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Life After Tokenization

During my recent trip to the Real World Summit in New York, there was much talk about institutional experimentation with tokenization. From VCs to banks, everyone was buzzing with excitement that tokenization would bring trillions of assets onchain.

But if all we are doing is just putting out a token representing an offchain asset, we are missing the full potential of blockchain. That is to say what good is a tokenized asset if it cannot do anything but simply sit there.

One thing I am particularly looking forward to is the ecosystem that is emerging around tokenization platforms. This ecosystem consists of things such as secondary market liquidity for tokenized assets and lending markets.

A first mover advantage in these new markets could be super valuable if new entrants can find product-market-fit. So who are some of these new projects and how big are their total market size?

Let’s dig in.

Look into the Horizon

“Institutional investors are projected to allocate 7.2% of their portfolios to tokenized assets by 2026”, according to the latest EY-Parthenon survey report. See chart below.

Using Bain’s latest report on the global institutional capital figure of $140 trillion, 7.2% of institutional money is roughly $10 trillion in assets.

Cross referencing this number with the BCG and ADDX estimate of $7.6 trillion, we have a range for the possible total addressable market between $5-10 trillion.

In order for this significant amount of assets to come onchain, there is an obvious need for infrastructures that goes beyond simply issuing these assets as tokens. We must offer capital efficient use cases for these assets just as they exist in the offchain world.

While there are many projects focused on the issuance part of the tokenization life cycle, there are very few projects focusing on enabling secondary market activities. Apart from a few enterprise focused solutions such as Tzero and Securitize, there aren't many crypto led players.

Here are the two projects I met during my RWA Summit trip that are building infrastructures for life after tokenization.


Built on the Avalanche blockchain, HiYield is a lending marketplace that is focused on RWAs. Given Avalanche’s recent Vista initiative, HiYield is preparing for a range of tokenized assets to come onchain to the Avalanche network.

Given the explosive growth in tokenized US Treasury on Ethereum, I would imagine HiYield foresees a similar dominant market share leadership on the assets tokenized on the Avalanche network.

If that is the case, there certainly will be a need for holders of these tokenized US Treasuries to do a few more things other than just holding.

One of interesting things mentioned on the “Institutional investor's opportunity in tokenized assets” panel during the RWA Summit was institutions’ preference for tokenizing liquid and stable assets such as the US Treasuries at the start of their tokenization journey simply because it would be a harder sell to do more exotic assets for distribution purposes.

In traditional finance, US treasuries trade at $750 billion daily volume and the Repo market trades at $4 trillion daily volume.

As a way of comparison, there are over $300 million tokenized US Treasury onchain, but the biggest secondary activity we have is the $25 million repo market on Flux Finance. This means 92.5% of US treasury sits idly onchain.

There are 2 key differences between an RWA focused lending market and a crypto collateral based lending market like Aave. First the borrowers on the RWA lending marketplace must be KYC’ed to satisfy regulatory requirements. Since there is no doubt tokenized assets are securities, all the purchasers and holders of such instruments must go through an onboarding process that includes KYC and AML. Second, depending on the assets, it can be much harder to price and source liquidity for secondary liquidity. While short-term US treasuries are liquid and easy to price, secondary pricing for a LP position in a private company’s debt capital stack is not.

HiYield is looking to tackle the Repo market first to bootstrap before evolving into a generalized lending market for onchain RWAs. It is aiming to launch in Q4 2023.

Poet Network

While HiYield has a crypto retail feel to its product, Poet Network chose an API-based and institutional approach that is more familiar to regulated trading professionals.

While building a Repo market onchain is important, being able to have a generalized lending market offers more flexibility for issuers and holders.

Of course, it can also Repo market infrastructure, perhaps with even better liquidity and pricing given its API-first build and its Alternative Trading System (ATS) regulatory status that is likely to interface with professional trading desks instead of retail users. See its post below.

However, it offers the infrastructure to solve what is arguably a much harder problem that is the tokenized private market secondary liquidity.

There are close to $400 million tokenized private credit currently. But the only secondary market available is the FIDU-USDC pool on Curve for Goldfinch’s Senior LP positions. Yet the pool is only $600,000 in depth and it trades at 20% below par and with huge slippage.

A US treasury repo market infrastructure cannot price these tokenized LP positions. Having the infrastructure for professional credit desks to interact with the isolated credit markets onchain could bring an 0 to 1 moment in terms of enabling liquidity and by extension further origination volume to the asset class.

Another interesting GTM path it could consider is the secondary market of private companies. For example, currently the trading of private startups occurs mostly OTC. This is inefficient from both time and price discovery perspectives.

Bringing private startup’s equity onchain and enabling liquidity for the secondary market is an under-explored area currently in our ecosystem.


In order to realize the full potential of blockchain, we need to have much better financial infrastructure around tokenized assets, from secondary trading liquidity to lending/borrowing markets that meet regulatory requirements.

One of my biggest takeaways from the RWA Summit is that 3 years after learning about tokenization, it seems we are finally getting to the moment where an ecosystem is being developed.

This should unlock further origination volume in the primary issuance market. Depending on the assets being enabled on the secondary market, the onchain primary market for US Treasuries or another asset class could experience further growth.

However we are still in the very early innings. HiYield doesn’t expect to launch until Q4 2023 while Poet Network’s regulatory compliance and API focused approach is likely to take it to 2024 before the product is ready. Of course I will be keeping a keen eye on the future development. Stay tuned.

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.


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