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

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 straightforward answer.

On-chain government bonds exceed $4B+, tripling in value over the past year. BlackRock’s BUIDL fund has raised several hundred million dollars in a single quarter. Franklin Templeton and HSBC are also entering the space. The TVL of RWA projects 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, heading downward. Some have fallen over 90% from their highs.

Why?

Some say: Retail investors can’t get in. That answer is partly correct but outdated.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 fundamentally misunderstood the essence of the project from the start.

RWA products + TOKEN require each to do its part. The token economic model is flawed.

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

User deposits TVL to earn RWA yields → Simultaneously issues tokens as extra rewards → Users keep selling tokens → Token price drops → More tokens are issued 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 to sell. No one needs to buy tokens because there’s no additional benefit. To get RWA yields, users can just deposit assets—no need to hold tokens. This creates a market with only selling pressure and no buying interest.

Many DeFi projects die here. They deposit TVL for yields, give airdrops, and reward tokens—cycle after cycle. 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 pattern.

So what should be done?

Since I work in strategic consulting and growth strategies, I’ve boiled down the core issue to the RWA business itself.

RWA projects should focus 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 for 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 risk control on the asset side must be solid, and the underlying assets should not default.

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

Demand is transmitted from the asset side to the token side, creating real reasons to buy. Not the other way around—using tokens as subsidies to attract users, only to find that no one actually wants to hold the tokens.

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 fundamentally flawed token model.

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 using TVL to support the token. Reversing the order—no matter how compelling the story or how great the market experts—won’t save it.

Good assets attract users; users support the token. Doing it the other way around is just using tokens to subsidize a product no one truly wants.

Y Strategy—Jiayi