Unlocking Liquidity for Tokenized RWAs Through Decentralized OTC Trading
Abstract. A decentralized over-the-counter (dOTC) platform is the next major evolution in providing liquidity for on-chain assets by enabling direct, large-scale transactions without intermediaries or slippage. Traditional OTC markets suffer from inefficiencies such as high costs, counterparty risk and limited transparency, while automated market maker pools (AMMs) and decentralized exchanges (DEXes) struggle with liquidity shortages for large tokenized real-world asset (TRWA) trades and slippage. Swarm Markets’ dOTC addresses these challenges by leveraging smart contracts to facilitate secure, efficient and compliant peer-to-peer trading. Integrating dynamic pricing, liquidity aggregation and institutional-grade compliance, dOTC ensures deep liquidity and stable pricing for on-chain assets, both crypto and TRWAs. The platform synchronizes on-chain and off-chain prices via trusted oracles, connecting decentralized finance (DeFi) and traditional markets. This approach eliminates counterparty risk and unlocks yield potential for otherwise passive assets such as gold. As tokenized assets gain prominence, Swarm Markets dOTC provides the infrastructure for both institutional and retail trading, fostering a more liquid and accessible financial ecosystem.
Fully Decentralized Atomic Swaps for Any Asset, Any Chain
Swarm Markets’ dOTC is a fully decentralized trading solution designed to execute trustless atomic swaps across diverse asset classes – cryptoassets, tokenized real-world assets (TRWAs), NFTs, and commodities – on any blockchain where dOTC is deployed.
By leveraging blockchain interoperability and smart contract technology, dOTC eliminates traditional intermediaries, removes counterparty risk and slippage and ensures immediate settlement for both parties in every transaction.
Through escrow-based smart contracts and cross-chain interoperability protocols, the platform securely and transparently handles large, complex trades involving tokenized securities (e.g., T-bills), tokenized gold and NFTs, mitigating risks typically associated with cross-chain trading.
Its architecture supports direct asset swaps across major blockchain ecosystems, transforming cumbersome processes into efficient, trustless exchanges. The platform is EVM compatible and currently deployed onto Ethereum, Polygon and Base mainnets.
The Evolution of OTC Trading and the Need for RWA Liquidity
Over-the-counter (OTC) trading has long been a cornerstone of financial markets, enabling institutional investors, high-net-worth individuals (HNWIs) and corporations to execute large transactions privately, minimizing price fluctuations and market impact.
However, traditional OTC markets face inefficiencies, including high fees, counterparty risk and opaque processes.
Meanwhile, TRWAs are gaining traction as blockchain technology enhances financial accessibility, fractional ownership, and operational and compliance efficiency. Despite this potential, liquidity remains a critical barrier. Without an efficient secondary market, tokenized assets stagnate, undermining their value proposition.
Swarm Markets’ dOTC offers a transformative solution by merging blockchain technology with OTC trading principles, facilitating large transactions via smart contracts in a secure, efficient, and regulatory-compliant manner. This resolves liquidity challenges across both crypto and TRWA markets.
The Liquidity Challenge in TRWAs and Large-Volume Trading
The tokenization of real-world assets such as commodities (e.g., gold), real estate, government bonds and other securities, has earned institutional recognition, with firms such as BlackRock championing its utility. Excluding stablecoins, the TRWA market surpassed $19.6 billion as of the end of Q1 2025 [1], yet liquidity remains a pressing issue, unlike stablecoins, which benefit from listings on major CEXes and DEXes.
The TRWA market excl. stablecoins according to RWA.xyz
While DEXes have revolutionized crypto trading, they fall short for large-volume TRWA transactions. Relying on automated market maker (AMM) pools, they often face liquidity shortages, leading to excessive slippage – where the final price deviates significantly from the expected price.
Slippage
Establishing substantial AMM pools requires significant capital, rendering them impractical for many institutional investors. Meanwhile, crypto and TRWA markets demand an efficient, secure and trustless OTC solution that minimizes slippage, eliminates counterparty risk, and ensures compliance.
Swarm Markets dOTC: A Next-Generation OTC Solution
Swarm’s dOTC delivers a trustless, compliant and efficient trading mechanism tailored for large-scale digital asset transactions. Unlike traditional OTC desks, which depend on intermediaries, dOTC uses smart contracts to enable direct peer-to-peer (P2P) trading, eliminating counterparty risk.
dOTC order matching
Key Features of dOTC
- Trustless Smart Contract Execution: Escrow-based smart contracts eliminate intermediaries, ensuring secure and transparent trade completion.
- Slippage-Free Pricing: Dynamic pricing mechanisms prevent price deviation, enabling large transactions at expected prices.
- Instant Swapping and Order Matching: Flawless order execution bypasses centralized order books, providing deep liquidity for TRWAs.
- Regulatory Compliance: Offers optional KYC and AML verification to meet institutional standards, allowing users to tailor compliance levels without centralized enforcement.
- On-Chain and Off-Chain Price Synchronization: Trusted oracles align asset valuations with traditional markets.
dOTC user interface
Who Is dOTC For?
Swarm’s dOTC serves three primary user groups, each leveraging its decentralized capabilities distinctly:
- Institutional Investors & Asset Managers
- Suited for hedge funds, banks, and asset managers handling TRWAs or digital assets.
- Enables efficient asset allocation, risk management, and liquidity provisioning with minimal market impact and full compliance.
- Institutional and Retail Liquidity Providers
- Allows liquidity providers to participate in large-volume trading without capital lockups or counterparty risk.
- Empowers market makers and trading desks to supply liquidity for tokenized gold, bonds, commodities, or cryptocurrencies, earning incentives.
- Ecosystems and Third-Party Integrators
- Offers turnkey OTC trading infrastructure for integration into third-party platforms.
- Supports customized solutions and marketplaces for on-chain applications in real estate, commodities, or securities.
dOTC is already being used for tokenized gold, equities and bond ETF trading. The infrastructure can be used by anyone wanting to build their own on-chain and decentralized marketplace that benefits from global liquidity and asset transfer across any market vertical.
$SMT and fees
dOTC trading fees buy and burn $SMT, which happens automatically. Fees for dOTC trading are 0.25% and are paid by the Maker only in the case of an offer being successfully taken. Canceled offers are not subject to any fees. Trading fees are collected in a smart contract and anyone can trigger the buy and burn of $SMT.
When making an offer, the Maker enters a price and is provided a quote for the expected amount of asset they would receive if the offer is taken, less the 0.25% fee. $SMT is a payment token based on the ERC20 protocol on the Ethereum blockchain. $SMT is part of a virtuous circle of fees, payments and rewards flowing through the Swarm Markets decentralized public good tools such as dOTC.
Special incentives are built into the token economy to reward liquidity providers who provide liquidity across the platform.
SMT Rewards consist of three categories:
- Liquidity Providers (Ethereum, Polygon, BASE)
- RWA Holders (Polygon)
- RWA Stakers (Polygon)
Regular calculations are made to determine the TVL for each category, applying any boosts, with the weekly SMT allocated proportionally to each category.
Within each category, rewards will be distributed to each wallet address proportional to their contribution to the total TVL.
The Next Phase: Scaling Liquidity in RWA Markets
For TRWAs to achieve mainstream adoption secondary market liquidity must be robust.
While primary issuance – bringing assets onto the blockchain – has been the focus for TRWAs so far, market maturity and utility hinges on efficient secondary trading platforms.
As tokenized assets expand, demand for secure, compliant, and efficient trading solutions will grow. Without liquid secondary markets, TRWAs risk stagnation in treasuries or low-yield pools. The next wave of DeFi innovation will prioritize platforms offering institutional-grade trading infrastructure, enabling capital to flow freely across digital and traditional markets.
Use Case: Primary Issuance Platform for Swarm’s TRWAs
Swarm’s dOTC is a primary issuance platform for TRWAs, enabling institutional issuers to launch tokenized commodities, real estate, bonds, and securities onto blockchain networks. Benefits include:
- Transparent and Secure Issuance: Smart contracts ensure transparency, reduce costs, and boost investor confidence.
- Immediate Asset Liquidity: Issued assets are instantly tradable on dOTC, enhancing liquidity over traditional methods.
- Regulatory Compliance and Choice: Optional KYC/AML processes within smart contracts balance compliance and decentralization.
This empowers issuers to digitize RWAs efficiently, enhancing the appeal of tokenized assets.
Use Case: Facilitating Large-Volume Secondary Market Transactions
Swarm’s dOTC excels as a decentralized OTC venue for large-volume transactions across tokenized assets, cryptoassets, and TRWAs. Institutions and HNWIs benefit from:
- Slippage-Free Trading: Oracle-driven pricing ensures precise execution for large trades with minimal market impact.
- Direct Institutional Liquidity Integration: Partnerships with liquidity providers guarantee deep pools for large volumes.
- Decentralized Execution: Atomic settlement via smart contracts eliminates counterparty risk.
- Privacy and Fair Pricing: Private execution avoids adverse price impacts seen in public order books.
This infrastructure enables efficient repositioning of large holdings, hedging, and liquidity access without traditional friction.
Conclusion: The Future of OTC Trading, RWA Liquidity and AI
The digitization of real-world assets marks a pivotal financial revolution, yet its potential remains untapped without deep, liquid markets. Swarm Markets’ dOTC leads the charge, offering an institutional-grade, compliant, and efficient platform for large-scale trading.
By using blockchain to eliminate counterparty risk, reduce slippage, and align on-chain and off-chain pricing, dOTC is poised to become the premier trading and issuance tool for tokenized RWAs.
Looking ahead, its trustless, scalable infrastructure will support AI agents autonomously executing complex trading strategies, enhancing liquidity and efficiency. These AI-driven participants could optimize market-making and asset allocation in real time, amplifying dOTC’s impact on the tokenized asset ecosystem.
As institutions, hedge funds, and asset managers explore blockchain’s potential, demand for robust, transparent OTC solutions will rise. With the TRWA sector evolving rapidly, Swarm Markets connects traditional finance and DeFi, unlocking digital assets’ full potential in a secure, scalable, and future-proof manner.
