Mapping the Blockchains Driving Asset Tokenization

#Ethereum

Ethereum is the largest smart contract network and holds a dominant market share in terms of assets under management (AUM) and total number of tokenization initiatives. At the time of this writing, sources indicate that there is just over $1 billion worth of tokenized U.S. Treasuries and RWA-backed stablecoins issued on the Ethereum network. Additionally, there were 66 tokenization initiatives accounting for over 35% of total tokenization projects launched thus far. Ethereum’s dominant market position and network security create a fly-wheel for initiatives in these early days of asset tokenization.

Below are some of the most salient facts regarding the current tokenization landscape on Ethereum:

• 69% (or 9 of the 14) of tokenized asset-backed stablecoins use Ethereum as their primary hub for liquidity. Notable entries include MakerDAO, Euro-focused Angle, and Circle’s USDC.
• Publicly accessible asset tokenization platforms are also gaining popularity, with 22.6% (or 19 of the 84) prioritizing Ethereum for their tokenization activity. This diverse category includes Uranium3o8, which tokenizes uranium and energy assets, and Cogito Finance, which tokenizes securities for onchain fund activity.
• Of the onchain credit protocols currently operational, such as Goldfinch and Centrifuge, 33% (or 13 of the 39) use Ethereum for their lending activity.

Institutional tokenizers’ confidence in the network is due to its technical and broadly distributed robustness. Additionally, with the SEC recently approving the Ethereum ETF and the longstanding recognition by CFTC that Ethereum is a commodity, there’s additional regulatory clarity. The network’s smooth transition to a Proof-of-Stake (PoS) consensus mechanism has made it more environmentally friendly and ESG compliant, improving its corporate optics. While high gas fees have been a concern for some users, they are less of an issue for large institutional tokenizers dealing with high-value assets.

#Polygon

Polygon has emerged as a leading Ethereum scaling solution, commonly referred to as a “layer 2”. It has used this position to capture 14.4% of all tokenization projects and initiatives presently onchain. However, the network only maintains around $13.8 million in tokenized U.S. Treasuries. Polygon has become an attractive choice for new market participants seeking to leverage Ethereum’s ecosystem while mitigating its high network transaction costs.

The concentration of marketplace and lending activity on Polygon supports this preference for high-volume, retail-focused tokenization initiatives selecting the ecosystem:

• Currently, 25% of all decentralized exchanges, or 2 out of 8, are dedicated to permissionless tokenized assets exclusively on Polygon. IX Swap boasts some of the highest trading volumes of this category.
• All 3 onchain reputation-backed credit protocols, namely Atlendis, Clearpool, and Jia, use Polygon for primary lending activities.
• Collectible markets like Courtyard benefit significantly from Polygon’s low transaction costs while inheriting Ethereum’s security. Of the 27 tokenized collectible platforms, 29.6%, or 8, use Polygon as their primary chain of operation.

Polygon offers a lower-cost option for asset tokenization when compared to Ethereum, making it attractive for retail-oriented and high-volume initiatives. Products like carbon credits and even ammunition have been tokenized on the network. By providing faster and cheaper transactions, Polygon enables a broader range of assets to be tokenized and traded on Ethereum-compatible infrastructure. Nevertheless, an ongoing need for regulatory clarity continues to loom over as Polygon’s native MATIC token was named by the SEC as a security in a pending lawsuit by the SEC against Binance.

#Avalanche

At the time of writing, Avalanche hosts approximately 3.2% of all tokenization projects and initiatives. Similar to Ethereum, Avalanche is its own layer 1 blockchain. With its focus on scalability and interoperability, its unique architecture allows for the creation of custom subnets, which can be optimized for specific use cases, including tokenization. Stablecoins currently dominate the asset-backed tokenization landscape on Avalanche, with USDC boasting a $652 million market cap and USDT maintaining a market capitalization of just over $1 billion.

While Avalanche currently maintains a smaller portion of tokenization initiatives, the network’s strategic position across multiple asset categories is a testament to its flexibility and resilience:

• ArkeFi, a collectibles platform, uses the Avalanche network for its collectibles tokenization activity, representing 3.7% of all collectible platforms currently operating.
• As the largest global asset market by value, tokenized real estate has also found its way to Avalanche in the form of Homium. This concentration demonstrates Avalanche’s cross-asset class flexibility for asset tokenization.
• Intain, which focuses on structured finance, has chosen Avalanche for its tokenization activity. At the time of writing, its presence on the network resulted in Avalanche having a 6.3% share of all tokenized private debt instruments.
• Avalanche hosts several unique stablecoins, such as the VNX Franc, a Swiss Franc stablecoin with around $700,000 in total minted supply at the time of writing, and the fledgling BiLira, a Turkish Lira stablecoin with just over $115,000 in total minted supply.

The platform’s native subnet approach enables projects to launch their own networks while still benefiting from Avalanche’s overall ecosystem, facilitating an attractive value proposition for the ecosystem. A notable example is the Spruce subnet, which Citi has used to test the tokenization of private credit. Avalanche’s C-chain also provides accessibility for retail users, further expanding the potential for tokenization adoption.

#Stellar

Stellar has gained notable traction in tokenization, mainly due to Franklin Templeton’s Benji’s tokenization of over $356 million worth of U.S.Treasuries, primarily using their blockchain. While Stellar boasts less than 2% of tokenization initiatives, it enjoys an outsized proportion of 29% of the tokenized U.S. Treasuries market due to this relationship.

In addition to this significant concentration of tokenized U.S. Treasuries, Stellar has a strategic interest in several other tokenization initiatives:

• WisdomTree Prime has launched its centralized exchange for tokenized assets on Stellar, giving the blockchain a 3.4% share of centralized exchange focused on tokenized real-world assets.
• Cross-border payment and liquidity engine provider Arf uses the Stellar blockchain to support its tokenized financial activity. This selection gives Stellar a 3.2% share of the financial services and payments category for tokenized assets.

Stellar’s significant proportional share of tokenized U.S. Treasuries highlights its focus on high-quality, traditional financial assets. U.S. Treasuries are considered one of the safest and most liquid investments globally, and their tokenization on Stellar highlights the platform’s robustness and suitability for institutional-grade assets. The tokenization of these established financial instruments and Stellar’s strategic interest in tokenized financial services activity continue to pave the way for further adoption by traditional financial institutions seeking to explore tokenization.

#Base

Base, a newer tokenization market entrant, has begun attracting notable projects. Base is an Ethererum layer 2 blockchain incubated by Coinbase leveraging the Optimism technology stack. While Base maintains ~1% of all tokenization initiatives at the time of writing, it is emerging as a contender in the future of tokenization, given the support Coinbase provides.

Retail tokenization platforms have already begun to emerge on Base:

• Collectibles platforms Degen Distillery, which offers tokenized spirits, and AnotherBlock, which enables investments in tokenized intellectual property from the music industry, give Base a 7.4% share of this category, highlighting its retail applicability.
• Backed Finance, which recently closed a $9.5 million investment round to expand its offerings, launched on the Base blockchain and represents 1% of this category.
• Maple, a leading onchain capital market protocol, has approximately $17 million in exposure to this blockchain.

As one of the largest and most well-recognized digital asset exchanges, Coinbase has significantly shaped Base’s future growth and adoption in the tokenization market. This close connection has spurred adoption but also brings concentration and centralization risk. As Base continues to evolve, it will look to become more decentralized and ubiquitous.

As tokenization continues to develop, we anticipate continued innovation and competition from these public blockchain environments to attract the diverse, emerging range of tokenization initiatives.

#Provenance Blockchain

Provenance Blockchain is a permissionless blockchain ecosystem designed to support the tokenization and trading of a wide range of financial assets, including stocks and alternative investments. The ecosystem’s focus on compliance and regulatory frameworks makes it an attractive choice for institutions looking to tokenize assets in a controlled environment.

Provenance has begun to make significant inroads into existing blockchain infrastructure and ecosystems:

• The Inter-Blockchain Communication protocol, pioneered by the Cosmos network, enables USDC transactions on Provenance via Noble.
• Data security provider ZorroSign integrated with Provenance to provide further cross-chain interoperability and transactional security.
• Provenance maintains a $50 million grant program for blockchain developers, incentivizing further network development and expansion.

Figure, a leading fintech company, chose the Provenance Blockchain to build its trading platform, Figure Markets, which supports cryptocurrency, stocks, and alternative investments. Figure Markets CEO Mike Cagney is also a co-founder of Provenance Blockchain. With over $13 billion in assets under their administration, Provenance is poised to play a significant role in driving the tokenization of traditional assets and expanding the range of investment opportunities available to market participants.

#Plume Network

Plume Network is the first modular Ethereum layer 2 blockchain dedicated exclusively to asset-backed tokens. Its mission is to simplify the complex processes of asset-backed token project deployment and provide investors with a blockchain ecosystem that facilitates cross-pollination and investment opportunities in tokenized assets. Its recent $10 million round has helped accelerate the adoption of real-world assets in its ecosystem.

As an end-to-end solution, Plume allows developers to focus on product development while minimizing operational considerations. It provides investors with a streamlined and secure environment for capital deployment and investment in tokenized assets. At the time of writing, the Plume Network is in the early access development stage and is preparing for deployment.

Notable milestones for the Plume Network include:

• The development of the RWA Launcher, a self-contained, comprehensive, and open-source tokenization application for tokenizing various assets.
• Application modularization for developers that fit their specific tokenization needs, such as onramps and offramps, identity verification, monitoring and sanctions, and primary offering and secondary trading using alternative trading systems.

Plume Network works to bridge the gap between traditional finance and DeFi by offering a dedicated environment for the modular tokenization of assets. This modularity fosters innovation and collaboration between asset issuers and investors and minimizes friction throughout the asset tokenization and investment processes.

#XDC Network

The XDC Network is a hybrid blockchain platform designed to support enterprise use cases, particularly in trade finance and real-world asset tokenization. Built on a delegated proof-of-stake consensus mechanism, XDC offers high throughput, near-zero transaction fees, and interoperability with traditional financial systems. The network’s focus on compliance and enterprise adoption has positioned it as a leader in bridging traditional finance with blockchain technology.

Some notable developments and use cases of the XDC Network include:

• The world’s first trade finance-based non-fungible token (NFT) transaction, completed by Tradeteq on the XDC Network in September 2021.
• Integration with R3’s Corda Network, allowing XDC to be used as a settlement coin inside Corda, bridging enterprise and public blockchain ecosystems.
• USTY tokens, representing shares in a U.S. Treasury bond ETF, were launched on Tradeteq’s Yieldteq platform, contributing to the growing market for tokenized U.S. Treasuries.

The XDC Network has gained traction in the trade finance sector, becoming the first blockchain network invited to join the Trade Finance Distribution Initiative (TFDi). With its focus on real-world asset tokenization and enterprise adoption, XDC is well-positioned to play a crucial role in the future of global trade finance and the broader tokenization of traditional financial assets.

#J.P. Morgan’s Onyx

J.P. Morgan’s Onyx platform targets institutional and inter-jurisdictional tokenization solutions that enable the transfer of tokenized assets across different legal and regulatory frameworks. The platform has been involved in Project Guardian, a collaborative effort among financial institutions and regulators to explore the potential of tokenization in the financial industry.

Some notable real-world use cases for Onyx include:

• The tokenization of a $10 million municipal bond offering from the City of Quincy, a municipality in the greater Boston area.
• Siemens is utilizing Onyx for blockchain-based payment infrastructure using the environment’s native JPM Coin.
• A milestone was reached in Q4 2023 when JPM Coin began clearing over $1 billion in daily transactions.

Onyx leverages deposit tokens, which are digital representations of deposits held at J.P. Morgan. These tokens can be used for secure and efficient value transfer between institutional clients within J.P. Morgan’s ecosystem. Onyx’s tokenization offerings are designed to streamline financial transactions and reduce settlement times for incumbent financial institutions and central banks.

#R3’s Corda Platform

R3’s Corda is a permissioned ledger platform designed for the financial services industry. It enables the issuance and trading of digital assets, including bonds. Corda has facilitated the live issuance of digital bonds, demonstrating its capabilities to support the tokenization of traditional financial instruments.

Corda serves as the backbone of several significant tokenization initiatives, including:

• The SIX Digital Exchange (SDX), responsible for over $375 million in tokenized bonds from banking giant UBS, uses Corda as its infrastructure.
• The HQLAx platform leverages blockchain tokenization for collateral mobility and market performance and uses Corda for its core infrastructure. HQLAx’s backers include Goldman Sachs, BNP Paribas, and lead partner Deutsche Börse Group.
• Agora Digital Capital Markets leverages Corda for its blockchain infrastructure, reducing reconciliation times by 93% and delivering $15,000 in annual savings per syndication team member.

Corda has been involved in various tokenization projects and partnerships. One notable example is its participation in the Regulated Liability Network (RLN) trial, which explores distributed ledger technology for managing and transferring financial liabilities and creating a unified ledger for tokenized deposits.

#Canton Network

The Canton Network is a privacy-enabled interoperable blockchain designed for institutional assets. It is purpose-built to unlock the potential of synchronized financial markets and create a ‘network of networks’, allowing previously siloed systems to interoperate with the governance, privacy, and permissioning functionality required for highly regulated industries. The Canton Network leverages the Daml smart contract language to enable global composability of applications while maintaining strict privacy controls.

Some notable real-world use cases and pilot programs for the Canton Network include:

• A successful pilot program demonstrating the interoperability of 22 independent distributed ledger applications (dApps) in the capital markets domain, with over 350 simulated transactions executed.
• Deutsche Börse Group’s D7 post-trade platform and Goldman Sachs’ GS DAP™ are connected to the network while retaining privacy and permissioning.
• One application on the network reported monthly notional traded volumes exceeding the most active crypto token volumes.

The Canton Network has garnered support from major financial institutions and technology providers, including BNP Paribas, Deutsche Börse Group, EquiLend, Goldman Sachs, Capgemini, Deloitte, IntellectEU, and Microsoft. It aims to enable financial institutions to offer innovative products to their clients while enhancing efficiency and risk management in areas such as asset tokenization, fund registry, digital cash, repo, securities lending, and margin management transactions. The network’s unique approach to balancing decentralization with privacy and control positions it as a potential game-changer for blockchain adoption in regulated industries.

#Kinto

Kinto is a KYC-compliant Layer 2 blockchain network built on Arbitrum Nitro technology, designed to bridge the gap between traditional finance and decentralized finance. It provides a secure environment for financial institutions and DeFi protocols, offering built-in KYC, AML monitoring, and insurance at the blockchain level. This unique approach allows Kinto to maintain the benefits of blockchain technology while addressing traditional financial institutions’ security and compliance concerns.

Some notable features and developments of Kinto include:

• A successful migration to the Arbitrum ecosystem, leveraging the Arbitrum Nitro technology stack to enhance security, reliability, and regulatory compliance.
• Raised $5 million in two funding rounds from notable investors, including Kyber Capital Crypto, Spartan Group, and Parafi.
• Plans to open its onboarding and KYC process, with a mainnet launch scheduled for Q1 2024.

Kinto’s innovative approach to blockchain security and compliance makes it well-positioned to attract traditional financial services industry participants. By offering a KYC-compliant Layer 2 solution with built-in insurance and developer incentives, Kinto offers a safer environment for both traditional financial institutions and decentralized finance protocols.