capital for the asset pool.

• Specialization and scale: A mature ecosystem of originators, servicers, and investors emerged, supporting multi-trillion-dollar credit markets spanning housing, consumer finance, and corporate lending.

In this sense, traditional structured finance can be seen as a precursor to today’s RWA tokenization. By transforming fragmented assets into standardized, tradable products, it extended the reach of capital markets. The same evolutionary lesson applies to RWAs today: bringing the core principles of structuring on-chain may be key to overcoming current limitations in liquidity and integration. 

On-Chain Structuring in Practice: From Centrifuge to Maple and Beyond

In reality, a number of projects have already emerged within the DeFi ecosystem that are exploring how traditional structured finance logic can be combined with blockchain systems. These projects introduce mechanisms for layering and splitting risk across RWAs and crypto-native assets. The following cases are representative examples.

• Centrifuge (and the Tinlake Platform): Centrifuge is one of the earliest projects to bring real-world assets into DeFi. It adopts a structure similar to a “two-layer security” to finance asset pools on-chain. Each Tinlake pool issues two tokens: DROP tokens, which function as senior claims with lower risk and fixed returns, and TIN tokens, which act as junior claims that absorb first losses while capturing residual upside. This design directly mirrors the senior/subordinate tranching used in traditional structured finance. DROP holders receive stable returns, while TIN holders take on additional risk in exchange for higher expected yields. The dual-token structure gives asset originators greater flexibility and allows investors with different risk profiles to participate in the same asset pool, thereby improving overall liquidity. As analysts have observed, senior tranches such as DROP provide low-risk, stable income suitable for conservative capital, while junior tranches like TIN absorb more risk in return for higher potential returns. These layers enable structured credit markets to operate fully on-chain, supported by automated waterfall payment mechanisms and real-time net asset value updates. In this way, Centrifuge achieves a form of integration between DeFi and traditional securitization, while eliminating many intermediate layers. Notably, Centrifuge has also promoted the trading of its RWA yield tokens on decentralized exchanges, further improving liquidity. For example, the AAA-rated JAAA token — an on-chain CLO-style fund launched by Centrifuge — is tradable through DeFi platforms. This allows loan-based assets that are traditionally illiquid to benefit from continuous on-chain pricing and liquidity.

• Maple Finance: Maple is an on-chain institutional lending platform focused on unsecured or lightly collateralized loans. While Maple primarily serves institutional borrowers, its approach to risk mitigation draws directly from structured finance concepts. Maple lending pools introduce a Pool Cover mechanism, where subordinated capital provided by pool delegates and other stakers serves as a first-loss buffer in the event of default. Specifically, each Maple pool consists of two types of capital providers:
 senior lenders, who receive priority repayment, and Cover providers (including the pool delegate), who contribute junior capital and absorb losses first if a borrower defaults. As described in Maple’s documentation, lenders effectively function as senior tranches — impacted only at the final stage of liquidation — while Cover providers act as junior tranches that bear the earliest losses. This structure ensures that pool delegates have strong incentives to manage credit risk carefully, while providing senior lenders with a stronger safety buffer. Maple’s use of proactively subordinated risk capital closely resembles traditional forms of credit enhancement in structured finance, making on-chain unsecured lending more attractive to conservative capital.

• Goldfinch: Goldfinch is a DeFi lending protocol focused on emerging market credit and also adopts a two-layer capital structure. Its design separates capital into a Senior Pool and individual borrower pools. Within each borrower pool, community backers provide first-loss capital, functioning as the junior tranche. These backers assess borrower quality and invest their own funds as subordinated capital. The protocol then allocates a larger share of senior capital from the Senior Pool into the borrower pool based on a predefined leverage model. Under this structure, backers absorb losses first, while Senior Pool capital enjoys priority repayment. The model resembles a form of “crowdsourced due diligence combined with community-provided subordination and pooled senior capital.” Liquidity providers in the Senior Pool effectively act as senior creditors across all borrower pools. Their participation is represented by the FIDU token, which earns a stable yield sourced from aggregated loan interest. According to Goldfinch, Backers supply the true junior tranche capital that protects the Senior Pool, ensuring that senior liquidity is consistently shielded by more risk-bearing participants. To compensate backers for risk-taking and due diligence, 20% of the nominal interest generated by the Senior Pool is allocated to them. Through this mechanism, Goldfinch enables unsecured lending without traditional collateral, while distributing credit risk in a decentralized manner. To date, it has funded dozens of loans globally while maintaining a record of zero defaults.

• Ondo Finance: Ondo initially became known for its fixed and floating yield split products on-chain, aiming to provide DeFi investors with more stable, traditional-style return profiles. Its early vault products divide a capital pool into two segments: one group of users deposits funds to receive fixed returns, while the other absorbs market volatility in pursuit of amplified upside. This structure allows conservative investors to lock in predictable income, while more aggressive participants effectively take leveraged exposure to yield fluctuations. In essence, Ondo’s early products were decentralized structured products that layered DeFi yield streams. More recently, Ondo has expanded into the RWA space through partnerships offering tokenized U.S. Treasury exposure, such as OUSG. These products deliver low-risk returns backed by U.S. government bonds. According to analyses, Ondo is applying traditional financial strengths — stable yield and trusted assets — to blockchain systems through structured products. This allows users to earn Treasury yields without leaving DeFi, while insulating them from crypto market volatility. For example, OUSG enables investors to hold short-term U.S. Treasuries while retaining on-chain liquidity, allowing the token to be traded freely or used as collateral — a level of flexibility not available in traditional treasury investing.

• Pendle Finance: Pendle provides a more generalized mechanism for yield tokenization. It allows users to separate the future yield of any yield-bearing asset — such as staked ETH or interest-bearing stablecoins — from its principal value. Each yield-generating asset is split into two independently tradable tokens: PT (Principal Token), representing the principal portion and redeemable at face value at maturity, and YT (Yield Token), representing the future interest stream. This separation allows interest rates themselves to become tradable instruments. Investors can purchase YT to speculate on rising yields or hold PT to lock in principal safety. Pendle’s design closely resembles traditional strategies that separate zero-coupon bonds from coupon payments, introducing interest rate derivatives into DeFi. This expands the available strategy space for hedging, speculation, and fixed-rate positioning, while also improving liquidity and price discovery for the underlying assets.

Taken together, these projects demonstrate that the concept of structuring has already begun to take root on-chain. Whether through Centrifuge’s securitization of RWAs via dual tokens, Maple and Goldfinch’s layered credit designs, or Ondo and Pendle’s decomposition of yield streams, they all move in the same direction: translating mature structured finance mechanisms into programmable, decentralized financial building blocks. However, most of these explorations remain localized practices designed for specific assets or narrowly defined use cases. They have not yet converged into a unified paradigm. Each protocol maintains its own token formats and structural logic, with limited cross-protocol standardization. As a result, composability remains constrained. This naturally raises the next question: why might a comprehensive, standardized structuring paradigm become the key breakthrough for RWA adoption on-chain?

Why Structuring Is the Next Paradigm for RWAs

The cases above show that introducing structured finance concepts on-chain has already begun to improve liquidity, risk pricing, and composability. The reason structuring is likely to become the next paradigm shift for RWA tokenization lies in its ability to directly address the core limitations facing RWAs today, while elevating on-chain finance to a more advanced level.

• Precise risk pricing over one-size-fits-all exposure: Through structuring, different components of risk and return can be separated and priced independently by the market. For example, when a debt instrument is split into principal and interest components, markets can separately price pure time value (interest rates) and credit risk premiums. This enables more granular and transparent pricing. As described in AquaFlux documentation, separating principal, coupon, and risk allows each slice of risk and return to be mapped precisely to investors best suited to bear it. Investors only assume the risks they are willing to take, while overall financing costs decline due to broader capital participation.

• Improved on-chain liquidity and capital efficiency: Structured assets attract a wider range of capital and deepen market participation. In Centrifuge’s case, senior tranches allow conservative capital to enter RWA pools that would otherwise be inaccessible, providing stable liquidity. More importantly, once assets are structured into tradable components, they can be listed on decentralized exchanges, used as collateral, or supplied to liquidity pools. Yield-bearing RWA tokens can be traded, used for market-making, or borrowed against, transforming assets from static holdings into actively deployed capital. Continuous settlement, 24/7 trading, and programmability further enhance liquidity relative to traditional markets.

• Stronger DeFi composability: Structuring turns assets into standardized financial building blocks. When RWA tokens can be decomposed into simple and consistent modules, DeFi developers gain new primitives for building strategies. With structured P, C, and S tokens, users can construct combinations such as fixed-income positions (P + C), capital-protected yield strategies (P + S), or enhanced yield structures (C + S). These combinations can themselves be tokenized, traded, or integrated into lending and liquidity protocols — enabling forms of financial engineering that are difficult or impossible in traditional markets.

• Enabling derivatives and risk management ecosystems: Standardized structured assets serve as a foundation for derivatives markets. Once assets are decomposed and standardized, it becomes easier to build futures, options, swaps, indices, and ETF-like products around them. This creates a positive feedback loop: active derivatives markets deepen spot liquidity, which in turn attracts more participants and institutions. Just as equity markets are heavily driven by derivatives activity, RWAs must evolve beyond spot tokens toward a full-stack financial ecosystem in order to unlock similar growth dynamics.

• Building a familiar bridge for traditional capital: Structuring also speaks the language of traditional finance. On-chain implementations of senior/subordinate tranching and credit enhancement are easier for institutions to evaluate and adopt. Some on-chain structured products have already achieved AAA ratings — such as Centrifuge’s JAAA fund — while offering competitive risk-adjusted returns. Combined with blockchain transparency and automation, institutions gain the ability to monitor assets continuously and adjust exposure in real time. Once credibility and liquidity reach sufficient depth, institutional participation can scale significantly.

Taken together, structuring emerges as a critical key to resolving today’s RWA bottlenecks. It does not merely address liquidity and pricing issues but reshapes the broader architecture of on-chain finance. Moving from simple tokenization to standardized structured finance marks the transition from RWA 1.0 to RWA 2.0. In the former, assets are merely brought on-chain; in the latter, they become fully integrated, productive components of DeFi. As one industry commentary has observed, an open and unified RWAFi stack can transform static RWAs into dynamic, composable modules that are “derivatives-ready” from day one. If the DeFi Summer of 2020 was built on “money legos” like ETH and WBTC, the next wave may well emerge from “asset legos” anchored in real-world value — made possible by mature structuring frameworks.

AquaFlux: Reshaping On-Chain Structuring Through the Tri-Token Model

As one of the pioneers in on-chain structured finance exploration, AquaFlux proposes a unique Tri-Token model, setting a precedent for RWA on-chain structuring. AquaFlux re-maps traditional bond-like RWA products into three types of tokens: P, C, and S tokens, representing Principal, Coupon, and Shield (risk cushion) elements, respectively. This design aims to create a standardized, composable, and derivative-ready asset language to solve the structural problems of the current RWA market and grant on-chain assets unprecedented flexibility. 

• P-Token (Principal Token): P represents the principal component of the bond and is designed following zero-coupon bond logic. In AquaFlux, a P-Token can be redeemed 1:1 for a stable asset such as USD at maturity, effectively functioning as a bond that repays principal without periodic interest. As a result, P-Token holders receive capital protection—assuming no default—while foregoing interim yield during the holding period. This profile makes P-Tokens particularly suitable for risk-averse participants, such as DAO treasuries or institutional treasury teams, that prioritize principal preservation over yield. In essence, P resembles an on-chain short-term Treasury bill or time deposit.

• C-Token (Coupon Token): C represents the coupon, or interest-income, component of the bond and is structured as a fixed-rate cash-flow stream. Holding a C-Token grants the right to receive all scheduled interest payments from issuance until maturity. Conceptually, C-Tokens are similar to traditional strip bonds or annuity-style assets, offering a clean and predictable yield profile for investors seeking stable income without exposure to principal repayment risk.

• S-Token (Shield / Risk Buffer Token): S represents the residual, risk-bearing layer of the structure and functions as the junior, or equity, tranche. S-Token holders absorb losses first if the underlying asset defaults or underperforms, thereby protecting P- and C-Token holders. In return for assuming this higher level of risk, S-Token holders are entitled to residual upside, including surplus yield, protocol fees, and incentive distributions. When performance is strong, S offers leveraged upside; when defaults occur, it may be fully impaired. In traditional structured finance, S is analogous to the equity tranche.

Through the P/C/S model, AquaFlux achieves a full deconstruction of a single RWA bond by separating rights to principal repayment, interest income, and credit risk allocation—elements that are traditionally bundled together. As AquaFlux articulates, decoupling principal, coupon, and risk allows each specific slice of return and exposure to be mapped precisely to the most appropriate investor. This removes the need for participants to absorb a mixed bundle of risks they may not want, significantly improving market-level capital allocation efficiency and transparency.

Importantly, AquaFlux does not stop at proposing the Tri-Token concept in theory. Instead, it is designed as a composable set of fundamental primitives. The official documentation describes P, C, and S as financial “LEGO blocks” that can be freely assembled into a wide range of structured products. Several representative combinations include:

• P + C, which reconstructs complete bond exposure combining fixed coupon payments with principal repayment at maturity, suitable for conservative capital seeking predictable returns.

• C + S, which form a higher-yield coupon structure where fixed interest income (C) is augmented by subordinate risk exposure (S), increasing potential returns while introducing default risk. This configuration closely resembles mezzanine products in traditional structured finance and appeals to yield-seeking capital.

• A long C / short P position, which creates an on-chain carry-style strategy. In this setup, low-cost funding obtained through short P positions is used to capture fixed coupon income via C, allowing participants to express interest-rate views or construct leveraged yield strategies natively on-chain.

All of these configurations are enabled by AquaFlux’s standardized Tri-Token interface. Moreover, each composite strategy can itself be packaged into a new token or strategy contract and deployed across DeFi for trading, liquidity provision, or collateral use. In this sense, AquaFlux is laying the foundation for a new on-chain structured finance ecosystem: simple primitives, recombined in multiple ways, can give rise to a broad spectrum of financial products whose scope rivals decades of traditional derivatives and structured credit innovation. Crucially, these structures are executed entirely by smart contracts, reducing intermediary costs while enhancing transparency and composability.

Early market response points to strong interest in this modular approach. Following its launch on the Pharos testnet, AquaFlux reportedly recorded over 95 million interactions and participation from more than one million unique addresses within a short time frame. This traction suggests that both DeFi-native users and institutionally aligned participants are actively exploring standardized, composable RWA structuring mechanisms. AquaFlux also clearly positions itself as an infrastructure layer for the RWA ecosystem, aiming to serve as the foundational standard and coordination hub for on-chain structured products.

Simply put, AquaFlux is turning structured finance into an on-chain native language. The Tri-Token model provides the alphabet and grammar through which complex financial structures can be expressed using a small set of standardized components—P, C, and S. Once such a language gains broad adoption, interoperability between protocols naturally improves. Lending platforms could accept P-Tokens as collateral, yield aggregators could algorithmically split and recombine P/C/S to capture inefficiencies, and risk management protocols could build default-hedging tools around S-Tokens.

Just as ERC-20 standardized fungible tokens and catalyzed the emergence of DeFi, a widely adopted Tri-Token standard for RWAs could form the foundation of the next wave of on-chain financial innovation.

Conclusion: Structuring Is Not Just a Solution — It Is the New Language of On-Chain Finance 

Looking back at the evolution of financial markets, major paradigm shifts have almost always been driven by the emergence of new tools or new languages. Interest rate swaps made modern risk hedging possible. ETFs democratized diversified investment. Smart contracts transformed trust into executable code. Today, as crypto systems and traditional finance continue to converge, structured finance is poised to become the next foundational language of on-chain finance.

For RWA tokenization, structuring does far more than solve immediate issues around liquidity and pricing. It opens a much broader design space in which real-world assets can actively participate in DeFi. Structuring allows RWAs to communicate clearly—with investors about risk and return, with protocols about composability, and with regulators and institutions about enforceable financial logic. It enables on-chain finance to describe risk with far greater precision, turning coarse, monolithic assets into fine-grained, programmable units of value.

Looking ahead, it is not difficult to imagine a world in which corporate bond issuances are natively split into P, C, and S tokens from day one, allowing global investors to subscribe directly to different tranches without intermediaries. Real estate projects could decompose rental income and capital appreciation into separate on-chain instruments, each attracting different forms of capital. Portfolio managers could construct highly customized on-chain portfolios by combining structured tokens across assets and risk profiles, adjusting hedges and exposures in real time.

In such an environment, “structuring” would no longer be a niche term reserved for financial engineers. It would become a new primitive for DeFi. As several industry analyses have noted, when RWAs cease to be merely assets that happen to reside on-chain and instead become the foundational substrate of on-chain finance, a new DeFi expansion cycle may emerge.

— AquaFlux Research