DePIN (Decentralized Physical Infrastructure Networks) refers to blockchain projects that distribute ownership and revenues of physical infrastructure (wireless networks, solar panels, EV chargers, data centers) to <a href="https://claude-me.com/en/glossary/core-concepts/token/">Token</a> holders. When DePIN device revenues (electricity fees, network traffic fees) are tokenized as RWA-like fixed income instruments, the DePIN and RWA concepts begin to converge — DePIN token holders don't just hold governance tokens but claims on real physical asset cash flows.

When a borrower's collateral value drops past the protocol's <a href="/en/glossary/derivatives-and-leverage/liquidation/" target="_blank">Liquidation</a> threshold (typically when LTV exceeds 75-95%), the protocol automatically sells (liquidates) part or all of the collateral to repay the loan, paying 'liquidation bonuses' to liquidators — typically 5-15% of collateral. The liquidation mechanism allows DeFi lending protocols to protect lenders from losses even without credit scores.

Your loan amount ÷ collateral's current market value, expressing the borrowing ratio relative to collateral. LTV = 80% means: you pledged $10,000 of assets and borrowed $8,000. LTV is the most important risk management parameter in DeFi lending protocols and <a href="/en/glossary/fixed-income/tokenized-private-credit/">Tokenized Private Credit</a> — higher LTV means more borrowing and greater <a href="/en/glossary/derivatives-and-leverage/liquidation/" target="_blank">Liquidation</a> risk; lower LTV means lower capital efficiency but larger safety <a href="https://crypto-bible.com/en/glossary/derivatives-and-leverage/margin/" target="_blank">Margin</a>.

A mechanism for calculating credit risk scores for wallet addresses using verifiable on-chain behavioral history data (loan repayment records, <a href="/en/glossary/derivatives-and-leverage/liquidation/" target="_blank">Liquidation</a> history, DeFi participation depth). The goal is to evolve DeFi from 'overcollateralization' to 'credit lending' — borrowers don't need to deposit collateral exceeding the loan amount but instead obtain credit lines through on-chain credit records. However, it faces the fundamental challenge of Sybil attacks (creating new wallets to reset credit history) and remains in early experimental stages.

The collateral provided by a borrower exceeds the loan amount, with the excess serving as a buffer. For example, pledging $15,000 in assets to borrow $10,000 gives a 150% collateralization ratio. Overcollateralization is the core mechanism DeFi lending protocols and tokenized stablecoins (DAI) use to protect lenders against asset price volatility.

In the crypto context, 'Real-World Assets' refers to traditional assets existing outside the blockchain (government bonds, equities, real estate, gold, corporate loans) whose ownership or income rights are tokenized and brought on-chain, enabling DeFi users to hold and use them. RWA is the bridge connecting traditional finance and decentralized finance.

"Real Yield" distinguishes cash flows generated by genuine real-world economic activity from artificially inflated APY sustained by token emission. In the RWA context, real yield refers specifically to income tokenized assets earn from underlying real-world production: interest on tokenized Treasuries, lending rates on <a href="/en/glossary/fixed-income/tokenized-private-credit/">Tokenized Private Credit</a>, rental income from tokenized real estate. These returns are backed by actual cash flows and require no new token minting to sustain. By contrast, many early DeFi protocols (Curve, Compound) delivered high APY largely by distributing protocol tokens (CRV, COMP) to liquidity providers — tokens that are themselves inflationary, meaning holders earned "printed money" rather than productive cash flows. RWA's core value proposition is precisely this: bringing cash-flow-backed, sustainable, asset-supported yield onchain.

RWA liquidity risk is the risk that when you want to sell a tokenized asset, you cannot find a buyer at a fair price within a reasonable time — or if you can sell, only at a steep discount. Tokenization puts an asset on-chain, but it doesn't automatically create secondary-market depth. Tokenized real estate and private credit secondary markets are often very thin; investors in a rush to exit may face significant discounts or find no buyer at all. This is one of the most commonly overlooked core risks in RWA investing.

RWA market size means the total value of real-world assets that have been tokenized and placed on a blockchain. But the figure you see varies enormously depending on what's counted: only on-chain tokenized Treasuries, private credit, and commodities (roughly $26–32 billion in 2026), or stablecoins too (over $300 billion)? Add institutional forecasts for 2030 (ranging from $2 trillion to $30 trillion), and the same "market size" can be quoted as tens of billions or tens of trillions. Understanding this gap matters more than memorizing any single number.

The RWA secondary market is where tokenized real-world assets trade after issuance, allowing holders to sell tokens without directly redeeming with the issuer. Secondary markets theoretically offer greater flexibility and shorter exit times, but RWA secondary-market liquidity is extremely thin compared to equities or major cryptocurrencies. Most tokenized Treasury products (OUSG, BENJI) average only a few million dollars in daily secondary volume; tokenized real estate or private credit may have only tens to hundreds of thousands. This is far below the theoretical redemption value of the underlying assets. The core reason: tokenization does not create liquidity from nothing — it only reduces technical friction. If the underlying asset (commercial real estate, private corporate loans) lacks an active secondary market, the onchain token version does too. When evaluating any RWA product, investors must treat actual secondary-market depth as a core consideration, not just the issuer's claim of "always tradeable."

Tokenized asset investors face a core choice: deposit assets in a single protocol (Aave, Morpho) and earn the baseline yield (holding strategy), or switch between platforms, stack yield across multiple DeFi protocols, and farm tokens for potentially higher returns (yield-farming strategy). Holding aims for stable annualized returns with low friction; <a href="https://crypto-bible.com/en/glossary/defi-basics/yield-farming/" target="_blank">Yield Farming</a> chases APY maximization but requires constant rebalancing, exposes you to slippage risk and contract risk, and runs up gas costs. The trade-offs in taxes, time commitment, and risk tolerance are massive.