Deconstruction and Reassembly: How AquaFlux Uses "Structuring" to Define the Next Chapter of RWA

Structured finance is not only a solution but also a new language for on-chain finance. Written in this language, we look forward to seeing the expansion and reconstruction of the entire digital financial landscape, and to writing a new chapter in the integration of traditional finance and the blockchain world.

Article author, source: AquaFlux

Current Dilemmas of RWA Tokenization

In recent years, a large number of real-world assets (Real-World Assets, RWA) have been introduced into blockchain and tokenized, but the current RWA tokenization still faces many bottlenecks. Many tokenized assets remain only on the “on-chain” step and have not fully leveraged the advantages of blockchain. If these assets are just stored quietly in wallets after being on-chain, the most critical property of DeFi—the composability—cannot be realized. The main difficulties of current RWA tokenization include:

・Liquidity shortage: Many RWA markets are thinly traded, lacking mature secondary markets and financial derivatives support. This means that although assets are on-chain, they are difficult to transfer or collateralize effectively on-chain, leading to low capital efficiency. Compared to traditional markets with stocks and bonds that have rich derivatives (options, futures, leverage) supporting liquidity, on-chain RWA currently lack similar “liquidity structures.”

・Lack of structured layering: Most RWA tokens today are “one-size-fits-all” single risk/return products, unable to meet the preferences of different investors. A single token often bears all risks and rewards simultaneously, which is not ideal for risk-averse or risk-tolerant investors. This lack of layering results in low asset pricing efficiency and cannot precisely attract funds with different risk appetites. The market cannot price “time value” and “credit risk” separately, let alone effective price discovery.

・Weakness in standardization and composability: Many RWA token projects operate independently, with inconsistent asset forms, making it difficult to integrate into DeFi ecosystems as collateral or liquidity tools. Due to the lack of standardized financial Lego components, once real assets are on-chain, they often cannot be widely integrated into lending, trading, and yield aggregation protocols like ETH or stablecoins. As a result, although RWA tokens are “valuable,” they lack financial activity and cannot be further utilized, limiting their value realization.

The above fundamental dilemmas indicate that simple “tokenization” is far from enough. As industry analysis points out, if assets like real estate or stocks are only digitized but not financialized, these assets do not truly become “productivity” in on-chain finance. The bottleneck is not in the assets themselves but in the lack of structures and mechanisms to make assets liquid. Therefore, how to build a structured layer for RWA on-chain, similar to traditional financial markets, to unlock liquidity and enhance composability, becomes the urgent next step.

Historical Context of Structured Finance

To break through the current dilemma, one can draw wisdom from the development history of traditional structured finance. The core of structured finance is to package and layer assets, transforming inherently illiquid assets into tradable securities, and dividing them into different tranches according to risk/reward to meet the needs of different investors.

Modern structured finance traces back to the late 1960s. At that time, government-supported agencies in the US issued the world’s first mortgage-backed securities (MBS) (guaranteed by Ginnie Mae in 1968), pioneering the packaging and sale of residential mortgages. Subsequently, in the 70s and 80s, the mortgage securities market grew rapidly; by mid-1980s, structured techniques extended into non-mortgage sectors, giving rise to asset-backed securities (ABS), initially securitizing auto loans and credit card receivables. Since then, various innovative underlying assets (from student loans to copyright income) have been securitized into ABS, forming a highly diversified market.

In the late 1980s to 1990s, Wall Street further invented more complex structured products, such as Collateralized Debt Obligations (CDOs). In 1987, Drexel Burnham Lambert pioneered bundling a basket of high-yield junk bonds into the first CDO, achieving re-aggregation of different debts. The innovation of CDOs lies in the layering of underlying assets: dividing risks and yields into senior, mezzanine, and subordinate tranches in priority order, redistributing risk. Senior tranches have the lowest risk and lower yields, while mezzanine and subordinate tranches carry higher risk but higher expected returns—investors can choose risk exposures according to their strategies. Through this structure, a single asset pool could attract both conservative and aggressive funds, expanding financing capacity and market liquidity.

The emergence of CDOs was described as “alchemy” in finance—the transformation of a bunch of loans into investment products suited for different investors, with the magic being the redistribution of risk and reward across layers.

Of course, structured finance also revealed risks during the 2007-2008 financial crisis, especially with subprime mortgage-related CDOs playing a negative role. But setting aside those cases of over-packaging and credit mismatches, the essence of structured finance is: to securitize asset pools via legally isolated special purpose vehicles (SPV), design layered senior/subordinated rights, and transfer and subdivide risk. This has led to several long-term financial innovations:

・Risk pricing and sharing: allocating asset cash flows sequentially, with priority investors getting first claim and subordinated investors bearing the first losses but earning excess returns. This allows different risk appetites to be met.

・Liquidity creation: previously hard-to-trade loans and receivables can now be market-priced and traded through standardized securities, monetizing idle capital and improving market liquidity.

・Lower financing costs: the layered structure introduces high-rated senior bonds, significantly reducing the weighted financing cost of the entire asset pool, while transferring some risk exposure to risk-tolerant parties, thus improving financing efficiency.

・Specialization and division of labor: structured products involve multiple parties such as initiators, service providers, rating agencies, forming a complex but efficient market system. This system has spawned a huge market for structured credit over decades, with securitizations from housing mortgages, auto loans, to corporate loans totaling trillions of dollars.

It can be said that traditional structured finance is the precursor to real asset digitization and securitization. It transforms chaotic underlying assets into standardized, tradable financial products, enabling capital markets to reach into corners previously inaccessible. This development points the way for the current RWA tokenization upgrade: if the essence of structured finance can be brought on-chain, it could break through the current bottlenecks of RWA liquidity and adaptability.

Current On-Chain Structured Exploration: From Centrifuge to Maple and Others

In fact, some projects in DeFi have already been exploring integrating traditional structured logic with blockchain, introducing layering and splitting mechanisms for RWA and crypto assets. Here are several representative cases:

・Centrifuge (and its Tinlake platform): Centrifuge is one of the earliest projects to bring real-world assets into DeFi, adopting a “double-layer security” structure for asset pool financing. Each Tinlake asset pool issues two types of tokens: DROP tokens as senior bonds, with low risk and fixed interest; TIN tokens as subordinate bonds, bearing first losses and earning residual income. This design directly corresponds to traditional layered financing: DROP holders enjoy stable returns, TIN holders take on additional risk for higher yields. Centrifuge’s dual-token structure offers flexibility to asset originators—investors with different risk levels can invest in the same pool, enhancing liquidity. As analysis notes: “Senior tranche (DROP) offers low-risk stable income suitable for conservative funds; subordinate tranche (TIN) absorbs more risk but offers higher returns. These layers enable fully on-chain structured credit markets, with automated waterfall payments and real-time NAV updates, achieving “DeFi meets traditional securitization,” without cumbersome intermediaries.” Notably, Centrifuge also promotes trading of its RWA yield tokens on decentralized exchanges, further improving liquidity. For example, AAA-rated JAAA tokens (Centrifuge’s on-chain CLO fund) are traded on DeFi platforms, giving traditionally illiquid loan assets continuous pricing.

・Maple Finance: Maple is an on-chain institutional lending platform focusing on unsecured/low-collateral loans. Though targeted at institutional borrowers, it draws on structured thinking for risk mitigation. Maple’s loan pools incorporate a “Pool Cover” mechanism—subordinated capital provided by pool managers (Pool Delegates) and other stakers, acting as first-loss buffers in case of default. Specifically, each Maple pool has two types of investors: regular lenders as senior creditors, enjoying priority repayment; and Cover providers (including the pool manager itself) as mezzanine capital, absorbing losses first in case of borrower default. As Maple’s documentation states: “Lenders are akin to the senior tranche (last to absorb losses), while those providing pool Cover are akin to the subordinate tranche (first to absorb losses).” This incentivizes pool managers to implement strict risk controls while providing higher safety for regular lenders. Maple’s “active risk capital reduction” approach is similar to traditional subordination in structured finance, making unsecured on-chain loans more attractive to stable funds.

・Goldfinch: Goldfinch is a DeFi lending protocol focusing on emerging markets, also employing a layered structure. It divides into a Reserve Pool (Senior Pool) and individual borrower pools. In each borrower pool, community Backers serve as first-loss capital providers (junior tranche)), evaluating projects and contributing subordinated funds; then the protocol automatically allocates larger portions of senior funds from the Senior Pool based on a leverage model. Backers bear first-loss risks, while the Senior Pool benefits from priority repayment, similar to “crowdsourced due diligence + community subordination + public priority” structured loans. Goldfinch’s LPs (liquidity providers) are the senior creditors of all borrower pools, represented by FIDU tokens, earning a stable yield aggregated from all loan interests. Officially, “Backers provide the first-loss junior tranche capital, ensuring the security of the Senior Pool, so the Senior LPs’ funds are protected by more active Backer capital.” To reward Backers’ due diligence and risk-taking, the protocol distributes 20% of the nominal interest of the Senior Pool to Backers. This mechanism enables trustless risk sharing without collateral, successfully funding dozens of global projects with zero defaults.

・Ondo Finance: Ondo initially gained fame with on-chain fixed/floating yield splitting products, aiming to provide DeFi investors with stable, traditional-like returns. Its early Vaults split funds into two pools: one for fixed returns, another for market volatility-based floating returns (amplifying yields). This structure allows conservative investors to lock in stable yields, while aggressive investors leverage higher returns. Ondo’s first products are essentially decentralized structured products, layering DeFi yield streams. Recently, Ondo has entered the RWA space, launching on-chain US Treasury funds (such as OUSG) with partner institutions, offering low-risk returns backed by US Treasuries. Analysis reports that Ondo is bringing the advantages of traditional finance (stable income, credible assets) into blockchain as structured products, allowing ordinary users to earn treasury yields without leaving DeFi, and isolating market volatility risks. For example, OUSG, a token backed by short-term US Treasuries, enables investors to “hold treasuries with one click, enjoy yields, and trade or collateralize on-chain,” offering unprecedented flexibility unavailable in traditional Treasury investments.

・Pendle Finance: Pendle offers a more general yield tokenization (Yield Tokenization) module. Users can split interest-bearing assets (like staked ETH or interest-bearing stablecoins) into principal and future yield tokens. Pendle decomposes an interest-generating asset into two independently tradable tokens: PT (Principal Token), representing the principal, redeemable at face value at maturity; and YT (Yield Token), representing future interest income. This split allows interest rates to be traded separately—investors can buy YT to bet on rising rates or hold PT for principal safety. Pendle’s design is similar to traditional zero-coupon bonds + coupon separation strategies, introducing interest rate derivatives into DeFi. This provides more strategic options, such as hedging or speculating on interest rate trends, or building fixed-rate positions, and improves liquidity and price discovery of the underlying assets.

These explorations show that structured thinking has already taken root on-chain. Whether it’s Centrifuge tokenizing real assets into double-layer tokens, Maple/Goldfinch implementing on-chain credit layering, or Ondo/Pendle splitting yields, they all aim in the same direction: transforming traditional financial mature structured mechanisms into programmable decentralized financial Lego. However, many of these are context-specific or asset-specific practices and lack a unified standard. For example, each project has its own token or share format, with little interoperability across protocols, and composability still needs improvement. This leads to the next chapter: why a comprehensive structured paradigm could become the key breakthrough for on-chain RWA.

Why Structured Finance Is the Next Paradigm for RWA

As seen from the above cases, introducing structured finance into blockchain has already demonstrated initial success in improving liquidity, risk pricing, and composability. So why is “structured” set to become the next paradigm leap in RWA tokenization? The core reason is that the structured approach directly addresses the fundamental problems plaguing RWA and elevates on-chain finance to a new level:

・Precise risk pricing, saying goodbye to one-size-fits-all: Through structured splitting, on-chain assets can separate different risk/reward components, allowing the market to price and trade them independently. For example, splitting a debt into “principal” and “interest” parts enables the market to independently price pure time value (interest rates) and credit risk premiums. This fine-grained pricing enhances market efficiency and transparency. As AquaFlux docs state: “By splitting principal, coupons, and risks, you can precisely map each ‘slice’ of yield/risk to the most suitable investors, moving beyond ‘one size fits all’.” Each investor type only bears the risks they are willing to accept, and overall financing costs decrease due to a broader investor base.

・Enhancing on-chain liquidity and capital efficiency: Structured finance attracts more diverse capital, broadening market depth. For example, Centrifuge’s introduction of senior/subordinate shares enabled conservative funds to participate in RWA pools, providing stable liquidity sources. Additionally, subordinate investors increase the risk capital appeal of assets. More importantly, once assets are structured into tradable fragments, they can be listed on DEXs, used as collateral, or added to liquidity pools—shifting from static holding to dynamic operation. For instance, yield-bearing RWA tokens, when structured, can be traded on DEXs, used for market making, collateralized to borrow stablecoins, etc., preventing idle assets. Instant settlement, 24/7 trading, and programmability give these structured tokens liquidity advantages over traditional securities.

・Enhancing DeFi composability: Structured assets become standardized financial Lego blocks. When RWA tokens are decomposed into simple, uniform modules, they offer DeFi developers new building blocks to create endless strategy combinations. For example, through structured P, C, S tokens, users can assemble fixed-income bonds (P+C), capital-protected floating yields (P+S), or leveraged yield-enhanced portfolios (C+S). These can be further encapsulated as new tokens or contracts, circulating in the market. This flexibility and composability are hard to achieve in traditional finance and are unique advantages of blockchain-based structured products. Each combination strategy can become tradable tokens, integrated into automated market makers, collateralized loans, and more, creating arbitrage circles and innovations unavailable in conventional markets.

・Stimulating derivatives and risk management ecosystems: Structured finance’s advent paves the way for on-chain RWA derivatives markets. Once underlying assets are split and standardized, developing futures, options, swaps, or constructing indices and ETFs becomes easier. This creates positive feedback: active derivatives trading → deeper spot market liquidity → attracting more users and institutions. Just as traditional markets’ high trading volumes are driven by derivatives, RWA can unlock a DeFi summer with full-stack financialization (not just spot tokens but leverage, hedging, yield management tools). Standardized structured assets provide the foundation—making real assets the “bottom language” of on-chain finance rather than isolated entities.

・Building trusted bridges to attract traditional capital: Structured finance is familiar to traditional institutions. Implementing similar priority/subordination and credit enhancement structures on-chain makes it easier for traditional financiers to evaluate and accept blockchain products. This provides a bridge for compliant funds and large institutions to enter DeFi. For example, some on-chain structured products have received AAA ratings (e.g., Centrifuge’s JAAA fund) and show better risk-return profiles than traditional counterparts. Coupled with blockchain transparency and automation, institutional investors can monitor performance 24/7 and adjust positions at will. When credibility and market depth reach certain levels, banks and funds will be more willing to participate, further expanding RWA on-chain.

In summary, structured finance is the key to solving current RWA on-chain struggles. It can alleviate liquidity and pricing issues and has the potential to reshape the on-chain financial landscape. Moving from “tokenization” to “standardized structured finance” marks the transition of RWA into DeFi Stage 2—where the former just solves on-chain issues, and the latter can truly unleash value, making real assets an integral part of the on-chain financial system. As one industry comment states: “A unified open RWAFi (RWA Finance) stack will turn static RWA into dynamic Lego modules with composability and derivative-readiness.” This signals the foundation for a new wave of DeFi innovation: if 2020’s DeFi Summer was a feast built on ETH and WBTC’s “money Legos,” the next wave might be a “real-asset Lego” stack anchored in real-world value. The realization of all this depends on the maturity of the structured paradigm.

AquaFlux: Tri-Token Mechanism Reshaping On-Chain Structured Logic

As a pioneer in on-chain structured finance exploration, AquaFlux proposed the unique Tri-Token model, setting an example for RWA on-chain structuring. AquaFlux re-maps traditional debt-like RWA products into three token types: P, C, S—representing Principal, Coupon, and Shield (risk buffer). This design aims to create a standardized, composable, derivable asset language, solving the structural issues in current RWA markets and granting on-chain assets unprecedented flexibility.

・P-Token (Principal Token): P represents the principal portion of a bond, designed based on zero-coupon logic. In AquaFlux, P-Token matures to be redeemable at 1:1 for USD or other stable assets, essentially a maturity payout of principal without interest. Holders of P-Token thus get capital protection (full principal repayment in case of no default) but do not receive interest during holding. P-Token is suitable for risk-averse investors like DAO treasuries or institutions seeking stable returns—they care about principal safety and are willing to forgo interim income. In short, P is like on-chain short-term government bonds or fixed deposits, maturing for full repayment, suitable for low-risk funds.

・C-Token (Coupon Token): C represents the interest income part of the bond, designed as a fixed-rate coupon flow. Buyers of C-Token acquire the right to receive periodic interest payments until maturity. C-Token is similar to strip bonds or annuities in traditional finance, providing a tool for stable yield seekers.

・S-Token (Shield/Residual Token): S signifies the “shield” or residual rights, acting as the subordinate/junior tranche in the structure. S-Token holders are the first-loss bearers: if the underlying asset defaults or suffers losses, S absorbs the impact first, protecting P and C investors. As compensation for high risk, S-Token holders enjoy additional benefits such as residual profits from lending spreads, protocol fees, and airdrops. It can be understood that, in good times, S holders can earn excess returns and incentives; but in defaults, they may lose everything. S-Token targets high-risk investors (like DeFi degens), willing to play the subordinate role for high returns. In traditional structured finance, S is similar to “equity tranche” or junior bonds.

Through the P/C/S model above, AquaFlux thoroughly deconstructs a single RWA bond, splitting the original bundled principal repayment, interest income, and credit risk sharing. As AquaFlux states: “By decoupling principal, coupons, and risks, we can precisely map each ‘slice’ of yield/risk to the most suitable investors, eliminating the need to force everyone to accept a mixed-risk asset.” With these three simple tokens, users with different preferences can each take what they need, greatly improving market efficiency and transparency.

It’s notable that AquaFlux not only introduces the concept of three tokens but also aims to develop them into a composable foundational module. The team likens P, C, S to “LEGO bricks,” which can be freely assembled into various financial products. For example, some combinations include:

・P + C: Reconstructing a complete bond with periodic interest and principal at maturity, suitable for conservative funds seeking stable returns.

・C + S: Creating high-yield coupon products: investors receive fixed interest © plus subordinate rewards (S), significantly increasing annualized returns but with certain default risk. Similar to traditional mezzanine or structured products, attracting yield-seeking investors.

・Long C + Short P: forming a carry trade—borrowing low-interest funds (short P) to buy fixed coupons (long C)—expressing views on interest rate trends or leveraging returns.

All these rich combinations benefit from AquaFlux’s standardized P/C/S interface. Even more exciting is that each combination can be encapsulated as a new token or strategy contract, further used for trading, liquidity, or collateralization. This effectively builds a new on-chain structured finance ecosystem: simple core modules, combined in different ways, can generate endless innovative products, with potential scale comparable to decades of traditional derivatives and structured tools. All of this is executed automatically by smart contracts, greatly reducing costs and increasing transparency.

Market feedback indicates that AquaFlux’s concept has attracted wide interest. Reports show it was launched on Pharos testnet, with over 95 million interactions and 1 million unique addresses participating in a short period. This demonstrates that both DeFi-native users and traditional institutions are highly interested in such modular, composable RWA structured platforms. AquaFlux positions itself as the infrastructure layer for RWA: aiming to become the on-chain standard and hub for structured products, promoting the integration and utilization of real assets within the DeFi ecosystem.

In short, AquaFlux is transforming structured finance into an on-chain native language. Its Tri-Token provides an alphabet and syntax, enabling us to write complex financial “sentences” using just a few “words” (P, C, S). Once widely adopted, this language will greatly enhance interoperability among protocols. For example, other lending protocols could directly accept P-Token as collateral, since it’s equivalent to high-credit zero-coupon bonds; yield aggregators could deploy strategies to split or recombine P/C/S for arbitrage; risk hedging protocols could develop default swaps based on S-Tokens, and so on. It’s easy to envision a thriving ecosystem around P/C/S: like ERC-20 standardized tokens triggered DeFi’s summer, the Tri-Token could lead the next wave of on-chain financial innovation as a universal RWA standard.

Conclusion: Structured finance is the solution and a new language for on-chain finance

Looking back at the development of financial markets, every paradigm shift is often driven by new languages/tools: swaps for risk hedging, ETFs for democratizing index investing, smart contracts for codifying trust… Now, as crypto and real-world finance increasingly merge, structured finance could become the next new language for on-chain finance.

For RWA tokenization, structured finance not only offers technological solutions to current liquidity and risk pricing issues but also opens up a space full of imagination: bringing real assets alive, integrated, and used on-chain. The structured logic endows RWA with communication capabilities—communicating risks and rewards with investors, enabling composability with DeFi protocols, and regulatory compliance with traditional markets. It allows on-chain finance to depict and shape risks more precisely, turning past opaque assets into finely tuned, programmable value units.

Looking ahead, we might see scenarios where: corporate bonds are simultaneously split into P/C/S on-chain, enabling global investors to subscribe to different tranches without intermediaries; real estate income rights are decomposed, with rent and property appreciation issued as tokens for different investor preferences; portfolio managers assemble structured tokens into tailored on-chain portfolios aligned with their risk curves, adjusting hedges in real-time. Then, “structured” will no longer just be a financial engineering term but a daily language of on-chain financial activities. As one industry report states: “A unified open RWAFi stack will turn static RWA into dynamic Lego modules with composability and derivative readiness.” This signals the foundation for a new wave of DeFi innovation: if 2020’s DeFi Summer was built on ETH and WBTC’s “money Legos,” the next wave could be a “real-asset Lego” stack anchored in real-world value. The realization of all this depends on the maturation of the structured paradigm.

AquaFlux: Tri-Token Model Reshaping On-Chain Structured Logic

As a pioneer in on-chain structured finance exploration, AquaFlux introduced the unique Tri-Token model, setting a benchmark for RWA on-chain structuring. It re-maps traditional debt-like RWA products into three token types—P, C, S—representing Principal, Coupon, and Shield (risk buffer). This design aims to create a standardized, composable, derivable asset language, solving current RWA market structural issues and providing unprecedented flexibility.

・P-Token (Principal Token): P represents the principal part of the bond, designed with zero-coupon logic. In AquaFlux, P-Token matures to be exchangeable at 1:1 for USD or other stable assets, essentially a principal-only payout without interest. Holders of P-Token thus gain capital protection (full principal recovery in no-default scenarios) but do not receive interim interest. P-Token suits risk-averse investors like DAO treasuries or institutions seeking stable returns—they prioritize safety over interim income. In short, P is like on-chain short-term government bonds or fixed deposits, maturing for full repayment, suitable for low-risk capital.

・C-Token (Coupon Token): C represents the interest income portion, structured as a fixed interest flow. Buyers of C-Token acquire the right to periodic interest payments until maturity. It’s akin to strip bonds or annuities in traditional finance, providing a stable yield tool.

・S-Token (Shield/Residual Token): S signifies the “shield” or residual rights, acting as the subordinate/junior tranche. S holders are the first-loss bearers: in case of default or loss, S absorbs impact first, protecting P and C investors. As compensation, S-Token holders enjoy additional benefits such as residual profits from spreads, protocol fees, and airdrops. Conceptually, S is like equity tranche or junior bonds in traditional structured finance.

Through this P/C/S model, AquaFlux fully deconstructs a single RWA bond, splitting principal repayment, interest income, and credit risk sharing into separate tokens. AquaFlux states: “Decoupling principal, coupons, and risks allows precise mapping of yield/risk slices to suitable investors, no longer forcing everyone to accept a blended asset.” With these three simple tokens, users with different risk appetites can each take what they prefer, greatly improving market efficiency and transparency.

It’s worth noting that AquaFlux not only presents the three-token concept but also aims to make them into a modular, composable building block. The team compares P, C, S to “LEGO bricks” that can be assembled freely to craft various financial products. Some example combinations include:

・P + C: Reconstructing a complete bond with fixed interest and principal at maturity, suitable for conservative funds seeking stable yield.

・C + S: Creating high-yield coupon products: investors earn fixed interest © plus subordinate reward (S), significantly increasing annualized return but with some default risk. Similar to traditional mezzanine or structured products, attracting yield-oriented investors.

・Long C + Short P: forming a carry trade—borrowing low-interest funds (short P) to buy fixed coupons (long C)—expressing interest rate views or leveraging returns.

All these diverse combinations are enabled by AquaFlux’s standardized P/C/S interface. Even more exciting is that each can be encapsulated into new tokens or strategy contracts for trading, liquidity pools, or collateral. This effectively builds a new on-chain structured finance ecosystem: simple foundational modules, combinable into countless innovative products, with potential scale comparable to decades of traditional derivatives and structured tools. All automated via smart contracts, greatly reducing costs and increasing transparency.

Market response indicates broad interest. Reports show AquaFlux launched on Pharos testnet, with over 95 million interactions and 1 million addresses involved in a short time. This suggests both DeFi native users and traditional institutions are highly interested in such modular, composable RWA structured platforms. AquaFlux positions itself as a foundational infrastructure layer: aiming to become the standard and hub for on-chain structured products, promoting integration and utilization of real assets in DeFi.

In essence, AquaFlux is turning structured finance into an on-chain native language. The Tri-Token provides an alphabet and syntax, allowing users to “write” complex financial “sentences” with just a few “words” (P, C, S). Once broadly adopted, this language will greatly enhance protocol interoperability. For example, lending protocols could accept P-Token as collateral, since it’s akin to high-credit zero-coupon bonds; yield aggregators could deploy strategies to split or recombine P/C/S for arbitrage; hedging protocols could develop default swaps based on S-Tokens, etc. It’s easy to imagine a vibrant ecosystem built around P/C/S: like ERC-20 standards triggered DeFi’s summer, the Tri-Token could lead the next wave of on-chain financial innovation as a universal RWA standard.

Closing remarks: Structured finance is the solution and a new language for on-chain finance

Looking back at financial market evolution, every paradigm shift often arises from new languages/tools: swaps enable risk hedging, ETFs democratize index investing, smart contracts codify trust… Now, as crypto and real-world finance increasingly merge, structured finance is poised to become the next new language of on-chain finance.

For RWA tokenization, structured finance offers not only technical solutions to current liquidity and risk pricing issues but also opens a space full of imagination: bringing real assets alive, integrated, and utilized on-chain. Its logic enables RWA to communicate—risk and reward with investors, composability with DeFi protocols, and regulatory compliance with traditional markets. It allows on-chain finance to depict and shape risks more precisely, transforming opaque legacy assets into finely programmable value units.

Looking forward, scenarios may emerge: corporate bonds split into P/C/S on-chain, allowing global investors to subscribe to different tranches directly; real estate income rights decomposed into tokens for rent and appreciation, catering to diverse investor preferences; portfolio managers assemble structured tokens into tailored on-chain portfolios aligned with risk curves, adjusting hedges in real time. Then, “structured” will no longer be just a financial term but a daily language of on-chain activity. As one industry report states: “An open RWAFi stack will turn static RWA into dynamic Lego modules with composability and derivative readiness.” This could trigger a new wave of DeFi innovation: just as 2020’s DeFi Summer was built on ETH and WBTC’s “money Legos,” the next may be a “real-asset Lego” stack anchored in real-world value. The realization of all this depends on the maturity of the structured paradigm.

AquaFlux: Tri-Token Model Reshaping On-Chain Structured Logic

As a pioneer in on-chain structured finance, AquaFlux proposed the unique Tri-Token model, exemplifying RWA on-chain structuring. It re-maps traditional debt-like RWA into three tokens: P, C, S—representing Principal, Coupon, and Shield. Designed to create a standardized, composable, and derivable asset language, it aims to solve current market structural issues and grant unprecedented flexibility.

・P-Token (Principal Token): P signifies the principal part of the bond, designed with zero-coupon logic. In AquaFlux, P-Token matures to be redeemable at 1:1 for USD or stable assets, representing a principal-only payout at maturity without interest. Holders of P-Token thus achieve capital protection (full principal recovery in no-default scenarios) but do not receive interim interest. P-Token is ideal for risk-averse investors such as DAO treasuries or stable-yield seekers—focused on safety over interim gains. Essentially, P resembles on-chain short-term government bonds or fixed deposits, maturing for full repayment, suitable for low-risk funds.

・C-Token (Coupon Token): C stands for the interest income, structured as a fixed-rate cash flow. Buying C-Token grants the right to periodic interest payments until maturity. It’s similar to strip bonds or annuities, providing a stable yield.

・S-Token (Shield/Residual Token): S represents the “shield” or residual rights, acting as the subordinate tranche. S holders are the first-loss bearers: in default or loss scenarios, S absorbs losses first, protecting P and C investors. To compensate, S holders enjoy additional benefits like residual profits from spreads, protocol fees, and airdrops. In traditional finance, S is akin to equity tranche or junior bonds, bearing the most risk.

Through this P/C/S model, AquaFlux deconstructs a single RWA bond into separate tokens for principal, interest, and risk sharing, enabling precise mapping of risk/return slices to suitable investors. As AquaFlux states: “Decoupling principal, coupons, and risks allows for precise allocation of yield/risk slices, avoiding forced acceptance of a blended asset.” With these three tokens, different investor preferences are better served, greatly enhancing market efficiency and transparency.

It’s also worth noting that AquaFlux aims to make P, C, S into a modular, composable base. The team likens them to “LEGO bricks,” which can be assembled freely to create various financial products. Examples include:

・P + C: Rebuilding a complete bond with interest and principal at maturity, fitting for conservative investors.

・C + S: Creating high-yield coupon products: earning fixed interest © plus subordinate rewards (S), boosting annualized returns but with default risk. Similar to mezzanine or structured products, attracting yield seekers.

・Long C + Short P: a carry trade—borrowing low-interest funds (short P) to buy fixed coupons (long C)—expressing interest rate views or leveraging returns.

All these combinations are enabled by AquaFlux’s standardized P/C/S interface. Moreover, each can be encapsulated as a new token or strategy contract for trading, liquidity, or collateral. This builds a new on-chain structured finance ecosystem: simple modules, combinable into endless innovative products, with potential scale comparable to decades of traditional derivatives. All automated by smart contracts, greatly reducing costs and increasing transparency.

Market feedback shows broad interest. Reports indicate AquaFlux launched on Pharos testnet, with over 95 million interactions and 1 million addresses involved shortly after. This demonstrates strong engagement from both DeFi users and traditional players. AquaFlux aims to become an infrastructure layer, establishing itself as the on-chain standard and hub for structured RWA products, promoting integration of real assets into DeFi.

In essence, AquaFlux is turning structured finance into an on-chain native language. The Tri-Token provides an alphabet and syntax, enabling the composition of complex financial “sentences” from just a few “words” (P, C, S). Widespread adoption of this language could greatly enhance protocol interoperability. For example, lending protocols might accept P-Token as collateral, yield aggregators could split or recombine tokens for arbitrage, hedging protocols could develop default swaps based on S, and so forth. It’s easy to envision a vibrant ecosystem built around P/C/S: like ERC-20 set the standard for tokens, Tri-Token could lead the next wave of on-chain financial innovation as the universal RWA language.

Final thoughts: Structured finance is both a solution and a new language for on-chain finance

Reflecting on financial market evolution, paradigm shifts often stem from new languages/tools: swaps for risk management, ETFs for democratized index investing, smart contracts for trust automation… Now, as crypto and traditional finance merge, structured finance could be the next language enabling this integration.

For RWA tokenization, structured finance offers not only technical solutions to liquidity and risk pricing but also a space full of imagination: bringing real assets alive, embedded, and utilized on-chain. Its logic facilitates communication—risk and reward with investors, composability with DeFi protocols, compliance with regulations. It allows on-chain finance to depict and shape risks more precisely, transforming opaque assets into finely programmable units of value.

Looking forward, scenarios might include: companies issuing bonds split into P/C/S on-chain, enabling global investors to subscribe to different tranches directly; real estate income rights decomposed into tokens for rent and appreciation, catering to diverse preferences; portfolio managers combining structured tokens into tailored risk profiles, adjusting hedges dynamically. “Structured” will become a daily language of on-chain finance, not just a term. As one report states: “An open RWAFi stack will turn static RWA into dynamic Lego modules with composability and derivatives readiness.” This could spark a new DeFi wave: just as 2020’s DeFi Summer was driven by ETH and WBTC’s “money Legos,” the next might be a “real-asset Lego” stack anchored in real-world value. Its realization depends on the maturation of the structured paradigm.

AquaFlux: Tri-Token Model Reshaping On-Chain Structured Logic

As a pioneer in on-chain structured finance, AquaFlux proposed the unique Tri-Token model, exemplifying RWA on-chain structuring. It re-maps traditional debt-like RWA into three tokens: P, C, S—representing Principal, Coupon, and Shield. Designed to create a standardized, composable, and derivable asset language, it aims to solve current market structural issues and offer unprecedented flexibility.

・P-Token (Principal Token): P signifies the bond’s principal, designed with zero-coupon logic. In AquaFlux, P-Token matures to be exchangeable at 1:1 with USD or stable assets, representing a principal-only payout at maturity without interest. Holders thus secure capital protection (full principal repayment if no default) but do not earn interest during holding. Suitable for risk-averse investors like DAO treasuries or institutions seeking safety, akin to short-term government bonds or fixed deposits.

・C-Token (Coupon Token): C stands for interest income, structured as a fixed-rate cash flow. Holding C-Token grants rights to periodic interest payments until maturity. Similar to strip bonds or annuities, providing stable yields.

・S-Token (Shield/Residual Token): S represents the “shield” or residual rights, acting as the subordinate tranche. S holders are first-loss bearers: in default or loss