Discussion of

"Liquidity Mechanisms in DeFi: Design and Fragmentation in Illiquid RWA Markets"

by Ralf Laschinger, Heiko Leonhard, Gregor Dorfleitner, and Wolfgang Schäfers

 

Discussant: Katya Malinova

DeGroote School of Business, McMaster University

CBER 6th Annual Conference · June 4–5, 2026
New York University, New York, NY, USA

Tokenized RWA. Fractional. Tradable. Liquid?

Does tokenization create liquidity?
Not by itself.
Does liquidity beget liquidity?
Not here. The issuer seeds but nobody truly follows.
Three mechanisms — AMM, P2P, Buyback. Where does trading go?
Real estate evidence: (somewhat) sorts by size.  P2P takes 84%.
 
  • US real estate: $55T
  • REITs: $1.4T
  • tokenized: ~$0

June 2, 2026 updated version of a Chainalysis blog figure

Market cap growth of tokenized RWA asset classes - to $1 Billion

Not all RWAs are created equal

… nor supposed to — Cong, Mayer & Rabetti (2026):

Different tokenization goals

Integration

already-liquid assets join the on-chain ecosystem

Enhance transferability

creating a secondary market 

 

This paper's focus

Why expect tokenization to beget liquidity?

  • Divisibility/Fractional Ownership - akin to stock splits
    • Apple Inc. 2014, 7-for-1, $645 → $92
    • "to make Apple stock more accessible to a larger number of investors" 
  • (Easy) Tradability:
    • Tel Aviv: corporate bonds trade in a limit order book & very liquid (Abudy & Wohl, RoF 2018)
  • Yet RealT: little liquidity, little activity
    • ~9,200 wallets
    • $41M traded in six years
    • $9K per property per year
  • Too early? No trust in "tokenized"?
  • Is it the organization (and fragmentation) of trading?
  • Or is it the asset itself?

Six-year stats:

  • 752 rental properties
  • ~9,200 wallets
  • 777,038 trades — ≈ $50 each
  • $41M — $9K per property/yr

REITs democratized access in 1960. What do tokens add (undo)?

Problem REIT Property token
Huge lot size → fractional claims ✓ ✓✓  $50 of a house
Hard to trade, limited access → democratize access ✓ ✓✓  anyone*, anywhere*
Locked-in capital → tradability ~ ✓ ✓✓  24/7
Idiosyncratic risk → pooling ✓ ~ ✓ DIY 
Hands-on management → professional, monitored mgmt ✓ ~  outsourced but who monitors?
Unverified valuation → audited disclosure ✓ ~  issuer-reported, periodic 

Transferrable? And where? AMM, P2P, or Buyback?

  • Sorting?
    • AMM = small, P2P = large
    • LOB vs "upstairs" (blocks)
    • venue pecking order: Menkveld, Yueshen & Zhu 2017 JFE (execution vs cost)
  • Or: winner takes all?
    • liquidity begets liquidity → one venue (Pagano 1989 QJE)
  • Here: looks like one venue winning

Is this bad news for AMMs? Not necessarily ...

  • AMM design — active research.
  • **E.g. on LP compensation (= AMM fee):
    • Hasbrouck, Rivera & Saleh (MS 2026):
      • ↑ fee → deeper pool → ↓ price impact → ↑ volume
    • Malinova and Park 2026 "Learning from DeFi ...":
      • AMM fee ∝ σ · √(q/V) — ↑ volatility, ↓ volume
  • Here: 0.25%, hardcoded
  • AMM fees not enough compensation → issuer pays incentives to LPs
    • incentives stop → liquidity gone (not unique to AMM ... Park & Stinner 2026, DeFi lending)

**with apologies to the many others in this literature, many in this room

... But: is Real Estate built for 24/7 trading?  (after Fig. 2 Cong, Mayer & Rabetti WP)

Asset value adjustment speed ↑

Underbuilt

Permissioned wholesale pilots on liquid assets

Integration benefits forgone

 

Well matched (fast)

Tokenized Treasuries, equities

 

 

Well matched (slow)

Closed-end, gated, or lock-up tokenized illiquid vehicles

 

Speed-mismatched - liq transformation

Real Estate!

Buy&Hold in normal times - run risk under stress (Blackstone REIT: gated withdrawals 2022–23)

corp. bond ETFs — same mismatch, but professionally managed: Koont, Ma, Pástor & Zeng, RFS 2025

Trading speed →

But: corp bonds are very liquid in a Tel-Aviv LOB (Abudy & Wohl, RoF 2018). Why?

Transparent ownership, Opaque control

July 2025: TRO — rent → escrow, Buyback suspended

  • Paper: "a shock to the redemption facility"
    • but — also news about the asset itself!
    • can we disentangle? The size split helps (?)
    • spreads widen for large, narrow for small 

More questions arise:

  • dispersed ownership — agency problem?
  • a mechanism against tokenized lemons?

Mortgage Professional America, July 7, 2025

Added ex post (web version): two papers I learned of only after the session, both directly relevant:

• Augustin, Chen, Qian & Shin (2025), From Bricks to Blocks: Tokenization and the Financialization of Real Estate

• Chemla & Tinn (2026), Digital Ownership: The Tokenization of Real-World Assets

Better rails don't automatically createreinvent
liquidity, information, nor governance.

Very nice paper.

Go read it.