Fragmentation between blockchain networks is currently causing substantial economic repercussions within the market for tokenized assets, leading to an estimated loss of up to $1.3 billion each year due to inefficiencies.

In a report submitted to Cointelegraph, the data provider specializing in real-world assets (RWA), RWA.io, noted that while blockchain technology has spurred innovation, it has also erected barriers that hinder liquidity flow and capital mobility across various networks.

Consequently, tokenized RWAs have often functioned more like isolated markets instead of a cohesive financial ecosystem. The report highlighted that similar or economically equivalent assets frequently exchange at differing prices across different blockchains, while transferring capital between networks remains complicated and costly.

According to the researchers, these inefficiencies obstruct the market’s capability to correct itself through arbitrage, a process essential for efficient price discovery.

“This fragmentation is the single greatest impediment to the market realizing its multi-trillion-dollar potential,” said Marko Vidrih, co-founder and chief operating officer at RWA.io.

“In traditional finance, the EU-wide SEPA Instant mandate shows how value can move across accounts in seconds. Tokenized assets should be just as frictionless,” Vidrih added.

Price Inefficiencies and Capital Friction Across Chains

The report highlights that one of the main effects of fragmentation is the ongoing price disparity for identical assets issued on varying blockchains.

It stated that economically equivalent tokenized assets frequently trade within a 1% to 3% price range across major networks, despite representing claims on the same underlying assets. Unlike traditional finance, where arbitrage would swiftly correct such market discrepancies, crosschain arbitrage is hindered by various technical challenges, fees, delays, and operational risks.

The report claims that the relocation costs far exceed the price differences, allowing these inefficiencies to endure. On top of this, RWA.io projected that moving capital between incompatible chains could incur losses ranging between 2% to 5% per transaction. This is attributed to exchange fees, slippage, transfer costs, gas fees, and timing risks, leading to an average estimated loss of about 3.5% for capital reallocation.

If these patterns of fragmentation persist, RWA.io believes that associated friction costs could drain between $600 million and $1.3 billion annually from the market.

RWA.io anticipates that the market for tokenized RWAs could flourish into a $16 trillion to $30 trillion industry by 2030, warning that if current issues continue, the related economic drag could scale with that growth.

The application of existing fragmentation-related frictions to such a market size hints at potential annual losses ranging between $30 billion and $75 billion, transforming infrastructure limitations into a substantial hurdle for long-term expansion.

Tokenized Assets Gain Traction Despite Inefficiencies

Despite these claims of inefficiency, tokenized assets are still experiencing widespread adoption across both crypto-native platforms and conventional financial houses. This week, several companies announced their plans to tokenize equities. For instance, RWA-focused company Securitize shared its intention to begin compliant on-chain stock trading.

Furthermore, crypto exchange Coinbase rolled out a stock trading feature that allows users to invest directly in stocks via its application.