A new system targets the mismatch between fast DeFi liquidations and slow asset redemptions, a key barrier to the use of tokenized assets in lending markets.
RedStone, a decentralized oracle provider, has launched a new settlement layer for decentralized finance, aiming to make tokenized real-world assets (RWAs) usable as collateral in lending protocols.
The system, called RedStone Settle, is designed to address a long-standing structural issue in DeFi. While lending platforms such as Aave rely on near-instant liquidations to manage risk, RWAs, including tokenized funds and bonds, typically have redemption periods ranging from 60 to 180 days. This mismatch has largely prevented RWAs from being used as collateral.
According to RedStone, the new layer introduces an onchain auction mechanism that is triggered during liquidation events. Liquidity providers can step in to purchase positions immediately, supplying protocols with liquidity while assuming the delayed redemption risk tied to the underlying assets.
