RedStone launches Settle, infrastructure addressing liquidation and redemption window problems in tokenized RWA collateral.
Tech & Launches ·
Tokenized funds structured with extended redemption windows—such as a 90-day period—cannot be liquidated with the immediacy of native blockchain assets like BTC or ETH, creating a friction point when such instruments are used as collateral in lending protocols. RedStone has identified this mismatch as a practical obstacle to real-world asset integration onchain and introduced Settle, infrastructure designed to address the settlement and liquidation challenges tied to RWA collateral.
The core issue stems from behavioral differences between tokenized RWAs and traditional onchain collateral. While instantaneous liquidation works for assets with continuous spot markets and unfettered exit, RWA-backed tokens honor contractual redemption windows that block rapid conversion to cash, leaving lenders exposed to bad debt accumulation and protocol insolvency risk during market stress. Settle appears to operate as a settlement layer bridging that gap.
What remains unclear is the technical mechanism Settle employs—whether it functions as a derivatives overlay, a liquidity facility, a secondary market, or another structure—and which RWA issuers or lending platforms have committed to integration. The scope of assets addressable by the product and its fee or incentive model are not yet public.