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With the tokenization of real-world assets seen as one of the key trends to disrupt both markets, the Avalanche Foundation today announced it's allocating up to $50 million to purchase tokenized assets minted on the Avalanche blockchain.
Dubbed Avalanche Vista, the new program is designed to support and demonstrate the value of tokenizing a wide range of asset classes, such as equity, credit, real estate, and more, the Avalanche Foundation said in marketing materials seen by Decrypt.
Tokenization is the process of converting real-world assets or rights into digital tokens through the use of smart contracts. These tokens represent ownership or entitlements to the underlying asset and can be transacted and managed directly on the blockchain.
The tech is believed to offer a slate of advantages, including increased liquidity, fractional ownership, reduced transaction costs, enhanced transparency, and accessibility to a global market of investors.
While some popular examples of tokenized assets include corporate stock, commodities, and other physical goods, “tokenization can also extend to ideas, information, services—think insurance, sports collectibles, real estate or identity records, and so on,” Morgan Krupetsky, Director of Business Development for Institutions & Capital Markets at Ava Labs, told Decrypt.
Major institutional players like Bank of America also acknowledge the potential of tokenization, with the multinational investment giant expecting the tokenization of traditional assets to transform financial and non-financial infrastructure and public and private financial markets within the next 5 to 15 years.
Even BlackRock CEO Larry Fink, who until recently was quite skeptical about crypto, admitted last year that "the next generation for markets, the next generation for securities, will be tokenization of securities."
Avalanche's on-chain ambitions
Within the new program, the Avalanche Foundation will essentially act as an “investor," and will consider many assets from a purchase perspective, but mostly financial, such as equities, credit, and real estate.
“The program will seek to hone in on protocols across asset classes that have a clear value proposition, comprehensive go-to-market strategy, and thoughtful view on product-market fit,” said Krupetsky.
Additionally, the Avalanche Foundation will consider blockchain-native assets—those that are made buyable as an asset class or can be securitized because they are issued on-chain. These, according to Krupetsky, will include certain environmental, social, and governance (ESG), or emerging markets-related credit products, creator IP, music royalties, film slates, and more.
“These tokenized assets can be issued, traded, and managed on the blockchain, all while parties can easily track their performance in real time,” he told Decrypt.
The key element here will, of course, be the speedy and highly scalable Avalanche blockchain, which also includes the novel architecture of Subnets—custom blockchains built on Avalanche that can even use their own token instead of Avalanche’s native AVAX for paying network gas fees.
The Avalanche Vista initiative follows other major milestones in asset tokenization.
One such milestone was achieved last year by Securitize, a platform specializing in digital securities when it successfully tokenized a KKR fund on the Avalanche public blockchain. This marked the first time that exposure to one of KKR's alternative investment strategies was offered in a digital format in the United States.