RedStone launches Settle to enable $30B in RWA collateral

RedStone, a decentralized oracle provider based in Baar, Switzerland, announced RedStone Settle, an onchain settlement layer designed to let tokenized real-world assets (RWAs) with 60- to 180-day redemption windows be used as collateral in decentralized finance lending.

The product introduces an auction-based liquidation mechanism that runs onchain when a borrower’s position needs to be closed. The auction allows liquidated positions to be sold immediately while the underlying assets complete their offchain redemption processes over weeks or months.

Under the system, liquidity providers bid to purchase liquidated positions at auction. Winning bidders supply protocols with the cash needed to cover liquidations right away and then assume the delayed redemption risk associated with the underlying RWA as the offchain settlement proceeds.

RedStone estimates the approach could make more than $30 billion in tokenized RWAs available as collateral. Industry tallies value tokenized real-world assets, excluding stablecoins, at more than $30 billion, led by products offering U.S. Treasury exposure and private credit.

The design addresses a mismatch between fast onchain liquidation requirements used by many lending protocols and the long redemption periods common to tokenized funds and bonds. Protocols that rely on near-instant liquidations have generally excluded assets with multi-month redemption timelines because onchain sales cannot wait for offchain settlements to complete.

Oya Celiktemur of Ondo Finance warned that “there’s still this idea that tokenizing something illiquid will somehow magically make it a liquid asset, which is just not true.” RedStone’s settlement layer creates a market mechanism intended to convert slow-to-redeem tokenized positions into tradable claims during liquidation events.

RedStone described Settle as complementary to price oracles and other onchain infrastructure; the company said the layer focuses on settlement mechanics rather than price feeds. By automating liquidations through auctions, Settle aims to provide immediate cash to protocols in default scenarios while shifting redemption timing risk to participants that buy liquidated positions.

Industry data show DeFi lending expanded about 72% year-over-year through September, supported in part by institutional use of stablecoins and tokenized assets. Differences in settlement speed between onchain systems and offchain asset redemptions have limited the use of many tokenized RWAs as collateral. RedStone’s design places immediate liquidity provision and the assumption of delayed redemption risk in the hands of market participants willing to manage that exposure.