The significance of tokenization extends beyond 'putting stocks on-chain'; it lies in the series of actions traders take after going on-chain: betting, hedging, and leveraging.
Written by: Nina Bambysheva, Forbes
Translated by: Saoirse, Foresight News
Today, let's talk about a seemingly niche yet intricate area in the crypto space: perpetual futures for tokenized real-world assets (RWAs). Sounds convoluted? Many in the community believe that what can truly ignite the RWA boom may not be the currently popular tokenized stocks, but the derivatives hidden behind them. Let's dig into this matter today.
Quickly Understand 'Perpetual Contracts'
Perpetual futures (also known as 'perpetual contracts') are a type of cryptocurrency derivative that allows traders to bet on the future price of an asset, with contracts that never expire. For instance, if you are bullish on Bitcoin, you can buy a Bitcoin perpetual contract and hold it for as long as you want.
This type of trading does not require full upfront payment; only a margin — a small portion of the trading amount — is needed, with the rest covered by leverage. This means that small amounts of capital can leverage large positions, which is one of the reasons why perpetual contracts are favored by traders.
Of course, some may ask: since there is no expiration date, how do we prevent the contract price from disconnecting from the actual market? The answer lies in the 'funding rate' mechanism. Every few hours, parties on opposite sides of the market settle fees: if there is stronger demand from the bulls, they pay the bears; if the market turns bearish, the bears pay the bulls. During the holding period, this fee is automatically deducted from or credited to the account. For example, if you hold a $10,000 Bitcoin long contract and the funding rate for a certain period is 0.01%, then at settlement, you need to pay the bear $1; if you are in a short position, you will receive $1.
It sounds complex, but traders are quite fond of it. According to CoinGecko data, the trading volume of perpetual contracts on centralized exchanges reached $58.5 trillion in 2024, more than three times that of the spot market, while decentralized exchanges also saw a trading volume of $1.5 trillion.
The Collision of Tokenization and Perpetual Contracts
Now let's talk about another hot topic in the cryptocurrency field: tokenization. Industry executives often say 'the market is going on-chain'; from Larry Fink of BlackRock to Vlad Tenev of Robinhood, they have all painted such a vision: in the future, Tesla stocks, Apple stocks, bonds, and even your grandmother's antique collection could all be traded on the blockchain. The market never closes, settlement times are reduced from days to seconds, and funds tied up in the settlement process can be reactivated.
Although platforms like Robinhood and Kraken have launched tokenized stocks, more trading activity occurs in the perpetual contracts of these assets. The reason is simple: traders want not only to hold tokenized Apple stocks but also to profit from betting on their price fluctuations.
For example, xStocks, launched in late June, as a tokenized product for stocks and ETFs, can be traded on centralized exchanges like Kraken and Bybit, as well as decentralized exchanges like Raydium and Jupiter on the Solana chain, with a current trading volume reaching $558 million.
There are also iAssets launched by Injective Labs, the developers of the Injective blockchain, traded through the Helix decentralized exchange, with a cumulative trading volume exceeding $1.7 billion. iAssets do not directly represent stocks but are perpetual futures linked to 'seven tech giants', Circle, and even SharpLink Gaming, which is Ethereum-centric. Like most cryptocurrency perpetual contracts, iAssets support leveraged trading, usually up to 25 times.
"Last week alone, the trading volume was $107 million, and the week before, it reached $291 million," said Eric Chen, co-founder and CEO of Injective. Trading fees typically hover around 0.05%, and Injective does not actually hold stocks of Circle or Nvidia; instead, it obtains real-time stock prices from traditional markets through 'oracles', allowing iAssets to track these prices for traders to speculate on the underlying stocks.
John Wang, the newly appointed cryptocurrency head at Kalshi, summarized the appeal of RWA perpetual contracts: "Want to trade $1 billion in Apple-related assets? You don't actually need to raise $1 billion in stocks; just have corresponding long and short positions of equivalent value." In simple terms, no one is actually buying Apple stocks; traders are merely betting on price fluctuations, and these bets add up to a trading volume of $1 billion. Coupled with leverage — at 25x leverage, $40 million can control $1 billion in positions.
"Most RWAs are not assets that people want to hold long-term. Traders don't care about dividends, transfer rights, or voting at shareholder meetings; they just want to trade: going long 10x on the S&P 500, shorting Tesla, swinging oil based on CPI data, betting on interest rate trends..."
This statement has merit. Some joke that the core product in the cryptocurrency field is 'tokens'; if that is the case, then new speculative methods may be the 'real innovation' in this industry. This is also part of the reason why Polymarket, Pump.fun, and the perpetual contract giant Hyperliquid, which holds 80% of the market share, have been so successful.
So the question arises: before tokenized RWAs take a firm foothold, will perpetual contracts make their spot trading irrelevant? Injective's Chen believes not. He stated that without tokenized Tesla stocks as a market anchor, synthetic derivatives like iAssets would struggle due to pricing chaos and insufficient liquidity.
In traditional finance, market makers providing liquidity for derivatives (options or futures) of assets like Tesla often hedge risk through trading the underlying stocks, and the same is true in the cryptocurrency field. Tokenized spot assets provide traders with risk hedging tools — even though perpetual contract trading dominates, spot RWAs remain foundational.
Upon reflection, traders are actually betting on the 'derivatives of derivatives' for companies like Tesla and Nvidia, which sounds somewhat absurd, as if cryptocurrency has complicated things further. So why not trade options or futures directly through a formal brokerage?
Because for cryptocurrency players, these products are more 'user-friendly'!
"Compared to options, perpetual contracts are much simpler." said TK Kwon, co-founder of the tokenization startup Theo. "The pricing and funding rate mechanisms are basic; anyone can understand them (although I have my doubts), and they are very capital efficient." In fact, this means that traders only need to prepay a small portion of funds to control large positions through leverage, and they can renew indefinitely without worrying about expiration dates or the complex algorithms behind option pricing.
In contrast, the barriers to trading stock options or futures in the U.S. are much higher — usually requiring 'qualified investor' status or trading through brokers that can access platforms like the Chicago Mercantile Exchange (CME).
TK Kwon hopes that Theo can eventually operate both spot and perpetual contract markets simultaneously, such that on the same platform, one could buy tokenized gold (spot) and bet on the future price of gold (gold perpetual contract). This model could spawn strategies like 'arbitrage trading', allowing traders to profit from the small price differences between the two. For professionals, this is standard practice; for the overall market, it can enhance liquidity.
And this day may come soon: perpetual contract giant Hyperliquid is planning to upgrade its system, allowing anyone to create new perpetual contract markets for almost any asset.
Ultimately, the significance of tokenization extends beyond 'putting Apple stocks on-chain'; it lies in the series of actions traders take after going on-chain: betting, hedging, and leveraging. The creativity of cryptocurrency developers should not be underestimated, especially when designing new trading (speculative) methods for the digital assets they create. This creativity can be both beneficial and potentially troublesome.
