Designing A Protocol Builder for Real-World Asset Tokenization

Web3 insiders and financial institutions are increasingly fascinated by the technological potential of tokenization, the process of issuing digital assets on a blockchain. The more sophisticated end of this market has been sized to be worth trillions of dollars by the end of the decade. Currently, however, two issues, among several, limit broad adoption: (a) technological unpreparedness marked by the shortage of institutional-grade digital asset solutions with high degrees of flexibility and scalability and (b) high cost to implement that stands in the way of long-term economic efficiencies.

The technological solution to these issues, which we at FeverTokens refer to as functional scalability, resides in the tooling for an application-level protocol builder. The vision that drove us to start FeverTokens, application-level protocol builder provides functional components that builders can assemble based on their own business logic. Compared to building on specialty protocols, application-level protocol builder affords builders virtually unlimited flexibility, and the proper functioning of the resulting applications does not rely on any third-party provider.

In general, several aspects must be considered when designing this type of protocol builder as well as when using it. They include the list of stakeholders, the respective roles that they play, the methods of authentication, the interactions among stakeholders where applicable, the feed of off-chain data and the execution of off-chain activities, the custody of assets and tokens, the compliance mechanisms, the governance structures, the secondary markets, and the tokenomics, etc.

When it comes to real-world asset tokenization, which is the segment that has drawn the most attention from serious institutional players, our protocol builder provides end-to-end coverage for custom protocols.

First, the protocol builder should allow native interoperability with any standards or oracles for off-chain updates. As such, builders can easily work with external stakeholders and asset custody providers in a secure fashion. This type of solutions for high-throughput, highly customizable linkages to real-world assets greatly reduce the cost and complexity in implementing real-world asset tokenization.

Second, the protocol builder simplifies token issuance and custody while allowing for sophisticated custom configurations. Here, the builders can choose from almost all popular architectures, token standards, and functional features for virtually unlimited, unique results. Our supporting technologies also make it easy for builders to handle wallet management, to interface with on/off ramps and KYC solutions, and to manage payments including credit card options, etc.

Third, the protocol builder further streamlines token distribution and trading with a wealth of mechanisms. The builders can customize their protocols to work with their own launch strategy. They can also whitelist or blacklist trading options.

Lastly, the protocol builder is designed with governance and compliance in mind. It provides the tooling for the builders and protocol operators to handle regulatory compliance as well as all sorts of on-chain and off-chain governance tasks. A foundational aspect of this type of tooling is the assurance that comes with an upgradable architecture. Our architectures ensure that protocols can enjoy controllable updates (security, functions, and governance, etc.), if their builders so choose, even after deployment.

Now that we have explained application-level protocol builder for real-world asset tokenization in general, let us look at the specific case of real-world asset lending.

Real-world asset lending protocols are quickly emerging as a leader in web3 adoption. The main on-chain aspects include the stakeholders, the market structures, the pools, and the compliance and governance mechanisms. In this setup, the lenders fund lending pools from where approved borrowers draw funds. The off-chain aspects include off-ramps, legal structuring, oracles where data on the usage of the funds borrowed as well as the prospects of repayment. The protocol needs to have sufficient risk management mechanisms that integrates with both on-chain and off-chain aspects.

Ancillary considerations that are nonetheless important are similar to building applications without using a protocol builder: The team should consist of diverse specialists with a shared vision, the UX and UI must be properly thought out, the regulatory and legal aspects must be addressed before the lending protocol goes live, and there should be a health pipeline of deals that draw lenders in. Sometimes, there may also be a desire to have a decentralization strategy so that the lending protocol does not come under the control of a single entity, usually at the cost of the interests of other lenders.

FeverTokens is positioned to be the fabric of protocols, especially for real-world asset tokenization. Our sophisticated protocol builder already underpins highly-scalable tokenization projects. You can learn more by contacting us directly.