Why On-Chain Tokenization is Broken

Eli5DeFi argues that on-chain tokenization has a structural liquidity crisis, not a bootstrapping problem. A $4 million trade in tokenized gold perpetuals incurs ~150 basis points of slippage versus under 3 basis points for a $20 million CME futures trade, and oracle fragility from thin spot markets triggered $9 million in liquidations on Hyperliquid in October 2025. The fix requires shifting from inventory-based replication to 'reflected' liquidity models that source price discovery from off-chain venues—while accepting the counterparty and censorship tradeoffs that introduces.