Why Asset Managers Need Native DeFi Products, Not Wrappers

Wrappers like wstETH or tokenized ETFs create isolated liquidity pools, competing with the underlying asset. This fragments TVL and increases slippage for all users.

• Double the Pools: Underlying asset (e.g., ETH) and its wrapper (e.g., wstETH) require separate, competing liquidity.
• Higher Slippage: Trades suffer from ~30-50% higher effective fees due to fragmented depth across Uniswap, Curve, and Balancer.

Wrapped assets rely on centralized price oracles (Chainlink, Pyth) to maintain peg, creating a systemic single point of failure and manipulation risk absent in native assets.

• Single Point of Failure: Oracle downtime or manipulation directly breaks the wrapper's redemption mechanism.
• Latency Arbitrage: ~2-5 second oracle update delays create guaranteed arbitrage opportunities, extracting value from LPs and users.

Wrappers cannot be natively used in DeFi's core money legos (e.g., Aave, Compound, MakerDAO) without explicit, risky integrations, limiting their utility to basic swaps.

• Integration Lag: Protocols must manually add support, creating months of delay and smart contract risk for each new wrapper.
• Limited Utility: Excluded from $10B+ of DeFi lending and leverage markets, relegating wrappers to second-class financial citizens.

Issues tokenized versions of real-world assets (RWAs) like U.S. Treasuries directly on-chain, bypassing the inefficiency of wrapping existing ETFs.\n- Direct On-Chain Ownership: Eliminates the custodian and wrapper token layer, reducing points of failure and fees.\n- Programmable Yield: Enables native integration with DeFi lending markets (e.g., Aave, Compound) for collateralized borrowing against yield streams.

Provides a native on-chain capital marketplace for institutional borrowers, creating yield sources that don't exist in TradFi.\n- Underwritten Risk: Professional pool delegates perform KYC and credit analysis, creating a permissioned but composable layer.\n- Capital Efficiency: Lenders earn yield from real business activity (e.g., market-making, venture debt) without relying on synthetic wrappers or derivatives.

Wrapping a yield-bearing asset (e.g., stETH) into a cross-chain version (e.g., wstETH) severs its native yield-generating properties, forcing asset managers to choose between liquidity and returns.\n- Yield Leakage: Each wrapper adds a layer of trust and ~10-50 bps in annual fees, eroding returns.\n- Settlement Risk: Relies on bridge security (e.g., LayerZero, Wormhole), introducing a catastrophic failure point absent in native issuance.

Protocols like Centrifuge and Tokeny enable asset originators to mint compliant, permissioned tokens natively on-chain with embedded transfer restrictions.\n- Regulatory Primitives: Embed KYC/AML checks directly into the token's transfer logic, enabling a single source of truth across all DeFi venues.\n- Capital Unlock: Native RWAs can be used as collateral in lending markets without wrapper approval, unlocking $10B+ in currently stranded capital.

Aave's permissioned liquidity pool and native overcollateralized stablecoin demonstrate a full-stack approach to compliant DeFi.\n- Whitelisted Pools: Institutions access DeFi yield through KYC-gated liquidity pools, avoiding the regulatory gray area of public wrappers.\n- Native Monetary Policy: GHO stablecoin is minted natively within the Aave ecosystem, allowing for protocol-controlled interest rates and direct integration with its credit markets.

Tokenizes intellectual property and research data as Non-Fungible Tokens (IP-NFTs) on-chain, creating a new asset class impossible to wrap.\n- Direct Funding & Royalties: Researchers receive funding natively in crypto; investors gain direct, tradable claims on future revenue.\n- Composable Research: IP-NFTs can be licensed, fractionalized, and used in DeFi as collateral, creating a native financial layer for science.

Wrapped assets (e.g., wBTC, stETH) create a liquidity silo, preventing direct access to DeFi's native yield engines like Aave, Compound, and Curve. This intermediation layer siphons fees and introduces settlement lag.

• Direct Yield Access: Native integration unlocks 5-15% APY from lending and LP staking, not just the wrapper's base rate.
• Capital Efficiency: Eliminate the ~1-3% mint/burn spread and gas overhead of wrapping, freeing capital for compounding.

Wrappers reintroduce the centralized custodian risk DeFi was built to eliminate. Native assets live on-chain with cryptographic finality, governed by transparent, auditable code.

• Sovereign Custody: Assets are held in smart contracts like Maker's PSM or native vaults, not a custodian's balance sheet.
• Verifiable Proofs: Real-time on-chain attestations (e.g., via Chainlink Proof of Reserve) replace opaque audit reports.

Wrapped assets are inert tokens; native assets are programmable financial primitives. This enables automated strategies across Uniswap, Balancer, and Yearn without bridging layers.

• Atomic Execution: Bundle lending, swapping, and staking in a single transaction, reducing MEV exposure and slippage.
• Protocol Revenue: Capture fees directly by providing native liquidity to AMMs, rather than paying them to a wrapper gateway.