Where does this number come from?

Here's one source: https://www.bis.org/publ/otc_hy2111.htm

Reports notional as in the hundreds of trillions and market value over ten trillion.

Unless I'm misreading you and you're talking about defi swaps? Though surely the analagous tradfi market shows the potential there.

These are credit default swaps. I don't know if they are implementable as smart contracts (I don't think so, but I could be wrong). I was thinking about overcolateralised DeFi loans which can be seen as a kind of swap where two parties exchange the returns of two different assets.