RWA narrative is so strong, but why are all RWA tokens falling? I think the logic was flawed from the beginning.

Author: Jiayi Jiayi

I’ve thought about whether to write this for a long time. I have RWA projects on hand, and writing this might seem like shooting myself in the foot. But this issue really deserves a direct answer.

On-chain government bonds exceed $4B+, tripling in value over the past year. BlackRock’s BUIDL fund has attracted several hundred million dollars in a single quarter. Franklin Templeton, HSBC, and others are entering the space. The TVL of RWA is one of the few metrics still rising in this bear market.

But when you look at the tokens of these projects—almost all green, trending downward. Some have fallen over 90% from their highs.

Why?

Some say: Retail investors can’t get in. That answer is half correct but outdated. There are projects already solving this problem—register and retail users can participate in RWA yields. The access barrier has been lowered. Yet, token prices are still falling.

I believe many RWA projects have never understood the essence of the project from the start

RWA products + TOKEN need to serve their respective roles

The token economic model is fundamentally flawed.

The most common death formula for all RWA-related TVL projects looks like this:

Users deposit TVL to earn RWA yields → Simultaneously issue tokens as extra rewards → Users keep selling tokens → Token price drops → Continue issuing more tokens to subsidize → No one dares to buy tokens

The core logic here is: tokens become subsidy tools, not value carriers.

If you think about the business logic this way, the only action for token holders is—sell. No one needs to buy tokens because there’s no additional benefit. To get RWA yields, users can just deposit assets directly—no need to hold tokens at all. This creates a market with perpetual selling pressure and no buying interest.

Many DeFi projects die here. They deposit TVL for yields, distribute airdrops, reward tokens—round after round. No one buys, only sells. The project’s token reserves grow, prices plummet, and eventually liquidity dries up.

The RWA track is now repeating this cycle.

So what should be done?

Since I work in strategic consulting and growth strategies, I boil down the problem to the core—RWA’s business itself.

RWA projects should focus their resources on one thing—finding truly good RWA assets.

Not designing increasingly complex token incentive systems.

What makes a good RWA asset? Four standards:

1. Attractive APY. The yield must be compelling enough to attract users, competitive with traditional finance, and not lower than bank savings.
2. Consensus. The asset itself should have market recognition—government bonds, credit products backed by reputable institutions—things users understand and trust.
3. Stability. Not high-risk, high-reward speculative products. The core value proposition of RWA is stable, real returns.
4. Security. The underlying asset’s risk control must be solid, and the asset should not default.

When the underlying assets are good enough, users will naturally come to earn yields. At this point, the role of tokens should be: holding tokens unlocks access to better assets, higher yields, and priority quotas.

Demand propagates from the asset side to the token side, creating a real reason to buy. Not the other way around—using token subsidies to attract users, only to find no one wants to hold the tokens in the end.

The narrative around RWA is real, the data is real, and institutional participation is real.

But no matter how strong the narrative, it can’t support a token model that is fundamentally flawed from the start.

I predict that the next successful RWA project will first solidify the asset side, then discuss token value. Not relying on token rewards to pull TVL, but supporting the token with TVL. The sequence is reversed—no matter how compelling the story or how many market gurus endorse it, it won’t save a flawed design.

Good assets attract users, users support the token. Reversing this—using tokens to subsidize a product no one truly wants—is a flawed approach.