※ URL(Korean): https://www.kisdi.re.kr/bbs/view.do?bbsSn=114677&key=m2101113055776&pageIndex=3&sc=&sw=

The Korea Information Society Development Institute (KISDI, President Sangkyu Rhee) has recently released its Basic Research Report (24-09) titled “A Study on the Applicability of Decentralized Finance Algorithms in the Real-World Asset Token Market for Revitalizing the Digital Economy.”

The report presents a theoretical and empirical analysis of the potential application of decentralized finance (DeFi) algorithms in the Real-World Asset (RWA) market, which has been growing rapidly. It also derives policy implications for revitalizing the digital economy. RWA, which refers to the digital tokenization and trading of tangible assets, offers new opportunities for both issuers and investors by enhancing asset liquidity and portfolio diversification. Furthermore, it is expected to contribute to price discovery and the efficient allocation of resources.

The report outlines the current market landscape across key RWA categories—including private credit, U.S. Treasury bonds, commodities, and real estate—and analyzes the structure and operational mechanisms of representative projects. It also examines the structure and pricing mechanisms of DeFi algorithms, particularly Automated Market Makers (AMMs) and lending protocols, discussing their functions and limitations.

By analyzing DeFi transaction data recorded on the blockchain and synthesizing recent academic studies, the research found that AMM and lending algorithms have the potential to partially address liquidity and efficiency challenges found in traditional financial markets. However, the study emphasizes that applying these mechanisms to real-asset markets would require certain preconditions—such as the complementary role of centralized verification institutions, regulatory framework development, and mitigation of information asymmetry between asset issuers and investors.

Policy implications presented in the report include the establishment of disclosure and evaluation systems to prevent “lemon markets,” exploration of the potential use of algorithm-based market makers to enhance liquidity, the design of ownership systems appropriate to different asset types, and the need for legal and institutional reforms along with consumer protection measures for RWA markets.

Associate Research Fellow Chan Kim stated, “This study is among the first attempts to examine, using both theoretical and data-driven approaches, whether decentralized finance based on blockchain technology can play a meaningful role in real-asset markets. We hope it will serve as a useful reference for future policy discussions and regulatory design.”