Tokenized real-world assets (RWA) have soared to an impressive $8 billion in total value locked (TVL) this year, outperforming Bitcoin and Ether in both market performance and risk-adjusted returns. These assets, tokenized on blockchains, encompass a diverse array of tangible financial instruments such as private equity, real estate, government securities, commodities, and various financial obligations.

The rise in popularity of tokenized RWAs within decentralized finance (DeFi) gained momentum as traditional finance bond yields outpaced low-risk DeFi yields during the bear market from 2022 to 2023. Aggressive interest rate hikes by the United States Federal Reserve made U.S. Treasury yields competitive with stablecoin yields in DeFi, despite the latter's inherently lower risk profile. For instance, as of June 13, one-year Treasury bills offered yields ranging from 5% to 5.24%, comparable to DeFi stablecoin yields on platforms like Aave, which ranged from 3.73% to 7.46%.

In response to higher borrowing costs and subdued DeFi activity, several protocols began offering tokenized U.S. Treasurys and private loans on blockchain ecosystems. The average annual percentage yield for tokenized private loans reached 9.57% in early June, capitalizing on renewed institutional interest as the crypto market recovered in 2024. This surge in institutional activity contributed significantly to the current $8 billion TVL of RWA projects.

Notably, asset management giant BlackRock entered the space with its BUIDL fund, swiftly becoming the largest provider of tokenized U.S. Treasurys. Initially launching with a market cap of $180 million, it has since grown to $462.27 million, capturing a dominant 30% market share ahead of competitors like Franklin Templeton’s Benji Investments fund.

The growth of the RWA market is not only evident in TVL but also in the impressive token performance across related projects. In May alone, RWA tokens saw gains of 55.20%, accumulating a staggering 224.57% year-to-date increase. Leading performers include TrueFi, Ondo, Dusk, Clearpool, and TokenFi.

To gauge risk-adjusted performance, Cointelegraph Research calculated the Sharpe ratios of RWA tokens using daily returns from January 1 to May 31. Notably, Ondo Finance stood out with the highest Sharpe ratio at 4.78, reflecting its robust return relative to risk. TokenFi followed with a Sharpe ratio of 2.66, while TrueFi, Dusk, and Clearpool also demonstrated favorable ratios compared to Bitcoin and Ether during the same period.

Ondo Finance’s success has been driven by product innovation, including the launch of the U.S. Government Bond Fund (OUSG) on its platform, which leverages tokenized derivatives of BlackRock’s U.S. Treasurys ETF. Expanding onto the Solana blockchain further enhanced accessibility, enabling instant investments and redemptions. As of June 13, Ondo ranks as the third-largest issuer of tokenized U.S. Treasurys, underscoring its pivotal role in the burgeoning RWA market.

Overall, the surge in tokenized real-world assets underscores a growing trend where blockchain technology is leveraged to democratize access to traditional financial instruments, offering investors enhanced yield opportunities in a rapidly evolving digital economy.