Hedera vs Ethereum: Which Network Will Lead Tokenization? AllinCrypto August 26, 2025
The tokenization of real-world assets is becoming one of the most popular use cases for blockchains and DLTs.
Converting assets such as real estate, equities, commodities, and debt instruments into digital tokens for institutions to be able to manage and unlock liquidity, fractional ownership, and greater transparency proves revolutionary.
Ethereum is recognized as a dominant blockchain for tokenization, with its established DeFi ecosystem and institutional investments via ETFs. However, Hedera Hashgraph, backed by its enterprise-grade governance model, is emerging as a strong competitor.
Ethereum’s Strength in Tokenization
Ethereum is known for its first-mover advantage in the blockchain space, developing the ERC-20 and ERC-721 standards, which are used across blockchains via Ethereum Virtual Machine integrations and in DeFi.
Ethereum has curated the blueprint for fungible and non-fungible tokens, which became foundational for DeFi and the NFT market. Institutions exploring tokenization may sometimes begin with Ethereum due to its popularity and ocean-like developer community.
Many major tokenized government bonds, real estate projects, and stablecoins have been issued and launched on Ethereum. However, Ethereum faces ongoing challenges:
- Scalability issues: Despite ETH’s Layer 2 network solutions, Ethereum’s base layer struggles to handle high transaction throughput.
- Gas fees: Unable to handle congestion, ETH gas fee costs can spike to three-digit highs during bull markets, which is problematic for high-volume tokenization projects.
- Finality times: Settlement finality on Ethereum is slower than Hedera’s, introducing friction for real-time applications.
While Ethereum’s ecosystem is unmatched in its DeFi width, the network’s structural limitations raise questions about whether it can efficiently support the large-scale tokenization of RWAs at an institutional level.
Hedera’s Strength in Real-World Asset Tokenization
Hedera Hashgraph approaches tokenization differently, focusing on efficiency, security, and enterprise adoption from the ground up since its conception.
Hedera’s ABFT consensus mechanism provides fast finality, high throughput, and resistance to network attacks, including future proofing for quantum threats.
For tokenization, such features are critical for institutional adoption because financial markets want to make use of instant, transparent settlements.
Hedera’s overall strengths include:
- Scalable performance: Hedera is able to process thousands of transactions per second with near-instant settlement. This scale is ideal for tokenizing high-volume assets such as bonds or payments.
- Predictability with costs: Unlike ETH, Hedera offers very low transaction fees, making it easier for enterprises to forecast their expenses and run large-scale tokenization systems.
- Enterprise governance: Hedera’s Council includes large enterprises such as Google, IBM, Standard Bank, and Arrow Electronics. This governance structure assures institutions that the network will evolve in a compliant, transparent way.
Hedera is positioning itself as an alternative network for regulated financial infrastructure to build on. Recent partnerships for tokenized carbon credits with DOVU, supply chains with Arrow Electronics, and regulated financial stocks with Swarm Markets.
Recently, Lloyds Bank utilized Hedera Hashgraph to tokenize UK Money Market Funds, while the Reserve Bank of Australia chose Hedera as part of Project Acacia for CBDCs. Such partnerships highlight Hedera’s growing foothold in enterprise tokenization.
Can Hedera Hashgraph Beat Ethereum?
Comparing HBAR and ETH in their tokenization journey can come down to two factors, which include their respective ecosystem maturity and rate of institutional adoption.
Ethereum has an advantage with ecosystem maturity, boasting a large developer community that is deep into ETH’s DeFi protocols, and deep liquidity pools that make tokenized assets tradable. Institutions value these network features because tokenization can create value when assets are liquid and interoperable.
Hedera’s direction for institutional-grade tokenization is boosted by its governance model and network scalability, issues that institutions face on Ethereum, such as scalability, gas fee predictability, and finality.
If the tokenization of RWAs evolves into a heavily regulated, enterprise-driven industry, which the US believes it can, Hedera could gain the upper hand by aligning more closely with compliance needs.
Another factor is perception and trust. Ethereum, while innovative, is still seen by some regulators as a retail-driven, experimental ecosystem for DeFi. Hedera brands itself as an enterprise-ready DLT with top enterprises involved in its governance.
HBAR’s credibility could make governments, banks, and multinational corporations more comfortable deploying tokenized assets on Hedera rather than Ethereum.
Looking ahead for HBAR and ETH
It is unlikely that Hedera will “replace” Ethereum entirely right now, but HBAR could overtake Ethereum in the near future if adoption on Hedera accelerates.
More realistically, both networks can coexist, with Ethereum focusing on retail-driven tokenization markets while Hedera becomes a go-to network for regulated, large-scale institutional usage.
If the future of tokenization is defined by institutional adoption, compliance, and scalability, Hedera has a good chance of surpassing Ethereum for the tokenization of real-world assets. The next few years will be interesting.
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