Liquidity play people for suckers and chain abstraction: the culprit restricting RWA development

Author: Bai Ding, Xian Rang

Blockchain technology is reshaping the global financial system, and RWA has become a bridge connecting traditional finance and DeFi. Once traditional assets such as real estate, artworks, bonds, and gold are converted into on-chain tokens, global asset flow and ownership fragmentation can be achieved, marking an undeniable revolution in financial technology.

According to current market data, the market capitalization of non-stablecoin RWA has reached 33.7 billion USD and is expected to exceed one trillion by 2030. All achievements are attributed to the trustlessness and transparency provided by blockchain in asset custody and circulation, but it is evident that RWA is also facing challenges in liquidity fragmentation and security.

The concept of RWA originates from the digital transformation of traditional assets through blockchain, mapping physical assets into programmable tokens, thereby absorbing liquidity from around the globe. According to the latest report, the RWA tokenization market is expanding at a compound annual growth rate (CAGR) of over 50%, with the main driving factors including the maturity of DeFi, improvements in the regulatory environment, and the influx of institutional investors.

For companies in traditional industries, issuing RWA has multiple positive significances.

First, it expands the financing channels. Traditional financing methods often rely on bank loans or stock issuance, but these methods have high thresholds and long cycles. Through RWA, companies can tokenize assets such as real estate or intellectual property, directly attracting global investors for low-cost financing. For example, a real estate company can split a property into thousands of tokens, each requiring only a few hundred dollars, and this low-threshold approach can greatly reduce financing costs.

Secondly, RWA enhances asset liquidity. For instance, artwork or private equity often has very poor liquidity, with transactions taking months from proposal to completion. However, with on-chain RWA tokens, these assets can be traded instantly on the secondary market at any time.

Then, RWA promotes innovation in financial services and effective risk diversification. Traditional investment institutions can create new types of financial products through tokenization, such as yield-bearing tokens, allowing token investors to receive dividends from asset earnings. At the same time, the RWA of heavy assets like real estate can fragment ownership to attract diversified investors, effectively diversifying risks.

In addition, RWA has enhanced the competitiveness of certain companies. In the wave of digital transformation, companies that adopt blockchain technology are more likely to gain resources within the Web3 ecosystem and attract the favor of investment and financing institutions. For example, in August last year, Longxin Group partnered with Ant Group to complete the country's first financing based on new energy assets using the RWA method, with some of Longxin's charging piles serving as RWA anchored assets, and the financing amount reached one hundred million RMB.

Overall, RWA can revitalize traditional companies, helping them transition from closed local markets to an open system on a global scale. However, despite the significant meaning and rapid development of RWA, a core pain point restricts its growth: in the Web3 world, there are too many public chains, and liquidity is fragmented across hundreds of public chains, leading to severe disconnection.

In fact, similar phenomena are also common in the traditional Internet field. Before the World Wide Web (WWW) became the mainstream text data transmission protocol, there were several competitors, such as Gopher, Archie, WAIS, Usenet, and BBS. These systems or protocols could provide file retrieval, forum communication, or file transfer functions, but due to various limiting factors, they ultimately operated independently without establishing a unified and efficient consensus.

After Tim Berners-Lee proposed the concept of the World Wide Web in 1989, it quickly became popular due to hypertext links, multimedia support, and user-friendliness. By 1995, the World Wide Web had basically established its dominant position, ending the chaotic and incompatible state of Internet text transmission protocols, and achieving a unified, open, and inclusive network system on a global scale.

Compared to traditional internet, blockchain has long lacked a unified standard due to its deep ties with financial capital, geopolitical factors, and other elements. Additionally, everyone wants to create a public chain, and even after more than a decade of development, it has yet to achieve technological standardization like traditional internet; today, it remains in a multipolar state. Many public chains have their own set of technical standards and independent ecosystems, which has led to a serious problem—liquidity fragmentation:

Different public chains such as Ethereum, Solana, and Sui have their own advantages, but assets cannot flow seamlessly across chains, forcing traders to be limited to the liquidity pools of specific chains.

For example, an RWA token issued on Ethereum may not be easily transferable to Solana. This pain point magnifies into a systemic issue.

First, insufficient liquidity leads to significant price fluctuations. The trading volume of single-chain RWAs is often limited and easily manipulated by large holders, exposing investors to high slippage risks.

Secondly, the opportunity cost is high. Users need to switch wallets and assets across multiple chains, increasing operational complexity and security risks.

Thirdly, from an ecological perspective, single-chain issuance hinders the deep integration of RWA and DeFi, and fails to fully leverage cross-chain DeFi yield acquisition or lending opportunities.

This is the “island effect” of blockchain, where the consensus mechanisms and token standards of different chains (such as the ERC-20 standard and SPL standard) are incompatible, and asset transfers rely on cross-chain bridges, which are often the weakest link in the system. Cross-chain bridges not only affect the development of RWA but also limit the growth of the entire blockchain industry.

Current Cross-Chain Technology and Its Pain Points

To solve the blockchain island problem, various cross-chain technologies have emerged, but most solutions fail to perfectly achieve the transfer of multi-chain liquidity, not to mention that many cross-chain bridges do not support RWA assets. As of today, the simplest and most straightforward multi-signature cross-chain bridges still dominate, but this solution has already encountered countless failures. By June 2025, losses from hacks on cross-chain bridges exceeded $2.8 billion, the vast majority of which were multi-signature cross-chain bridges.

For RWA, any security vulnerability can lead to huge losses due to the involvement of high-value physical assets, which is much more complex and difficult to solve than mere Web3 issues. Therefore, cross-chain issues have become one of the bottlenecks in the development of RWA, and how to efficiently mobilize liquidity within a multi-chain ecosystem is a serious problem.

Another significant pain point of traditional cross-chain bridges is the long delay. The verification of multi-signature bridges requires multiple nodes to reach consensus, and transferring assets from Ethereum to Solana can take several minutes to half an hour, which is clearly unacceptable for those accustomed to instant payments in traditional financial systems. In high-frequency trading scenarios, high latency severely restricts the circulation efficiency of RWA, especially during market volatility, where even second-level delays can lead to substantial losses.

The operational experience of cross-chain bridges is another significant bottleneck. To give a simple example: if a regular user wants to use B coin on A chain to purchase D coin on C chain, the so-called “ABCD transaction,” they must go through a cumbersome process: first exchanging to a shared asset on a DEX on A chain, then transferring it to C chain via the cross-chain bridge, and finally completing the transaction on a DEX on C chain.

The entire process requires users to manually complete tasks in at least three dApps, which not only involves switching between multi-chain wallets and paying gas fees but also requires an understanding of the operational logic of bridging protocols. Non-expert Web3 users find it extremely difficult to manage, and potential Web3 users abandon participation in on-chain interactions due to the complexity of cross-chain operations, accounting for almost over 95%, severely limiting the popularity of RWA and the expansion of the Web3 ecosystem.

The Rise of Chain Abstraction and Case Studies

According to the analysis above, the limitations of traditional cross-chain bridges in terms of security, speed, and user experience can no longer meet the needs of the rapid growth of RWA and the expansion of the Web3 ecosystem. Centralized risks, transaction delays, and cumbersome operation processes not only hinder the full-chain liquidity of RWA assets but also restrict the participation of non-expert users, slowing down the popularization of Web3.

In this context, Chain Abstraction has gradually gained attention as an emerging concept, providing a new perspective for solving cross-chain interoperability.

Chain abstraction is a grand vision of Web3, referring to the shielding of various complex operational details and cumbersome components through a single user interface. This allows users to be unaware of the existence of major public chains and liquidity pools, enabling them to automatically obtain liquidity from different public chain ecosystems via a one-click cross-platform on a single platform. It provides the best trading experience through the process of “interpreting user intent → splitting orders → routing → completing transactions.”

For example, on the UniversalX platform, we can see the liquidity distribution of the CRV token across four public chains. The platform can automatically split large buy orders from users into multiple smaller buy orders, interacting in different pools to achieve the minimum slippage loss. To achieve this effect, there must be a mature full-chain interaction system behind it.

Apart from UniversalX, some other cutting-edge projects have begun to fully explore the potential of chain abstraction and intent platforms, attempting to reshape the issuance and circulation model of RWA through bridge-less interoperability and unified settlement mechanisms.

Taking PicWe as an example, this solution aggregates full-chain liquidity through omni-chain infrastructure and enables one-click issuance of RWA, raising $1 million through RWA public fundraising for the Isfayram Phase I small hydropower station of AK BUURA Energy Group. Around PicWe's full-chain RWA solution, we can gain a deeper understanding of the impact of chain abstraction on RWA.

PicWe has built a full-chain swap system for RWA assets under IRO (Initial RWA Offering) using the stablecoin WEUSD as the medium of exchange and guided by user intent, with the core aim of eliminating dependence on traditional bridging. This design shields the complexity of cross-chain operations and optimizes liquidity and security.

The chain abstraction implementation of PicWe is centered around the Chain Abstract Transaction Model (CATM). This model is essentially a distributed transaction coordination framework that deploys standardized contracts on each chain integrated with PicWe, which serve as state synchronization and execution nodes. Unlike traditional cross-chain solutions that rely on intermediary bridges with a “locking-minting” process, CATM adopts an intention-driven execution logic:

Users submit transaction intents on the source chain, and the system automatically matches and settles through the contract network without manual intervention from the user for inter-chain transfers. This abstract layer treats multiple chains as a logical unit, where users perceive only a single transaction entry point, while the underlying contracts handle validation, routing, and release, ensuring that intents are executed atomically across multiple chains.

The key technology supporting CATM is the Omni-Chain Permissionless Bidding Orchestration Protocol (OPBOP), an open bidding orchestration protocol that allows any liquidity provider (LP) to participate in cross-chain order matching without permission. OPBOP works similarly to a decentralized auction market:

When a user initiates a cross-chain purchase intention, the protocol broadcasts the order details to the contract pool of the target chain, and LPs bid to provide the required assets based on real-time quotes. The bidding process is embedded with a time decay mechanism - the initial quote is higher, and as more LPs respond, the price gradually decreases until the optimal match is reached.

In this way, not only is low-threshold liquidity injection achieved, but economic incentives can also encourage LPs to actively bridge supply gaps, avoiding the static locking of traditional bridges.

If OPBOP is the technical foundation for PicWe's abstract chain swap, the stablecoin WEUSD is an important medium in this process.

WEUSD is minted 1:1 by users collateralizing USDC and can be redeemed at any time. In the specific process of the “ABCD transaction” mentioned earlier, B coin on chain A is first swapped into WEUSD on chain A, then automatically converted by PicWe's smart contract into WEUSD on chain C, and finally swapped into D coin. This entire process is completed with one click in the PicWe exchange, and users are completely unaware of the existence of the cross-chain bridge and WEUSD, as if their B coin was directly exchanged for D coin.

In DeFi, WEUSD will serve as collateral for lending, enabling multi-chain yield farming; on the RWA platform, it bridges TradFi assets such as bonds or real estate tokens, ensuring compliant circulation and undertaking the yield settlement of RWA assets; in cross-chain payments, WEUSD becomes a universal exchange medium.

As PicWe connects to more chains, even all public chains, WEUSD will become the settlement layer for the entire blockchain ecosystem, supporting DeFi, RWA platforms, and cross-chain payments. If this process can be effectively promoted, we may see the emergence of a standardized RWA full-chain liquidity protocol.

Conclusion

The rise of RWA opens up vast prospects for connecting traditional finance with decentralized ecosystems in Web3. However, the fragmentation of cross-chain liquidity, security risks, and the complexity of user experience remain core pain points that constrain its potential. The island effect caused by single-chain issuance, the high costs and delays of traditional cross-chain bridges, and the participation barriers for non-expert users collectively suppress the global circulation of RWA and the innovative vitality of Web3.

Chain abstraction, as an emerging paradigm, shields the complexity of multi-chain operations and enables the seamless flow of assets. Chain abstraction is not only expected to solve the cross-chain interoperability dilemma but also to provide higher capital efficiency and security for RWA. Perhaps when the technology of chain abstraction matures in the future, the cross-chain issues will truly be resolved, allowing RWA to transition from a hundred billion to a trillion market, and genuinely achieve deep integration of traditional and digital finance.